Our Asset-Based Mortgages
FREE Asset-Based Mortgages Advice
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Jonathan Smith – (CeMAP, BA Hons, Aff SWW, CeRER)
As a high net worth individual, you are likely to have significant assets, such as a luxury home and vehicles, pensions, investments and an art collection. Your income, however, may be minimal or have an extremely complex structure. You may only withdraw a small income from your business or have already retired as you no longer need to rely on an income. Your company may be based overseas so that your income is paid in a foreign currency or you may have several income streams. Being asset-rich and income-poor can be an issue when trying to secure a mortgage. This is when an asset-based mortgage provides you with a solution.
At Trinity Finance, we have formed good relationships with lenders offering asset-based mortgages. They will look at your application on a case-by-case basis, providing you with a bespoke solution to your funding needs. Here, we’ll explain what an asset-based mortgage is, how it works, the eligibility criteria and what to consider before applying for one.
What is an asset-based mortgage?
An asset-based mortgage is a tailored way for you to borrow and this type of mortgage specifically caters to high net worth individuals. The Financial Conduct Authority (FCA) defines a high net worth individual as someone with an annual net income of at least £300,000 or net assets of at least £3 million. When you fit into this category, the affordability rules become more flexible for a mortgage. Instead of a lender checking your income, your liquid assets are used as security for the mortgage loan.
How does an asset-based mortgage work?
Usually, when calculating your affordability for a regulated mortgage loan, lenders have to check your income. They use an income multiplier to determine how much you can borrow and the mortgage is secured against the property you’re either buying or remortgaging. However, this process doesn’t tend to work for high net worth individuals. You may take very little income from your business or perhaps you’ve already retired. Your income structure may be complex, such as being paid in foreign currencies or via different methods and at inconsistent periods. Lenders tend to shy away from offering loans to those with a non-standard income stream as it increases their level of risk.
With your high net worth status, you can benefit from more flexibility via private banks and specialist lenders. Instead of looking at your income to assess your affordability of the mortgage loan, they can look at your liquid assets. Also known as securities-backed mortgages, asset-based mortgages are secured against liquid assets instead of the properties being financed. This type of high-value lending is an ideal solution if you’re asset-rich income-poor.
The types of assets that your mortgage can be secured against
Private banks and specialist lenders look at your liquid assets when determining what your mortgage can be secured against. These assets can include:
- Stocks, shares and bonds
- Cash, jewellery, bullion and gems
- Collectible cars
- Luxury yachts
- Private aircraft
- Art collections
- Life insurance policies
Eligibility criteria for an asset-based mortgage
Asset-based mortgage lenders have different criteria as these loans are offered on a bespoke basis. There are some general requirements that you usually have to meet, however, as detailed below.
One of these requirements is that your portfolio must have a minimum value. This tends to be set at £100,000 although some lenders may stipulate a much higher amount.
As with most mortgage products, lenders generally require you to pay a deposit. The amount you need to pay will depend on your lender as well as the level of risk that your assets pose for them. For example, cash and bullion are considered to be low-risk assets. In this case, a lender will probably require a deposit of 5% to 10%. Stocks and shares, however, are more volatile assets and expose the lender to more risk. In this case, you will more than likely need to pay a larger deposit, such as 25% to 50%.
Having a good credit history isn’t a requirement to be approved for an asset-based mortgage as it is with a standard mortgage. Asset-based mortgage lending is done on a much more flexible basis. If you have a bad credit status, the lender will assess it and offer you a mortgage deal accordingly. You may, for example, be asked to pay a higher deposit or incur a higher interest rate.
A certificate of high net worth
You may be asked to provide a certificate of high net worth by the specialist lender or private bank. This confirms that you meet the criteria of a high net worth individual as detailed by the FCA.
Benefit from a personalised service to meet your financial needs
When you’re looking for a bespoke mortgage solution to suit your high net value status, speak with one of our specialist mortgage brokers. Located throughout Kent, London and Edinburgh, our brokers have extensive experience in arranging niche mortgages. They will analyse the assets you have to ensure that your borrowing potential is maximised. Once you’re ready to proceed, they’ll tailor-make your application before presenting it to a carefully selected lender.
At Trinity Finance, we have unrestricted access to the market and extensive dealings with private banks and specialist lenders. As asset-based mortgages are usually only offered by lenders via brokers, this means you can rest assured that we’ll find the best deal for you. We’ll approach the lender most suited to handling your application and the lender will do this on an individual basis, offering you a custom-made funding solution. We’ll also ensure that the best interest rate and terms are negotiated on your behalf.
To get started, simply call us on 01322 907 000 or send us an email at firstname.lastname@example.org. If you prefer, send an enquiry to us via our contact form. One of our expert mortgage brokers will reply to you as quickly as possible so that you can proceed to the next step.
How much can you borrow with an asset-based mortgage?
In general, asset-based mortgage loans are offered with a loan-to-value (LTV) ratio of 50%. This means that if your assets have a market value of £10 million, you can expect to borrow £5 million. This LTV isn’t set in stone, however, and the amount you can borrow depends on various factors. These include how much you want to borrow, the mortgage term and the types of assets you’re providing as security. For more volatile assets, such as shares, the lender is likely to offer a much lower LTV as they’re taking on more risk. For low-risk assets, such as cash and bullion, the lender will be more inclined to offer you a high LTV, such as 95%.
How to apply for an asset-based mortgage loan
Private banks and specialist lenders often only offer asset-based mortgage loans via brokers. At Trinity Finance, we have formed good relationships with these lenders and, based on your circumstances and loan requirements, we’ll approach the right one on your behalf. You need to confirm the assets you wish to use as security and provide evidence of your high net worth status. Your tailor-made application will be presented to the lender and your dedicated mortgage broker will negotiate the best terms and interest rate for you.
How much does an asset-based mortgage cost?
Asset-based mortgage interest rates are determined on a case-by-case basis. The lender will assess the overall level of risk, predominantly based on the assets you provide as security. With very liquid assets, such as cash and bullion, you’ll benefit from a lower interest rate. Asset-based mortgage rates tend to be lower than those for standard high net worth mortgages and are, therefore, a more cost-effective form of borrowing. As mentioned above, your dedicated mortgage broker will negotiate for the best interest rate on your behalf.
The advantages of asset-based mortgages
There are many benefits to having an asset-based mortgage:
- If you’re asset-rich income-poor, you can still arrange a mortgage.
- The interest rate is usually lower than it is for a standard high net worth mortgage.
- You don’t need to liquidate your assets to raise the funds you need, saving you time, stress and potentially a lot of money in the future.
- The underwriting process is more efficient compared with a standard high net worth mortgage so it’s faster to arrange.
- With significant assets, you have the opportunity to secure a larger loan than you could with an income-based mortgage.
- You don’t need to miss out on an investment opportunity when you haven’t got adequate cash to hand.
Considerations before applying for an asset-based mortgage
An asset-based mortgage is ideal if your income is limited but you have significant assets. If your income is sufficient to secure a standard high net worth mortgage, however, decide which of the two options is best for you. For example, you might not want to secure the loan against all of your assets or a significant portion of them. Another option is to arrange a mortgage using your income combined with your assets. Our mortgage brokers can check your circumstances and compare the mortgage deals available to ensure that you make the best decision for your needs and situation.
You usually need a minimum portfolio value of £100,000 to be approved for an asset-based mortgage. There may also be a minimum loan amount, depending on the lender. Allowing for any fluctuations in prices, your assets usually need to have a higher market value than the loan amount. Bear in mind that the prices of your assets can go down as well as up. If using stocks and shares as security, the lender may stipulate a margin call if the value of these assets drops below a specific level. In this instance, you’d either need to offer other assets that the lender can use as security or repay the mortgage loan.
Secure a unique asset-based mortgage deal
As a high net worth individual, your income structure may be complex or you may have a minimal income but significant assets. Either way, using an asset-based mortgage can make financial sense. It’s an efficient way to raise funds quickly so that you don’t miss out on an investment opportunity. There’s no need to liquidate your assets so you can still benefit from the potential returns on them in the long term.
When you’re ready to discuss whether an asset-based mortgage is the right option for you, just give us a call on 01322 907 000. Our mortgage brokers – located in Kent, London and Edinburgh – can check your financial position and advise you accordingly. Depending on your circumstances, they will approach the private bank or specialist lender most suited to your case. They will negotiate for the best terms and interest rate on your behalf and you’ll benefit from a bespoke deal. If you’re unable to speak on the phone, send an email to us at email@example.com or send an enquiry via our contact form. One of our asset-based mortgage specialists will reply to you as quickly as possible with further details.
At Trinity Finance, we can help you with other financial aspects as well as arranging your asset-based mortgage. This includes arranging your home insurance, life insurance and critical illness cover. For full information on the financial protection products we have to offer, get in touch with us as detailed above. Our mortgage and protection consultants are here to ensure that you have the right cover in place to protect you, your family and your home against unforeseen issues.
Yes, refinancing your asset-based mortgage can be beneficial in some circumstances. The value of your assets may have increased since you took out your mortgage, for example. Refinancing can, therefore, allow you to borrow more if needed. Or you may decide that you prefer a standard high net worth mortgage to an asset-based one. As long as you meet the income criteria, you can refinance to this other type of mortgage. Whatever your reason for refinancing, our mortgage brokers can find the optimum deal for you that caters to your unique circumstances as a high net worth individual.
Asset-based mortgage lenders offer more flexibility when it comes to your credit rating. This is because using your assets as security reduces their risk. If you have a bad credit rating, they’ll assess the reasons for this, which will determine the mortgage deal you’re offered. You may, for example, be charged a higher rate of interest or be offered a lower LTV.
The lender will check the assets you’re providing as security. This will include checking the types of assets they are, their value and their liquidity. If your assets are listed, they will check which exchange they’re listed on and the industry they relate to.