When looking to secure large mortgage loans of more than £1 million, high net worth individuals have traditionally had to apply via private banks using assets under management (AUM) for security. As the demand for large mortgages has increased, however, the market for them has grown more competitive. Others lenders now provide large mortgage loans and offer this level of borrowing without assets under management. This is known as dry lending and allows applications to be assessed based on an individual’s complete profile.
What are assets under management?
Private banks generally prefer to form long-term relationships with their clients. This is achieved by asking high net worth individuals to place their assets with them to manage. The assets can include stocks, shares and cash, for example, and act as security against a high-value mortgage. In return for this security, private banks are often willing to provide a higher income multiplier or a higher loan-to-value ratio.
In normal conditions, most private banks would ask for assets under management that totalled about 25% of the value of the loan. This means that if you wanted to borrow £1.5 million to purchase a property in Pimlico, you would need to lodge £375,000 worth of assets with the bank. Should you experience financial issues in the future, the bank can then make use of these managed assets.
As the requirement for large mortgage loans has continued to rise in recent times, however, private banks have had to be more flexible with their lending criteria. High street lenders increasingly offer high-value mortgages and don’t call for such as large degree of commitment. As a result, private banks have been compelled to reduce their requirements for assets under management when providing large mortgage loans.
What does dry lending mean?
Dry lending refers to mortgages offered without the need for assets being placed under management with the lender. Instead, the overall wealth of a high net worth individual is taken into account along with their income and assets. These assets can be held anywhere and are recognised when ascertaining the affordability and repayment details.
This type of lending is more commonly offered now by private and commercial banks as well as specialist lenders. The flexible approach allows an individual’s general financial position to be considered, which can lead to optimum repayment terms and rates.
Get expert advice from a specialist mortgage broker
There are benefits to using both private banks and conventional lenders when taking out large mortgage loans. A specialist mortgage broker can guide you on the differences between mortgages with assets under management and those without to help you decide which is best for your needs.
As a high net worth individual, your financial circumstances are unique and a tailored approach to your loan application will be taken by your specialist broker in London, Kent or Edinburgh. You may be happy to place your assets under management or prefer a more flexible option.
Regardless of how complicated your situation may be, when applying for high-value Welling or Pimlico mortgages, your broker will collate your complete financial profile and present it to the lenders offering the most competitive rates and best terms to suit your requirements. You can look forward to a bespoke mortgage solution that completely meets your borrowing needs.