Mortgages for Musicians’ Modest Homes and Celebrity Mansions

For the rich and famous, not only is getting a mortgage straightforward but it can also be a money-making tool, where investments yield a higher rate of return than money borrowed. The greatest difficulty they face when purchasing a new property is deciding between a customized multi-million dollar mansion or a luxury penthouse. However, the music business isn’t always easy or glamorous and it can still be difficult for ordinary, hard-working musicians to get on the property ladder.

Evaluating Earnings

Musicians have been a part of the growing gig economy for many years but, unfortunately, the lack of salary security makes arranging a mortgage a challenge for them. Even for well-established stars, earnings can fluctuate hugely from year to year and it can be difficult to collate evidence of money earned from royalties, playing live and selling merchandise. However, with the prediction that 43% of US workers will be freelancers by 2020, mortgage investors do want to make it easier for gig economy workers to afford their own properties by being more flexible with their evaluations of incomes. Even while being seen as a high risk by lenders, it’s still important to compare different mortgage rates to find a suitable deal.

Maximizing Income

In Brooklyn Heights, Bjork’s full-floor luxury penthouse was recently listed for $9 million, a price well outside most people’s range. Even to secure a mortgage for an apartment considerably more modest in price, independent working musicians will still need to show solid evidence of income. Although, according to the Bureau of Labor, singers and musicians earned a good average hourly rate of $35.86 last year, because of fluctuating earnings this doesn’t necessarily equate to a $70,000 annual salary. Freelancers who have a partner with a good, stable income may be able to get on the property ladder based on their partner’s income alone, but this can still present problems when two incomes are required to qualify for a mortgage. In order to maximize yearly income, keeping tax write-offs to a minimum in the months preceding a mortgage application could help. Lenders look at net income for appraisal, so holding off on investing in the latest piece of must-have kit or a vintage guitar will present a healthier looking profit.

Saving for a Downpayment

Although Beyonce and Jay-Z’s $35.2 million deposit for their Bel-Air mansion is more than many musicians will earn in a lifetime, saving up in order to make for a heftier downpayment could be the way to secure a mortgage. This way, paying private mortgage insurance on a deposit of less than the recommended 20% can be avoided and a more attractive mortgage rate may be obtained. Lenders ask for 24 months of income history anyway in the form of personal and business tax returns, so in any case, after a couple of years of saving, buyers are in stronger position to move forward.

Getting a mortgage as a musician can be tricky so, until the royalties come rolling in, being scrupulous with accounts and saving a larger deposit will help present a safer bet to potential lenders.