How to Calculate RSU Income for Mortgage
Restricted Stock Units (RSUs) are a popular form of compensation given to employees by their company. RSUs are typically granted as part of an employee’s overall compensation package and can have a significant impact on their income. When applying for a mortgage, it is important to accurately calculate RSU income to ensure that it is properly accounted for by lenders. Here are some steps to help you calculate your RSU income for mortgage purposes.
1. Understand the terms of your RSU grant: Familiarize yourself with the vesting schedule and any other restrictions associated with your RSU grant. This will help you determine the value of your RSUs and when they will be available for sale.
2. Determine the current value of your RSUs: Check the market value of your RSUs to estimate their worth at the time of calculation. This can be done by reviewing your company’s stock price or consulting with a financial advisor.
3. Calculate the number of RSUs vesting per year: Divide the total number of RSUs granted by the vesting period to determine the annual amount vesting. For example, if you were granted 1,000 RSUs over a four-year vesting period, you would have 250 RSUs vesting per year.
4. Determine the average selling price: If you plan to sell your RSUs to generate income for your mortgage, estimate the average selling price based on historical data or current market conditions.
5. Calculate the annual RSU income: Multiply the number of RSUs vesting per year by the average selling price. This will give you an estimate of your annual RSU income.
6. Include RSU income in your mortgage application: When applying for a mortgage, provide documentation of your RSU income, including past tax returns and your employment contract or offer letter. Lenders will typically require this information to verify your income.
7. Consult with a mortgage advisor: It is always recommended to seek guidance from a mortgage advisor or financial professional who can help you accurately calculate your RSU income and navigate the mortgage application process.
FAQs:
1. Are RSUs considered taxable income?
Yes, RSUs are generally considered taxable income. The value of the RSUs at the time of vesting is subject to income tax.
2. Can RSU income be used to qualify for a mortgage?
Yes, RSU income can be used to qualify for a mortgage. Lenders will typically consider RSU income as long as it can be documented and is expected to continue.
3. Can RSU income fluctuate?
Yes, RSU income can fluctuate depending on the performance of the company’s stock. It is important to provide documentation of past RSU income to demonstrate consistency when applying for a mortgage.
4. Can RSU income be used for a down payment?
Yes, RSU income can be used for a down payment on a mortgage. Consult with your lender to determine the specific requirements and guidelines.
5. How do lenders verify RSU income?
Lenders typically verify RSU income by reviewing past tax returns, employment contracts, and bank statements showing RSU income deposits.
6. Do all lenders accept RSU income?
Not all lenders may accept RSU income, as their guidelines and criteria may vary. It is advisable to consult with multiple lenders to find one that is willing to consider RSU income.
7. Can RSU income be used for refinancing?
Yes, RSU income can be used for refinancing a mortgage. The same documentation and verification process will apply as with a new mortgage application.
Calculating RSU income accurately is crucial for mortgage applications. By following these steps and seeking professional guidance, you can ensure that your RSU income is properly calculated and considered by lenders.