What are RSUs?
The use of Restricted Stock Units(RSUs) in compensation packages is becoming increasingly common in the UK, with the growth of US tech firms, like Amazon, Google, and Apple and many venture backed tech companies entering the UK market. Their core purpose is to align the objectives of the firm to that of the employee, and are often linked to performance milestones or length of service. RSUs have no tangible value until they vest-and this is there as on many of our clients run in to issues applying for a mortgage when trying to present their income to a bank or an inexperienced broker. When they vest, they are considered income, and at this point, the employee can decide whether or not to cash the min. The big difference between share options (which can expire without any value) is that RSUs will always hold value against the shares they’re present.
Can I use my RSUs to help increase what I can borrow when applying for a mortgage?
Limitless have been working with a number of high street and specialist lenders to improve their understanding of RSUs. These lenders are now accepting the use of RSUs as in come as long as certain criteria are satisfied. There are 2 ways that RSUs can help fund your house purchase:
1. As a deposit. You can legitimately use vested but unsold RSUs as proof for your deposit.
2. As income. Most lenders that accept RSU income would ask to see at least 2 payments received from cashed in RSUs, however a couple of lenders are now accepting just one payment. You will most likely need to have been employed by the company for at least 2 and a half years.
What about Bonuses?
Another part of the compensation package that can cause confusion when applying for a mortgage are bonuses. Companies that have RSU income as part of their incentive scheme often have sign on bonuses to help bridge the gap between an employee starting and their RSUs vesting.
Lenders in the UK have wide ranging criteria when it comes to including bonus payments as part of an applicant’s income. This ranges from lenders who won’t accept any bonus in come at all, to others that are happy to use 100% of it. At Limitless, we identify the lenders that treat bonus payments most favourably, depending on how they’re paid. In most cases, we are able to use bonus income when applying for your mortgage.
