One of the challenges facing those who receive a significant part of their income from bonuses is convincing lenders to take this into account when arranging a mortgage. Lenders will generally include no more than 50% of bonus income into an affordability calculation, averaged over the last two to three years. Arranging a large mortgage using bonus income can therefore be difficult.
This was the problem faced by one of my recent clients. A successful banker, my client received an excellent basic salary, but also received an annual bonus in cash and vested shares, in addition to a car allowance. He had been a client of Enness' for many years and was now looking to purchase a large house in the beautiful countryside around London.
However, in order to achieve this, he would need to take an average of 75% of his bonus income over the last two years in order to secure the level of borrowing he required. An average of 50% of his last two bonuses would not be enough,
My client had been renting in London, but was the owner of a buy to let property which he had sold to provide the deposit for his new family home. He was looking to secure as high a loan to value (LTV) as he possibly could—in the region of 80%. From a bank’s perspective, the difference between 75% and 80% loan to value is quite significant. At 75%, all we needed to use for affordability was his basic and his cash bonus. At 80% LTV, stricter affordability criteria meant I needed to think more creatively.
After carefully considering the structure of his income, I, therefore, negotiated with the lender to use a proportion of his vested shares, 50% of his cash bonus, and his car allowance, when calculating his affordability. Taking this combined approach allowed us to secure the 80% LTV, a fantastic result. To give my client security in what his repayments would be, we arranged for a 5-year fixed rate of 2.39%.
France is one of the most popular property markets for foreign nationals: we are all aware of the chic appeal of Paris, the enduring allure of the Riviera in the summer or the freshness of the mountains in winter.
Covering everything from search and negotiation to making an offer and the legal processes, the guide will help you fulfil your dream of property ownership in France.