How can I qualify for a mortgage with investment income?
Getting a mortgage when your primary income comes from investments may seem very difficult.
Many lenders prefer the security of salaried income, and investment income, whether from share dividends, rental properties, or a trust fund, can fall outside of lender criteria.
However, with the right advice and guidance, securing a mortgage with investment income can be entirely possible.
At Kerr & Watson, we can help help individuals with non-standard income sources, including investment income.
Can You Get a Mortgage with Investment Income?
Yes, with some lenders, you can secure a mortgage with investment income, but it’s important to understand that the process may differ from that of a traditional salaried applicant. Lenders typically assess income stability and longevity, so you’ll need to demonstrate that your investment income is sufficient and reliable.
Mortgage providers may be cautious when it comes to investment income, as it can fluctuate and is often seen as a less predictable income stream. However, many lenders are open to considering applications from individuals with complex income sources, provided you can offer the right evidence of income consistency.
What Types of Investment Income Can Be Used for a Mortgage?
Investment income can come from various sources, and many lenders will consider it when assessing your mortgage application. Here are the most common types of investment income that may be eligible:
Dividends
If you own shares in a company, you may receive regular dividend payments. Many company directors or shareholders use dividends as a primary income source. Lenders often accept this type of income, but you will need to provide evidence, such as dividend certificates and tax returns, to demonstrate consistency.
Rental Income
If you own one or more rental properties, the income you receive from tenants can be used to support your mortgage application. Lenders typically require proof of regular rental income, such as tenancy agreements and bank statements, to verify that this is a stable source of income. They may use the income on the AST or tax calculation, often deducting finance costs.
Interest from Investments
If you receive interest payments from savings, bonds, or other investment accounts, this can sometimes be included in your application. Lenders may request evidence such as investment account statements to confirm this income, wishing to also see longevity so they can be comfortable this income is sustainable and the asset is not to be sold.
Trust Fund Income
If you benefit from a trust fund, with the right lender for you, this income can often be considered for a mortgage. However, lenders will require documentation outlining the terms of the trust and confirmation of regular payments.
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Challenges You May Face with Investment Income
Although using investment income for a mortgage is possible, there are a few challenges you may encounter:
Income Stability
Lenders prefer steady, predictable income streams, which can make them wary of investment income. Dividends, rental income, and interest can fluctuate based on market conditions or changes in your portfolio, leading lenders to consider your application as higher risk.
Complex Documentation
Unlike traditional salaried employment, investment income often requires additional documentation to verify. You may need to provide tax returns, portfolio statements, or contracts related to your income sources to demonstrate consistency over several years.
Currency Fluctuations
If some or all of your investment income is paid in a foreign currency, exchange rate fluctuations could complicate the affordability assessment. Lenders may request additional documentation to understand how currency changes could affect your overall income.
How Much Can You Borrow with Investment Income?
When applying for a mortgage, lenders typically calculate how much you can borrow based on your income. For those with investment income, the amount you can borrow will depend on several factors, including the stability of your income streams and the specific lender’s criteria.
Income Multiples
Lenders usually multiply your annual income by a certain factor—typically between 4.5 and 5.5 times your income to determine how much they’re willing to lend, but this really depends on the application and a range of other factors. However, not all lenders treat investment income the same way. Some may only consider a portion of your investment income, while others may include the full amount if you can demonstrate its reliability.
At Kerr & Watson, we work closely with a wide range of lenders, including those that specialise in complex income cases. We can help you find the best lender for your specific situation
What Documentation Do You Need?
To successfully apply for a mortgage with investment income, you’ll need to provide detailed documentation to verify your income. Be prepared to supply the following:
- Tax Returns: Most lenders will require at least two years of tax returns to verify your income. These documents are especially important for self-employed individuals or those with multiple income streams.
- Dividend Statements: If you receive income from dividends, you’ll need to provide dividend certificates or statements from your shareholdings.
- Rental Income Statements: If your income comes from rental properties(Rental Income), be prepared to show tenancy agreements and bank statements proving regular rental payments.
- Investment Portfolio Statements: Lenders may ask for recent statements from your investment accounts to verify any interest or capital gains income.
- Trust Fund Documentation: If you receive trust fund income, you will need to provide documentation outlining the terms of the trust and proof of regular payments.
Gathering this documentation can be a time-consuming process, but Kerr & Watson is here to assist you. We’ll ensure all the necessary paperwork is in place to streamline the application process and maximise your chances of success.
Conclusion
While securing a mortgage with investment income may seem challenging, it’s certainly achievable with the right approach and expert guidance.
At Kerr & Watson, we’re here to help you every step of the way, from gathering the necessary documentation to finding the best lender for your specific needs.
If you rely on investment income and are looking to secure a mortgage, contact Kerr & Watson today. Our expert team is ready to offer tailored advice and guide you through the process.
