Complex Income
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Complex Income
Hemat Natha talks us through mortgages for people with complex income.
What is considered as complex income when it comes to mortgage applications in the UK?
Complex income mainly refers to having multiple income streams. When you apply for a mortgage, lenders want clear details about your earnings so that they can calculate affordability and decide how much to lend you.
We can use just about anything and everything as income for these calculations, including benefits. Typically people with complex incomes have a basic salary plus commissions, night shifts, special allowances and things like that.
Can you give some examples of people with complex income?
One of the most complicated pay slips we’ve seen is an AA patrol mechanic. They get different elements of income depending on the patrol, the shifts and the shift allowances. Drainage workers are another example. They do night work and have safety allowances and other elements.
NHS workers often have complex income – they’ve got night shifts, different salary bands, bank shift work etc. We also work with salespeople who have complicated commissions as well.
A complex income could mean that you have three or four different jobs. We dealt with a limited company director who owned a 20% share in a company, plus he had a Buy to Let property, so we used the profits from that as shown on their tax return. They had a pension as well. So we were able to use the three different elements of income to get the mortgage.
Another interesting one was a single mother who was an NHS worker. She had been through a bad divorce and we were able to use her overtime and her NHS basic income. She’d just been promoted. She’d never had a home for her two daughters and wanted a garden and their own space. She was doing lots of bank work and we used all of that income, plus maintenance income from her ex-partner, to get her a lovely home and make her dreams come true.
We obviously don’t want to just maximise your borrowing. We want to make sure that the property is affordable so you can afford a good lifestyle as well. We want to make sure it’s sensible and you’re not overstretched if you don’t have overtime or commission at some point.
How do lenders assess different complex incomes and how does that impact the mortgage process?
Each lender will have its own policies on different income elements. As an example, I was advising a restaurant chef and, believe it or not, chefs get tips. But you don’t pay National Insurance on tips. There’s something called TRONC on the payslips. Some lenders are funny about the tips not being taxed, but being on payslips – they want taxable income.
So there were some lenders we didn’t approach for this chef. But we found a high street lender who would average out the chef’s tips to get the mortgage.
So each lender has their own policies on the different elements of income and will ask for relevant proof and documents to prove things.
It can take more time, because there will be more questions. For example, for people with commissions – are they annual, monthly or quarterly? For nurses, how does your bank shift work, how long have you been doing that for? A lot of questions will be asked.
What documentation and evidence do I need to provide to prove my complex income?
It depends on the type of complex income. Typically lenders want to see a track record over time. Some lenders ask for an average of the last three months, some lenders ask for six months, some will need a supporting P60.
You don’t need to worry about that. You just need to tell us what your income sources are and we’ll explain what we need to get you a mortgage. We will find lenders that will accept your income for the borrowing you need.
What challenges might arise during the mortgage application process when declaring complex income?
In my early days, back in 2014, I had a client that was using their disability living allowance to buy a flat. He was 26 and the flat price was £240,000. He was saving up his disability living allowance because his parents were funding all of his expenditure.
We managed to prove his disability living allowance but the lender wanted to know about the buildup of the deposit. So we had to provide six years worth of bank statements to prove that he’d saved it from the disability living allowance. That’s how picky the lender got. It was the worst ever case. In the last ten years I haven’t had as bad a case as that.
But if something’s not right, lenders may just ask a few more additional questions. They want to understand what you’re earning and make sure everything’s okay.
The team here has enough experience to know what lenders will ask for. We don’t make applications just for the sake of it. We will do the research and we’ll know what the typical questions are. Lenders might take a bit more time assessing the documents, but typically we will be able to overcome any challenges.
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How do I improve my chances of getting approved for a mortgage with complex income?
It isn’t really any different from a standard mortgage. Just make sure that if you take out credit, you make your payments on time. Check you’re registered to vote, as well. Collect documentation so we can make the appropriate checks – we’ll let you know what we need upfront.
Just let us help you. If there’s a property you want, we’ll be able to answer any questions. Come to us and we’ll help you through the process.
Are there any mortgage lenders that specialise in offering mortgages to customers with complex income?
I’ve done a mortgage for a premier league footballer, I can’t name him but he played for a top club. That was challenging because he had renegotiated a contract and based on his status we had to work with a private bank. That was the most complex income I’ve done – there were large sums flying about.
We used that bank because it had a specialist sports division and a dedicated manager that went to see the player and assess their contract. So, yes, there are specialist providers that focus on certain sectors because they understand them.
We’ve got a lender that specialises in teachers. They understand teaching income so they’ll lend to supply teachers, contract workers and seasonal workers like university lecturers who work from September to March. They also take PhD students on research grants.
Other lenders specialise in complex income from self-employment or limited companies. I was able to get a mortgage for someone who couldn’t show the right level of income on their tax returns but we could use the net profits of their companies. They owned 10 limited companies!
Because they owned cafes around London we needed 10 sets of accounts for two years each. So that’s 20 sets of company accounts. We then needed six months’ business bank statements, so that’s 60 bank statements, each one around 10 pages long…. That was what you call complex.
For me, it’s about going the extra mile. They were a great couple, they had children from previous relationships and it was great to get them a bigger home where they could all live together.
I’ve dealt with a lot of interesting scenarios – the tougher the better! I love it when it’s challenging and we need to make the impossible possible.
How can I calculate my borrowing capacity when I have complex income? Does it differ from regular income?
You don’t need to do anything. Just provide the information and documents to us and we will do the hard work for you. We will use all forms of income that we can.
We’ll make it happen – let us do what we do best. We will guide you through that process. We do ask for information upfront so we can do some research and present it to you. If we don’t understand what a night allowance is or what a LCA23 callout stipend is, we’ll ask you. If it’s regular we’ll use it, if not we might discount it. Just give us the information and we’ll do the rest.
Is there anything else we need to know about complex income mortgages?
This has actually been one of my favourite recordings, because there are just so many different stories about people we’ve worked with. I’ve mentioned chefs, NHS staff; we’ve helped doctors, people with property income, investment income, pension income.
I actually helped an art dealer buy a house in Mayfair – that was a crazy one, because there is so much money in art: the commissions were ridiculous. That involved foreign income income from Christie’s, and much more.
So just challenge us. We’ll be able to find a lender for you. We’ve got an extensive panel of lenders that will fit all different income circumstances including multiple, complex incomes.
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Hemat Natha, trading as Mortgage Advice Point, is an Appointed Representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
A fee for our service is charged. This is typically £495 but the exact amount will be dependent upon your circumstances and we will discuss this with you.
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