Made partner? You need to read this

Becoming a partner at your law firm is a monumental achievement – congratulations! With a significant pay rise around the corner, you may want to leverage your higher income to upgrade your home and lifestyle.

As exciting as this next chapter is, borrowing money as a partner can present some unique challenges.

Your income is no longer a simple salary. Instead, it may include a base salary, profit distributions and bonuses. While this structure is highly rewarding, it can complicate things when dealing with lenders, who generally prefer predictable income streams.

Being a law firm partner means you’re technically viewed as self-employed. Without two years of tax returns to validate your income, securing a loan can be challenging due to the stricter criteria imposed on self-employed applicants from lenders.

Alternative income verification

The good news? Select lenders are willing to accept alternative ways to verify your income, even without two years of financials. Depending on your firm, some of the documents they may accept include:

1. CFO letter: A letter from your firm’s CFO can provide a comprehensive overview of your earnings, including your previous year’s income and forecasts for the year ahead.
2. Distribution statements: These statements outline your profit distributions and can serve as proof of income.
3. Bank statements: Showing regular deposits from your firm can help demonstrate the consistency of your income.

Credit policies and accepted firms will vary from lender to lender, so it is always best to seek expert advice at the start of your journey.

What to consider

Fixed and special draws:

• Your income may include fixed draws, which are regular payments, and special draws, which are additional distributions. It’s important to clearly document both types of draws to provide a thorough picture of your earnings.
• The timing of these payments can affect how lenders view your income stability. Ensure you have a consistent record of these draws over an extended period to demonstrate reliability as much as possible.

Trust distributions:

• Be cautious with trust distributions to parties other than your spouse. Many banks will not consider income from trusts distributed to individuals other than a spouse as part of your attributable income.
• If you do receive trust distributions, ensure they are well-documented and clearly traceable in your financial records to present a transparent view of your income sources.

How Legal Home Loans can help

As Australia’s only mortgage broking firm exclusively for legal professionals, we specialise in assisting partners in achieving their financial goals.

With access to more than 30 lenders, Legal Home Loans will navigate the market on your behalf, co-ordinating your application from start to finish with a dedicated specialist with you every step of the way.

Plus,if you’re a member of the Queensland Law Society, you can get $500 cash back upon loan settlement to help with transaction costs*.

Contact our legal lending experts today to explore your options and take the next step toward achieving your property goals.

*Rebate applies to the member’s first loan settled with Legal Home Loans. Legal Home Loans will honour the highest valued rebate applicable to the client. Limit of one rebate per loan in the case of multiple qualifying applicants. Loan value must exceed $250,000 to be eligible.