The good news is that you may be able to get a mortgage before your RSUs vest. You don't necessarily need to wait for your shares to become available before you start looking for a property or speaking to a mortgage advisor. However, whether your RSUs can help you borrow more depends on the lender, your employment income and your wider financial circumstances.
The important distinction is between being awarded shares, having shares vest and actually being able to access their value. These are not the same thing, and understanding the difference can help you plan your property purchase more confidently.
What does vesting mean?
Vesting is the process through which you become entitled to receive shares under your company's employee share scheme.
Your employer might award you restricted stock units (RSUs) as part of your compensation package, but you won't usually receive the shares immediately. Instead, the award is subject to conditions, often including staying with the company for a specified period.
Your RSUs become vested when you meet the relevant conditions.
For example, imagine your employer awards you RSUs worth £60,000, based on the share price at the time of the award. Your plan might allow those units to vest over four years, with 25% vesting each year.
There are four stages to understand:
RSUs awarded: Your employer grants you a conditional entitlement to shares. You don't usually own the shares yet.
RSUs unvested: Some or all of your award is still subject to the plan's conditions. You generally cannot sell these units.
RSUs vested: You have met the relevant conditions for those units, giving you the right to receive the shares under the plan.
Shares delivered or settled: The shares are transferred to you, subject to the scheme's rules and any applicable restrictions. Once you can sell them, you may be able to access their cash value.
The exact process depends on your employer's scheme. Some plans also withhold shares to cover tax, meaning the number of shares you receive may be lower than the number that vest.
HMRC explains how restricted stock units work in its guidance on restricted stock units and vesting.
Why does vesting matter when you're buying a home?
An RSU award can look substantial on paper, but an unvested award is not the same as money in your bank account.
You may have a valuable compensation package and expect to receive shares over the coming years, yet still need to work out how to fund your deposit today.
There are also uncertainties to consider. The value of your shares may change before they vest, and some awards may be forfeited if you leave your employer or don't meet the plan's conditions.
For mortgage purposes, this means you need to distinguish between the value you expect to receive in the future and the income or assets you can demonstrate now.
Can you get a mortgage with unvested RSUs?
Yes, it may be possible to get a mortgage with unvested RSUs. The key question is whether you can demonstrate enough acceptable income and meet the lender's affordability requirements without relying on shares that you have not yet received.
For example, imagine you earn a basic salary of £120,000 and have been awarded RSUs expected to vest over the next three years. You want to buy a home before your first vesting date.
A lender may assess your application using your salary and other eligible income, without giving your unvested RSUs any additional value for affordability. Another lender may take a different approach to the wider circumstances of your application, but you should not assume that future vesting will be accepted as income.
If your salary is sufficient to support the mortgage you need, you may not have to wait for your RSUs to vest at all.
If you need the RSUs to increase your borrowing capacity, the position becomes more complicated. You may need to explore lenders that understand share-based compensation and establish what evidence they require before deciding when to apply.
The important point is that you don't automatically need to wait for vesting to apply for a mortgage. But you shouldn't base your plans on unvested RSUs being counted as guaranteed income.
What if you need your RSUs to increase your borrowing power?
If your basic salary alone isn't enough to support the mortgage you want, your RSUs may be relevant. However, the way a lender treats them will depend on its criteria and your circumstances.
Some lenders may consider certain forms of vested share income when assessing affordability. Others may not accept RSU income at all, or may require a track record of previous awards vesting before they will consider it.
Unvested RSUs are more difficult because they represent a potential future benefit rather than income you have already received.
Before you apply, a mortgage advisor can help establish:
- Whether any lenders are prepared to consider your particular RSU arrangement.
- Whether you need evidence of previous vesting dates or received share awards.
- Whether the lender requires proof that vested shares have been sold.
- How much of your basic salary and other eligible income can be used in the affordability assessment.
- Whether waiting for one or more vesting dates could materially improve your application.
There is no universal rule that applies to every lender, so it is worth checking the criteria before submitting a full application.
Should you wait for your RSUs to vest before buying a property?
Not necessarily. The right timing depends on what you need your RSUs to do for your mortgage application.
If your salary already supports the mortgage
You may be able to move forward without waiting for your shares to vest.
You could start exploring your borrowing options, understand your budget and prepare your application based on income you can evidence today. Your future RSUs may be a useful additional financial benefit, but they don't necessarily need to be part of your mortgage calculations.
If you need the shares to fund your deposit
Waiting until your RSUs vest, and potentially until you can sell the shares, may make sense. Remember that vesting doesn't always mean you immediately have cash available. Your shares may need to be delivered to your brokerage account, and company trading restrictions may affect when you can sell them. You should also consider the value you will actually receive after any shares withheld for tax and other applicable deductions.
If you need the RSUs to support affordability
This is where getting advice early can be particularly useful. Waiting for vesting might help you build a record of received share awards, but it doesn't guarantee a lender will count them as income. The lender may also want evidence of consistency over time, rather than relying on one vesting event. Before delaying a purchase, find out whether a lender could consider your existing income and circumstances. You may have options that you haven't considered.
What documents should you prepare?
If you're planning to apply for a mortgage before your RSUs vest, it helps to organise your financial information early.
Depending on the lender, useful documents may include:
- Employment contract: showing your basic salary and any contractual compensation arrangements.
- RSU award letter: confirming the number of units awarded and the terms of the award.
- Vesting schedule: showing when you expect your units to vest, subject to the plan's conditions.
- Recent payslips: demonstrating your regular employment income.
- Bank statements: helping evidence your income, savings and deposit.
- Previous vesting or share statements: if you have received RSUs from earlier awards.
- Brokerage statements or sale records: where shares have already been delivered or sold.
Not every lender will ask for all of these documents, and providing them doesn't guarantee that the RSUs will be included in an affordability assessment. However, having a clear picture of your compensation package can help an adviser identify suitable options.
Key takeaway: You may not need to wait
Having unvested RSUs doesn't automatically prevent you from getting a mortgage. If your salary and other eligible income are sufficient, you may be able to buy a property before your shares vest.
If you need your RSUs to support your borrowing or provide your deposit, the timing and evidence become more important. An award on paper is not the same as accessible cash, and future vesting should never be treated as guaranteed mortgage income.
The best next step is to understand how a lender is likely to assess your particular compensation package before you decide whether to buy now or wait.
Thinking about buying a home before your RSUs vest? Speak to an expert advisor at Limitless Finance to explore your options and understand what may be possible based on your income, share awards and plans.
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