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Hitting the right note: Mortgages for musicians

by: Chris Lloyd, associate director at Enness
  • 27/09/2017
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Hitting the right note: Mortgages for musicians
Continuing his series considering mortgages for professionals with unusual incomes, Chris Lloyd examines how to hit the right pitch with borrowers who sing for their supper.

Whether it’s having a record go platinum or headlining Glastonbury, musicians are often dreaming of the big time—but when the wheels of the tour bus stop turning, even the wildest rock stars need somewhere to lay their head.

Unfortunately, this career is notorious for not having salary security, which makes arranging mortgages for musicians a real challenge.

A musician’s income is difficult to predict accurately, which is a big source of concern for lenders.

Earnings can increase or decrease drastically from year to year, as performers fall in and out of the charts. Unpredictable events, such as the use of an old song in a modern film, might spark a resurgence in popularity and cause royalties to spike.

 

Who are musicians?

‘Musician’ as an umbrella term could cover a multitude of positions.

Session musicians—who are hired to perform in record sessions but rarely achieve fame in their own right—typically work on a freelance basis. It might be the songwriter, who writes the melody and lyrics, or the recording artist or performer. They could even work as the publisher, who pitches the song to record labels and TV and film producers.

These roles are recompensed differently; recording artists earn royalties on the sale of their recordings (for example CDs and digital downloads), while songwriters and publishers earn royalties for public plays (such as on the radio).

 

The trouble with royalty

Royalties as an income stream are very hard to evidence accurately on a mortgage application. Artists in the UK can receive royalties from record sales, radio airplay and public performances, and these are understandably not packaged in a neat monthly salary. The UK has two primary organisations which collect and distribute royalties for music, one of which pays out quarterly, while the other pays out annually.

It’s therefore difficult to predict exactly how much an artist might earn at any point. Professional musicians also receive income from freelance work, playing live, and selling merchandise. All of these are hard to forecast.

A final complication is the level of discretion required. Understandably, famous performers may not want to walk into a high-street bank for an appointment. They may also want to keep details of their transactions and finances very private.

 

High street struggle

I recently worked on a case which combined these complicated factors.

My client had been part of a successful band who were a household name in the UK. Unfortunately, the group had split up, and the client’s income had decreased significantly, although they were still receiving royalties and planning to work again.

But as a result, arranging a mortgage on the high street was a struggle.

I advised my client on how to present their business plan for their future projects to the lender, and guided them on how to structure their application appropriately. As it happened, the most suitable lender was a high-street bank—but my relationship with the lender meant I could persuade them to take a view on the client’s unusual situation.

As ever, the importance of a broker’s relationship with a lender cannot be understated as it often enables cases to progress successfully.

This is definitely one of the more challenging professions to secure finance for, but with the right knowledge and contacts, it can be achieved—leaving musicians free to focus on penning the next top ten hit.

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