Remortgage on Investment Income

Can You Remortgage Using Investment Income?

Yes, you can remortgage using investment income, but the process may be more complex than for someone with a straightforward employed salary. Lenders need to be confident that your income is reliable and sustainable enough to cover your mortgage payments over the long term, and investment income can be inherently more variable than a regular wage.

The types of investment income that lenders may consider include:

• Share dividends - Regular dividend payments from shares or equity investments
• Savings and bond interest - Interest earned from savings accounts, corporate bonds or government gilts
• Investment property income - Rental income from property investments, which is typically assessed separately under buy-to-let criteria
• Pension income - Regular payments from a pension, which some lenders treat similarly to investment income
• Trust income - Regular distributions from a trust fund or family trust
• Investment portfolio drawdowns - Regular withdrawals from an investment portfolio, sometimes assessed by private banks and specialist lenders

Not all lenders will accept every type of investment income, and some may only consider it alongside a minimum level of employment or self-employment income. The key is finding a lender whose criteria align with your particular income profile.

It is important to understand that lenders distinguish between regular, predictable investment income and one-off or irregular gains. A consistent dividend payment from a blue-chip company held over several years is viewed very differently from a one-off capital gain from selling a property or a speculative share.

Specialist mortgage brokers who deal with high-net-worth or non-standard income clients are often the best route to finding suitable lenders for investment income remortgages. They understand the nuances of how different lenders assess this type of income and can match you to the most appropriate products.

How Lenders Assess Different Types of Investment Income

Each type of investment income is assessed differently by lenders, and understanding these distinctions will help you prepare a stronger remortgage application.

Share dividends. Lenders who accept dividend income typically want to see a track record of consistent payments over at least two to three years. They will usually assess the income based on an average of the dividends received over this period. If you own shares in your own limited company, the dividends may be assessed under self-employed criteria rather than as investment income.

Savings and bond interest. Interest from savings accounts and bonds is generally straightforward for lenders to assess, provided the capital generating the interest is substantial enough to produce meaningful income. Lenders will want to see that the capital is likely to remain invested and that the interest payments are sustainable. In a low interest rate environment, the income generated by savings may not be sufficient to support significant borrowing.

Trust income. Regular distributions from a trust can be accepted by some lenders, though they will typically want to see the trust deed, evidence of regular payments and confirmation from the trustees that the distributions are expected to continue. Trust income can be complex, and not all lenders are comfortable assessing it.

Portfolio drawdowns. Some private banks and specialist lenders will consider regular drawdowns from an investment portfolio as income. This approach is more common among high-net-worth lending, where the borrower has a substantial portfolio and is drawing a sustainable amount relative to its overall value. The lender will typically want to see that the drawdown rate is conservative enough to preserve the capital over the mortgage term.

Capital gains. Regular capital gains from trading investments are generally the most difficult type of investment income to use for mortgage purposes. Most mainstream lenders will not consider capital gains as income because they are inherently unpredictable. However, some specialist lenders may consider a track record of consistent gains over several years as evidence of earning capacity.

Regardless of the type of investment income, lenders will always want to see comprehensive documentation. This typically includes tax returns, investment statements, bank statements showing deposits and any relevant correspondence from fund managers, trustees or investment platforms.

Documentation Required for Investment Income Remortgages

Providing thorough and well-organised documentation is essential when applying to remortgage on investment income. The specific documents required will depend on the type of investment income and the individual lender, but there are some common requirements you should be prepared for.

Tax returns and SA302s. Your self-assessment tax returns are one of the most important documents for evidencing investment income. They show HMRC the total investment income you have received and the tax you have paid on it. Most lenders will want to see at least two to three years of tax returns to establish a track record.

Investment statements. Statements from your investment platform, stockbroker or fund manager showing the value of your portfolio and the income it has generated. Annual tax certificates from these providers, known as consolidated tax certificates, summarise all the income and gains from your investments during the tax year.

Bank statements. Three to six months of personal bank statements showing investment income being credited to your account. These should clearly show the source of each payment and match the figures on your tax returns and investment statements.

Portfolio valuation. A current valuation of your investment portfolio, showing the types of assets held, their values and the income they generate. Some lenders may want this valuation to be provided by an independent financial adviser or wealth manager rather than self-reported.

Trust documentation. If you receive income from a trust, you will need to provide a copy of the trust deed, evidence of regular distributions and potentially a letter from the trustees confirming the expected continuation of payments.

Accountant's letter or certificate. Some lenders may request a letter from your accountant confirming your investment income and its sustainability. This can carry significant weight with lenders as it provides independent verification of your financial position.

Organising all of these documents before you begin the application process can significantly speed things up and reduce the risk of delays. If you are unsure about what a particular lender requires, your mortgage broker should be able to provide a comprehensive checklist.

Challenges of Remortgaging on Investment Income

While remortgaging on investment income is certainly possible, there are several challenges that applicants commonly face. Being aware of these in advance will help you prepare and develop strategies to overcome them.

Income volatility. Investment income can fluctuate significantly depending on market conditions, company performance and economic factors. Dividends can be cut or suspended, interest rates can fall and capital values can decline. Lenders are acutely aware of these risks and may apply significant discounts to your declared investment income when calculating affordability.

Capital depletion risk. If you are drawing down from an investment portfolio to generate income, there is a risk that the capital will be depleted over time, particularly if withdrawals exceed investment returns. Lenders need to be satisfied that your income source will last for the duration of the mortgage term.

Limited lender options. Many mainstream lenders have restrictive criteria when it comes to investment income, preferring the stability of employment income. This can limit your options and may mean you need to approach specialist or private lenders, who may charge higher fees or interest rates.

Complex tax position. Investment income can involve multiple tax considerations, including income tax on dividends and interest, capital gains tax on disposals and potentially inheritance tax planning. Lenders may find it more difficult to assess your true net income position, which can complicate the application process.

Market timing concerns. If your investment portfolio has recently experienced a significant decline in value, this could affect both the income it generates and the lender's confidence in its sustainability. Conversely, if your portfolio has performed exceptionally well in recent years, lenders may view the income as unsustainably high.

Despite these challenges, thousands of people with investment-based income successfully remortgage every year. The key is finding the right lender, providing comprehensive documentation and presenting your financial position clearly and honestly. A specialist broker with experience in non-standard income applications can be invaluable in navigating these complexities.

High-Net-Worth and Private Bank Remortgage Options

If you have substantial investment assets, high-net-worth and private bank mortgage products may offer a more suitable route for remortgaging. These lenders take a different approach to income assessment and can be more flexible in how they evaluate investment-based earnings.

Asset-based lending. Some private banks offer asset-based lending, where they consider the overall value of your investment portfolio rather than focusing solely on the income it generates. Under this approach, a lender might be willing to lend a percentage of your total liquid assets, on the basis that these assets provide security and could be liquidated to repay the mortgage if necessary.

Bespoke underwriting. High-net-worth lenders often employ manual, bespoke underwriting rather than relying on automated systems. This means a human underwriter will review your application individually, taking into account the full picture of your financial situation. This can be particularly beneficial if your income structure is complex or does not fit neatly into standard lender criteria.

Relationship-based lending. Private banks often take a relationship approach, considering your overall banking and investment relationship with them. If you hold significant assets with a private bank, they may offer preferential mortgage terms as part of a broader wealth management package.

Flexible income assessment. High-net-worth lenders may be more willing to accept a wider range of income types, including portfolio drawdowns, trust income and foreign investment income. They may also be more comfortable with higher loan amounts and more complex property types.

However, private bank and high-net-worth mortgage products are not available to everyone. Minimum asset thresholds typically start at around 250,000 pounds in investable assets, though some lenders set the bar higher. The application process can also be more involved, and fees may be higher than for standard mortgage products.

If your investment portfolio is substantial, it is worth exploring private bank options alongside standard lender products. A specialist broker with connections in the private banking sector can help you assess whether this route would be beneficial for your circumstances and introduce you to appropriate lenders.

Tips for Improving Your Remortgage Prospects With Investment Income

If you are planning to remortgage using investment income, there are several steps you can take to improve your chances of approval and secure the best possible terms.

Build a consistent income history. Lenders value consistency above all else when assessing investment income. If possible, establish a track record of regular, predictable investment income over at least two to three years before applying. Avoid making significant changes to your investment strategy shortly before a remortgage application.

Diversify your income sources. Having multiple sources of investment income, such as dividends from different companies, interest from bonds and income from property, can make your overall income appear more stable and resilient. Lenders are more comfortable when income is not dependent on a single source.

Maintain a healthy portfolio value. The overall value of your investment portfolio relative to the amount you wish to borrow is an important factor. A larger portfolio provides a greater cushion against market fluctuations and demonstrates that your income is sustainable. Aim to keep your mortgage borrowing to a modest proportion of your total investment assets.

Keep your tax affairs in order. Ensure your tax returns are up to date and accurately reflect your investment income. File your self-assessment on time and maintain clear records of all income received. Lenders may view late or incomplete tax filings negatively.

Reduce other debts. Minimising your outstanding debts, including credit cards, personal loans and other financial commitments, will improve your overall affordability profile. Lenders assess your total debt obligations when determining how much you can borrow.

Consider the timing. If your investment income varies through the year, consider when your most recent tax return will show the strongest position. Applying shortly after a particularly good year for investment returns may improve your assessed income.

Engage specialist advisers. Work with a mortgage broker who has experience with investment income applications and a financial adviser or accountant who can help you present your finances in the best possible light. The combination of expert mortgage advice and sound financial planning can significantly improve your remortgage prospects.