As a high net worth individual, applying for a mortgage in the traditional way via a high street lender is not necessarily the best approach. Lenders typically prefer borrowers to have a steady income to ensure the mortgage repayments are made and, therefore, reduce their level of risk. As a high net worth individual, however, it’s likely that your income is irregular, being in the form of share dividends and bonuses, for example, or paid in foreign currencies.
It’s also important to have flexibility in your mortgage product. You may wish to protect your assets or have a complicated ownership structure, such as a foundation, trust or limited company. You may prefer a short loan term, want an interest-only mortgage or be looking for a high loan-to-value ratio.
That’s where a high net worth mortgage comes in. This is specifically designed to cater to your individual needs and circumstances. We’ll explain the criteria you need to meet, the reasons for taking out this type of mortgage and the availability of these mortgages below.
The criteria for a high net worth mortgage
According to the Financial Conduct Authority (FCA), you are eligible for a high net worth mortgage if you earn at least £300,000 per year or have net assets of at least £3 million.
Meeting this requirement opens the doors to specialist lenders and private banks that offer bespoke services for complex cases. This means you will receive a tailor-made solution to your mortgage needs, no matter how complicated your finances or situation.
Why use a high net worth mortgage?
You may wonder what the benefits are of taking out a mortgage when you have a high net worth. One reason is that you may have limited capital to hand to buy a property outright despite having considerable assets. On the other hand, you may have enough cash available to buy your dream property in Pimlico but prefer to maintain your liquidity in light of other investment opportunities.
Borrowing to invest in residential or commercial property, particularly when interest rates are low, is a good strategy to increase your wealth. As well as that, obtaining a high net worth mortgage is advantageous for tax planning purposes.
Which lenders offer high net worth mortgages?
Many high street lenders offer mortgages with a value of up to £1 million and you’ll find some who can go up to £2 million. You may benefit from competitive rates but the lending criteria may be quite strict and you usually have to proceed with the normal mortgage application process. With a complex financial situation, this can be time-consuming and frustrating. You also tend to find that the loan-to-value (LTV) ratio is lower, typically between 60% and 75%.
Specialist lenders and private banks, however, offer a lot more flexibility and can provide larger loans. They are able to handle much more complex cases, offering bespoke solutions that would be unobtainable with high street lenders. They are more flexible when assessing your income and take your assets into account as well as your wider income. They can adapt the terms to suit your needs and can also offer higher LTVs, with some even agreeing to a 100% LTV mortgage. The rates for high net worth mortgages are calculated on an individual basis. When dealing with a private bank, you can often obtain a lower interest rate if you place some of your assets with them.
To obtain a high net worth mortgage via a specialist lender or private bank, you usually need to use the services of a specialist mortgage broker to act as an intermediary.
Use a specialist mortgage broker to secure your high net worth mortgage
When seeking and applying for a high net worth mortgage, it’s essential to use the help of your specialist mortgage broker in London, Kent or Edinburgh. In fact, as mentioned above, many specialist lenders and private banks insist on dealing with an experienced broker rather than the borrower.
As with all Welling and Pimlico mortgages, your broker will have unrestricted access to the market and know the best lender to approach for your situation while obtaining the optimum rates and terms for you. Your experienced high net worth mortgage broker will not only be able to think outside the box when dealing with your complicated income structure but will be able to provide you with a responsive and discreet service. He or she will prepare your application carefully and ensure it is processed quickly and efficiently, saving you a considerable amount of time, money and stress.