Do RSUs count as income for a mortgage in the UK? 

Will RSUs help me borrow more?

Yes, in theory, but as ever with mortgages, it depends. Some banks just won’t include it, in which case RSUs won’t help you at all.

The banks that will accept these need a track record – and this where it can get complicated. Let’s say you’ve had a three-year track record of bonuses – whether that’s stock or cash – and it’s improved each year.

Some banks will either take the average, or the last year. If it’s highly volatile with big movements up or down, most banks would take the most recent year if it’s lower than the average.

How frequently a bonus is paid can hugely affect affordability. Banks can get a bit nervous about a big annual bonus, because for the other 11 months of the year, you still need to eat, drink and live. A bank needs to be comfortable that there’s a baseline level of income. Annual bonuses aren’t always factored in as favourably as quarterly or monthly ones.

What if my bonus or main salary is paid in another currency, like dollars?

This does come up a lot and we’re triggering two different things here – currency plus RSUs. Let’s say you work for Apple, for example – one of the biggest companies in the world. Their head office is in the US, obviously, and any stock award would be nominated in dollars. Sometimes even a cash portion of your bonus is in dollars.

Some UK banks don’t include non-sterling income at all for a mortgage, so this is where things can get tricky. You might have a bank that’s happy with RSU income, but only if it’s in sterling. Your RSUs in dollars would eradicate those lenders.

But there are lenders that will take non-sterling income, both stock and cash. It’s all about the ‘layering’ of criteria. It’s absolutely fine as long as we find the right bank.

It does change in time, too. We’re often asked which is the best bank for this right now – and I can only tell you today, because tomorrow it might change.

Another factor, which is true of any stock, bonuses or anything not paid in sterling – most banks apply a ‘haircut’ of 10% to 20%. Because currency fluctuates, banks build in a bit of a buffer. They make sure that in the worst case scenario, you can still pay your mortgage.

If you want to run the numbers through, we can help. Let’s say you get a big annual stock bonus, paid in dollars, for example. A bank might only use 50% of that bonus. And of that 50%, they’ll only take 80% towards the mortgage. It’s nice and confusing.

I have many clients who earn hundreds of thousands, even millions. But we might find that Lender A is only going to include £300,000 of a £1 million comp, while Lender B will take £750,000. You’ve got to be so careful.

What are the pros and cons of using RSU income to get a mortgage?

The pros are that you can borrow more. It’s very simple. RSU income, funnily enough, often has more effect on your product choice.

Some people don’t want to include it in the mortgage, but instead use RSUs to pay down the mortgage faster in future. That can drive the product you choose, not just the lender. It’s just something to factor in.

On the cons, different currencies and stock prices are volatile. That’s why most banks don’t like using that as income. You’ve also got to consider your own personal affordability. Do you actually want to use the RSUs for the mortgage or put it aside? How much do you want to factor in?

You’re the one paying the mortgage in the end. We can push things to help you secure a wonderful property. But if you’re living on beans and toast, is that really what you want?
You’ve really got to think about the pros and cons of it, including your affordability.

You’ve demonstrated how a mortgage broker can help. Have you got anything else to add?

Hopefully what’s clear from this conversation is that it’s complex. Annual rewards statements are often given in January or February, and people are really happy with what they see and decide to buy a property. Only then do they realise how complicated this is.

If this resonates with you, speak to a broker as early as you can. Don’t just talk to your own bank – they might offer mortgages, but will they factor in this type of income? You might not get the result you want.

Aside from looking at all the lenders for you, brokers add a lot of value throughout the process. We get exclusive rates and we can use lenders that aren’t available to the public.

In my experience, clients in this space are really busy as top-level execs. While you can do this on your own, have you got the time? Why not get us to do the donkey work for you?

Aside from saving time, the biggest value-add from a broker is advice. We haven’t even talked today about whether you want to go fixed, variable or interest-only? Or do you want to blend all those things? Quality advice gives the biggest value.

While AI is fantastic and it can do a lot of things, it could send you down the wrong mortgage path. Talk to a human who knows what they’re doing, and you’ll get a good outcome.

Key Takeaways:

• The majority of UK lenders do not count Restricted Stock Units (RSUs) as income for a mortgage because they are technically defined as capital, not income.
• A minority of banks, often those with private banking or ‘high value’ teams, will consider RSUs as income, usually requiring two to three years of history and a current valuation statement.
• RSUs are recognised as a legitimate source of funds for a mortgage deposit, whether the money is held on a stock platform or has already been liquidated into cash.
• RSUs or bonuses paid in non-sterling currency can lead to complications, as many banks will apply a ‘haircut’ (a 10% to 20% reduction) due to currency fluctuation, or may not accept non-sterling income at all.
• The criteria for using RSUs vary significantly between lenders; it is highly recommended to consult an experienced mortgage broker who can navigate the complexity and ensure you find a bank that will factor in this type of income
  
  

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.