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If you are a high-net worth mortgage customer – defined by the financial regulator as someone with a net income of at least £300,000 or net assets of at least £3 million – you may struggle to get a mortgage from a mainstream lender and may need to look at more specialist options.
It may be surprising that high-net-worth (HNW) individuals can find it difficult to get a mortgage but there are a number of reasons for this. You may want to borrow more than the maximum amount mainstream lenders are prepared to lend, which is usually £1 million or in some cases £2 million, to buy a high-value property.
You are likely to have complex financial circumstances, which could include offshore investments, family trusts, inherited wealth and irregular income sources, so won’t fit with lenders’ regular criteria. Plus, you may not be buying a property to live in – maybe you’re buying a holiday or second home, an investment property or somewhere for your children to live.
Since the financial crisis in 2008, mortgage regulation has been tightened up, with the Mortgage Market Review in 2014 and the Mortgage Credit Directive in 2016, and lenders are more cautious about who they lend to in order to reduce the risk they are exposed to. This has affected all types of borrowers, including first-time buyers and individual buy-to-let investors.
Although this is mostly a sensible approach for lenders to take, HNW individuals are particularly affected because their finances are often less predictable and it may be harder for them to prove they have a regular income that means they can afford to pay back the mortgage.
If you are wealthy you may be able to afford to buy a property outright but there are good reasons why you might still want to get a mortgage. Maybe you don’t want to tie up any cash you have in a property or you don’t have the liquid capital available. Interest rates are also historically low so borrowing is cheap.
Asset finance is another type of borrowing that is used to buy equipment to help a business grow, such as machinery or vehicles, with the assets used as security for the loan. It’s not usually used to buy residential property as it’s designed for short-term borrowing but it is possible to use your personal assets, which could include any investment properties, along with your income to help you get a mortgage.
As with mainstream mortgages, you can get fixed, tracker and discounted rates with many under 1.5% available. Product fees are also similar – they could be £995 or £1,499, for example. You can borrow up to 95% of the property’s value (although you’ll get better deals with a higher deposit) and you may be able to get interest-only loans in some circumstances.
It’s worth shopping around as with any mortgage but, because you’ll generally be using specialist lenders and private banks, the deals you can get will be more bespoke to you with your overall financial circumstances assessed in detail rather than on the checklist basis common with mainstream lenders.
It’s also likely that you’ll be able to get a better deal from a private bank as they are geared up to provide a more bespoke service and you may find it easier to borrow money to buy a high-risk property, such as a listed building.
Wherever your deposit money is coming from, you’ll still have to provide the lender with documents to prove its sources in line with mortgage regulation and money laundering rules.
Other evidence you would still need to provide includes the level of rental income if you’re purchasing a buy-to-let property and, in the case of a property you’re planning to live in either as your main residence or as a second or holiday home, proof that you have income that can cover the mortgage payments. It’s in your favour if you don’t have any large outstanding debts, although the lender will take a holistic view of your finances.
The tightening up of mortgage regulation means that mainstream lenders are less willing and able to be flexible or to look at a potential borrower’s individual circumstances in detail, especially if they don’t fit neatly into their existing assessment structure. As you are not a regular client, speaking to an expert who knows where to go for the service you need will be invaluable.
A broker specialising in high-net-worth mortgages will be able to investigate options from a range of lenders, including private banks. The broker will know which the best ones for your circumstances might be and may have relationships with them built up over many years. They can also negotiate the terms of the deal for you since they are tailored to each individual.
They will have a better understanding of the often complicated finances of high-net-worth individuals, can help you build your case with lenders and will help you with the application process, which is likely to be complex. Using a broker will also help to speed up the process of getting a mortgage and you won’t have to spend valuable time researching deals yourself or chasing the lender.
If you are buying a property overseas, speak to someone with knowledge and experience of dealing with the mortgage and property markets in that country, including the local rules and regulations.
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