Private equity and hedge-fund partners occupy a unique place in the mortgage market. They often earn seven-figure compensation, yet much of that income fluctuates year to year and is tied to fund performance, carried interest, deferred bonuses, and long-term incentive structures. While their wealth is substantial, it seldom conforms to the simple PAYE evidence that mainstream lenders prefer.
In 2025, this issue has intensified. Fund performance cycles have lengthened, carry crystallisation is less predictable, and bonus structures vary widely between firms. Many partners also receive a relatively modest base salary, making their headline income look deceptively low. When traditional lenders apply rigid affordability models, partners with exceptional wealth can find themselves treated as if their financial position is ordinary or even weak.
Willow Private Finance works extensively with partners across private equity, hedge funds, venture capital, asset management, and family offices. The underwriting considerations for their mortgages share similarities with the issues faced by founders and high-net-worth clients who rely heavily on assets rather than conventional income. This mirrors themes covered in our guides on asset-based borrowing and complex international income, which frequently overlap with PE and hedge-fund remuneration.
This guide sets out how lenders treat carried interest, performance fees, deferred compensation, K1-style income, bonuses, and long-term partnership distributions—and how private banks have adapted their lending models to suit this sophisticated group of borrowers.
Partners in private equity and hedge funds rarely earn income in a simple way. Their financial profile usually includes a blend of base salary, annual discretionary bonuses, carried interest participation, co-investment returns, and deferred compensation vehicles. These elements vary widely in size and timing, making traditional income verification difficult.
Base salaries are often low relative to total compensation. A partner earning £150,000 in base salary might earn £700,000–£2 million in total compensation once carry and performance-related elements are realised. Yet many mainstream lenders underwrite almost entirely off the base salary. They struggle to account for long-term incentive structures that cannot be neatly captured in a P60.
Carried interest is a further complication. Carried interest is typically realised when investments are exited, which may occur every few years rather than annually. Some lenders do not know how to model this type of income at all—they prefer predictable monthly earnings that fit their affordability calculators. But sophisticated lenders recognise that carry is one of the most stable long-term wealth engines in finance. Partners whose funds have multiple active investments and strong historical returns are seen as reliable borrowers by private banks, even if their income fluctuates year to year.
Deferred bonuses provide another dimension. In many firms, bonuses vest over several years and may be paid partially in shares or fund units. These deferred awards hold real value but are illiquid until they vest or crystallise. Private banks understand this structure and incorporate vested portions into affordability calculations, often treating them as forward-funded compensation.
In short, PE and hedge-fund income is predictable in macro terms—partners earn significant wealth—but it is unpredictable in timing. This distinction is critical in underwriting.
Mainstream lenders operate with rigid frameworks. They rely on automated affordability models, tick-box income verification, and narrow interpretations of bonuses and variable pay. If income is unpredictable, varies annually, or lacks the documentation that fits their model, they often exclude it entirely from affordability.
Carried interest is almost never counted. Bonuses may be averaged, discounted or excluded. Deferred compensation may be ignored altogether. The result is that a partner with £1 million annual wealth creation may be underwritten as if they earn less than £200,000.
This is not a risk issue—it is a model issue. Mainstream lenders simply are not set up to evaluate high-complexity remuneration structures. Their process prioritises simplicity, speed, and volume. For PE and hedge-fund partners buying in prime London or high-value residential markets, this often means automatic declines or severely reduced borrowing capacity.
Private banks take a very different approach. Their underwriting teams understand fund structures, carried interest waterfalls, partnership arrangements, and the long-term wealth arc of finance professionals. They regularly lend to clients with compensation packages consisting predominantly of carry, bonuses, or long-term incentive plans.
The first thing private banks evaluate is the overall pattern of remuneration. Even if one year’s bonus is unusually high, lenders consider the partner’s long-term earnings across several years. They assess the stability of the fund, the maturity of investments, the firm’s exit track record, and the partner’s role in deal flow or investment committees.
Carried interest is treated as a long-duration asset. If the partner has several active funds, multiple years of accrued carry, or vested units with foreseeable exits, private banks incorporate this into their affordability analysis. They know that carry may not be liquid annually, but its value is significant across a multi-year horizon.
Deferred bonuses are assessed based on vesting schedules. Vested amounts can often be included as income or asset strength. Unvested awards may still support lending where the firm is stable and the partner has long-standing tenure.
Private banks also evaluate personal liquidity. Many partners maintain substantial investment portfolios—sometimes consisting of co-invested capital alongside fund commitments—and these can be used as part of an asset-backed or portfolio-pledged mortgage structure. These strategies align closely with those discussed in Willow’s guide to borrowing using investment portfolios.
In practice, private banks underwrite partners based on their entire wealth ecosystem, not their salary.
Co-investment is integral to private equity and hedge-fund compensation. As partners increase in seniority, their co-investment allocations often grow substantially. While co-investments are not liquid, they are powerful indicators of long-term wealth. Private banks see co-investments as signals of aligned incentives, financial sophistication, and future liquidity.
Where partners receive distributions from co-investments, private banks incorporate these into income models—even if irregular. The consistency of investment performance, rather than the timing of individual payments, is what lenders use to establish affordability.
For hedge-fund partners whose compensation includes fund units or incentive fee participation, lenders take a similar view. They evaluate the fund’s volatility, return profile, and length of track record. Stable multi-year performance builds lender confidence.
Documentation for partners is more complex than for traditional borrowers, not because lenders are difficult but because the structures themselves require deeper analysis.
Partners typically need to provide:
Where partners receive US-style K1 income, lenders may also require multi-year summaries of distributions and capital accounts. For hedge-fund partners, documentation of incentive fees or fund participation may be required to demonstrate consistency.
While this documentation is extensive, private banks are highly familiar with it. They interpret the information quickly and with nuance, reducing underwriting friction for the borrower.
The single biggest challenge partners face is timing. Bonus cycles, carry crystallisation, and annual investment processes can complicate income evidence. Partners who apply just before bonuses are confirmed may lack up-to-date documentation. Similarly, carry statements may be available only quarterly or annually, delaying lender analysis.
Another common challenge is valuation volatility. Fund performance fluctuates, and while long-term performance for tier-one firms is strong, short-term variations can cause confusion for mainstream lenders.
Finally, partners with significant personal commitments—such as co-investments, capital calls, or deferred compensation taxes—need to demonstrate that these obligations do not impair mortgage affordability. Private banks approach these obligations commercially; mainstream lenders often misunderstand them.
Partners achieve the best outcomes when they prepare documentation early, especially around bonus season. Many structure their mortgage applications to coincide with bonus confirmations, vesting events, or distribution periods.
Another effective strategy is to leverage investment portfolios to enhance borrowing power. Partners with multi-million-pound portfolios can use asset-backed lending to secure significantly better terms, as explained in our article on investment-backed finance.
Some choose to borrow through LLPs or corporate structures as part of long-term wealth planning, though this requires careful documentation and specialist structuring.
Private banks also allow greater flexibility for partners purchasing high-value property—often offering interest-only terms, longer loan durations, and tailored repayment plans to align with liquidity events.
Consider a partner earning £200,000 base salary and £900,000 total compensation, with £3 million of accrued but unrealised carry across multiple funds. A mainstream lender might treat this as a £200,000-salary case, severely limiting borrowing. A private bank, however, evaluates the partner’s total wealth, historic earnings, carry schedule, fund performance, and liquidity outlook. The result is often lending of £2–£4 million, structured flexibly around the partner’s long-term income.
Another scenario involves a hedge-fund partner with a substantial personal investment account, consistent bonus history, and incentive-fee participation. Even if income fluctuates, the partner’s financial profile demonstrates long-term stability and high future earning capacity—allowing private banks to offer lending far beyond what base salary implies.
These examples illustrate why partners require specialist lenders who understand their world.
Private equity and hedge-fund lending remains strong in 2025, supported by private banks that understand complex remuneration. As compensation structures become even more aligned to long-term incentives, lenders are increasing their reliance on wealth-based underwriting and moving further away from traditional income calculations.
The future is clear: partners who prepare documents early, maintain transparent compensation records, and work with brokers who understand carried interest and fund remuneration will consistently secure better lending outcomes.
Willow Private Finance specialises in arranging high-value mortgages for private equity partners, hedge-fund managers, investment professionals, and clients with complex compensation structures. We understand carried interest, deferred bonuses, fund distributions, LLP profit shares, co-investments, and long-term incentive plans.
Our team works directly with fund CFOs, HR teams, and private-bank underwriters to present complex compensation clearly and efficiently, ensuring lenders recognise the partner’s true financial strength. Whether you are buying, refinancing, using assets to enhance borrowing power, or planning around a liquidity event, Willow ensures your case is positioned perfectly.
Q1: Do lenders count carried interest as income?
Private banks do. They assess accrued carry, vested amounts, fund maturity and liquidity potential.
Q2: Can bonuses be included in affordability?
Yes. Private banks often average multi-year bonuses or treat them as part of long-term earning capacity.
Q3: Do co-investments help or hinder borrowing?
They help, as they demonstrate long-term wealth creation, though lenders consider outstanding commitments.
Q4: Can partners borrow before carry or bonuses crystallise?
Yes. Private banks often lend against anticipated liquidity where documentation supports it.
Q5: Do LLP members need special documentation?
Yes. Profit share, K1-style distributions, carry statements and compensation summaries are typically required.
Q6: Are interest-only mortgages available to partners?
Yes. Private banks frequently offer interest-only terms for high-value residential borrowing.
Book a free strategy call with one of our mortgage specialists.
We’ll help you find the smartest way forward—whatever rates do next.
About the Author
Wesley Ranger is the Director of Willow Private Finance and brings over 20 years of experience securing mortgages for private equity partners, hedge-fund executives, and high-net-worth professionals with complex compensation structures. His expertise spans carried-interest analysis, fund-linked income, high-value private bank lending, and bespoke wealth-backed mortgage solutions for clients across the UK and internationally.
Important Notice
This article is for general information only and does not constitute personalised financial advice. Mortgage eligibility for private equity and hedge-fund professionals depends on individual compensation structures, liquidity, fund performance, and regulatory considerations. Carried interest, deferred bonuses, and investment-linked income may involve tax or legal implications requiring specialist professional advice.
Willow Private Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA No. 588422). Registered in England and Wales.
