Are you seeking a mortgage without verifiable income, but have significant assets that can justify a mortgage loan?
Although self-certification mortgages are a thing of the past, we have entered a realm where clients without provable tax return income can explore mortgage options.
Who might require this solution?
You might have sold a business and acquired a substantial investment fund from the sale, or perhaps you have diligently built up your investments over an extended period and no longer require traditional employment. These circumstances should not hinder your access to mortgage lending when the need arises, but it is important to understand how this needs to be presented to a lender to ensure success.
So, what is notional income and how can it help me get a mortgage?
Notional income refers to an assumed or theoretical income that is calculated based on the value of certain assets or investments.
Notional income allows individuals who may not have traditional, provable income sources to still demonstrate their ability to meet financial obligations. Instead, the notional income is derived from factors such as the value of discretionary portfolio funds, cash savings, or pension funds.
By assigning a notional income, lenders can assess an individual’s borrowing potential and determine their eligibility for financial products without solely relying on traditional income verification methods.
For discretionary portfolios, we can consider a notional income of 4-5% based on the fund’s value, provided you are within the pensionable age bracket. The same principle can be applied to pension funds, such as a SIPP (Self-Invested Personal Pension).
Alternatively, some lenders offer an additional option for generating income. It involves splitting the value of your cash or pension over the mortgage term to create a theoretical income that supports affordability specifically for your desired loan amount.
What would this approach look like in practice?
Let’s say you possess a discretionary portfolio worth £12,000,000. This could generate a notional income of £600,000. With a high income multiple of 5.5 times, which is achievable at certain loan-to-value ratios, you could have a borrowing potential of £3,300,000.
In summary, lacking traditional income won’t hinder your chances of obtaining a mortgage if you meet the criteria set by the lenders in question.
For more information or support in utilising your investment portfolio to demonstrate mortgage affordability using notional income, please do not hesitate to contact our specialist team of advisers.
Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
