RSU Mortgage

Podcast approved by The Openwork Partnership on 08/07/2024

What do we mean by restricted stock units or RSU?

RSU is an abbreviation for restricted stock units. For some companies, often big tech firms like Amazon, Google or Meta restricted stock units could form part of the overall compensation given to employees, in addition to basic pay or cash bonuses.

RSUs are usually defined as unvested, vested, cashed in or sold. Unvested RSUs are promised to an employee on a certain specific date in the future, perhaps subject to certain performance targets being hit.

Once that target is reached, the RSU is vested and the employee receives shares in the company’s stock. From that point, the individual could cash in that stock when they choose to.

Can I use RSUs as proof of the mortgage deposit?

You could, but not always, use vested RSUs to prove your deposit, , even if they have not yet been cashed in.

Ultimately, the lender will look at the value of the stock as if it were cashed in. But if you actually have cashed in your vested RSUs, the lender would simply define this as your own personal savings, accrued from your regular income. It’s pretty straightforward in that sense.

Can I use RSUs as part of my proof of income?

Yes – although your ability to include this on a mortgage application comes down to different qualifying criteria.

For example, lenders may want to know how long you’ve worked at the company, for what period you’ve been receiving vested RSUs, the vesting schedule moving forwards and more.

Typically, you would need to demonstrate a minimum of two or three years’ income from RSUs for this to be included. Lenders want to see a long and consistent history of the RSU income to include it in an application.

They want evidence of ongoing stability in this income stream – alongside the performance of the company’s stock, for example, to show you could maintain those mortgage payments moving forward.

Then lenders will assess the RSU income you’re receiving as part of your overall income and package, including your basic salary, any cash bonuses you receive and any other income – for example, property rental payments.

Some specialist lenders go even further and take more of a bespoke approach, particularly with individuals working for established employers. They’ll look at all elements of your bonus award, including cash elements, vested and even unvested stock you might hold.

While you could use RSU income for a mortgage, each individual’s situation is unique. It’s always worth speaking with a mortgage broker just to see where you personally stand.

Can I use RSU income as a First Time Buyer?

There are no issues or obstacles here. Buying your first home, doesn’t mean there are any specific differences to the criteria I mentioned.

I get bonuses, will this help me borrow more?

Probably, yes. Cash bonuses are easier for lenders to quantify, as you’d be receiving a specific amount at specific intervals, be that monthly, quarterly or annually.

The cash bonus income will contribute to your overall earnings and allow you to borrow more, even if the lender is only including a certain percentage in their affordability calculations.

The key consideration here is the period of time over which we need to evidence the cash bonuses you’ve received. For annual bonuses, typically two years’ history is required. For quarterly bonuses, sometimes it’s one year, but again, often two.

With any monthly additional pay, such as bonus, commission or overtime, a lender would look at the last three months and annualise the figure from there.