Emily Bernstein is an experienced private banker at Investec who specialises in supporting legal leaders and senior lawyers
Q: I earn £1m a year but I can’t get the mortgage I need. What are my options?
As a partner at a law firm, it can prove difficult to secure a mortgage that offers you the loan size and repayment plan that you need. Your mortgage should reflect your current income, as well as your earning trajectory. One solution is to work with a private bank, such as Investec, which can create a bespoke mortgage that is tailored for lawyers.
Typically, mainstream lenders that do not specialise in working with senior legal professionals, will look at your average income over a three-year period to determine your borrowing capacity. This can be particularly frustrating if you are a year-one partner, as your past income as a senior associate is less than your current income.
Additionally, foreign currency income may be a red flag for some lenders and cause delays – and flat-out rejection – given their formulaic approach.
‘Our focus is on building a long-term relationship – and we are here to help and support you as your goals evolve over time.’
Emily Bernstein, Investec
At Investec, we have a team that is dedicated to working with senior lawyers and we are comfortable with complexity, including income that is lumpy, in a foreign currency or deferred.
We truly understand your income. We know that some firms link income to seniority following a lockstep model, while others work to a merit-based system where remuneration depends on billable hours, or the value of new business generated.
Your net or gross pay may be received in consistent monthly payments or on an irregular basis.
In each case, we look at personal income holistically to determine mortgage affordability. And we will tailor the information we request from you, based on your circumstances.
Achieving a high loan-to-value (LTV)
The partners we work with are often looking to buy their ‘forever’ home, but are limited in the amount they can borrow by a low deposit, which might be less than 10% of the purchase price. This can often apply to those who may be less cash rich than they anticipated. If this applies to you, a high LTV mortgage might be appropriate.
Investec recently helped an equity partner to buy a home valued at £1.4m. The client was recently promoted and had a small deposit. However, after looking at her overall earning trajectory, which included a monthly draw and larger profit distributions, we were able to offer a 90% LTV mortgage over a 25-year term, with the initial interest rate fixed for two years.
Repayments aligned with your cash flow
That said, the support of a private banker often goes beyond how much you can borrow. We often help lawyers with lumpy income to align repayment of their mortgage with their cash flow timeline. We may be able to do this by providing an interest-only mortgage with capital reductions built in to reduce the balance as profit distributions are received.
In addition, lawyers who work for a US firm and receive their income in dollars, often ask us to manage their currency conversion to allow them to have future certainty over their monthly income for up to two years in advance. This gives them clarity and peace of mind.
Mortgage options in the current economic environment
Of course, the timing of a property purchase can often impact the options available to you and in the current economic environment, specialist advice is more important than ever.
Should you be looking to purchase a property now, you may be comparing fixed rates – which provide security over monthly outgoings – to tracker rates which would see your repayments fluctuate in line with the bank rate movement.
For example, our variable lifetime tracker mortgage tracks the Bank of England base rate with a small margin added. But we also offer clients the opportunity to transition to a fixed rate in the future, without incurring a fee. Clients can also make overpayments when they want to (although clearing an entire balance early may attract a fee).
Mortgages at speed
While there is lots to consider, the advantage of working with a private banker who understands your specific needs, is that the options can be explored and executed at speed – which is helpful if you are buying a property in a competitive market. We recently helped a partner who was under significant time pressure to secure a mortgage within a month.
Finally, when exploring other property purchases, do not forget to seek the same level of financial support for second homes and investment properties, as for your main residence.
Investec provides mortgages for buy-to-let and property portfolios and can also lend to trusts and special purpose vehicles (SPVs), where appropriate. Our focus is on building a long-term relationship – and we are here to help and support you as your goals evolve over time.
See how private banking can help you Investec provides extraordinary products and services specifically for legal professionals – from mortgages and private bank accounts to flexible FX.
Please contact Emily to discuss your needs.
E: emily.bernstein@investec.co.uk
Important information:
Your property may be repossessed if you do not keep up repayments on your mortgage. Investec residential mortgages are only available for residential properties in England or Wales and are primarily available to UK residents and subject to eligibility.
With investment your capital is at risk.
The value of investments can go down as well as up and you may not get back the full amount invested.
