Getting a large or high net worth mortgage often requires a more specialised approach, particularly if you have complex income streams and need a lender offering greater flexibility to high net worth individuals. Here, we explain everything you need to know about which types of lenders offer large mortgage loans, what additional requirements you may need to meet when you apply for a high value mortgage, and what sort of costs might be involved.
What is a large or high net worth mortgage?
A large mortgage is typically a mortgage for over £1m. If you’re looking to buy or refinance multimillion pound properties and want to apply for a large mortgage over £2m, you’ll generally need to be classed as a high net worth customer. This essentially means you must either be a high earner or own a significant amount of assets.
Who are considered high net worth individuals?
The Financial Conduct Authority defines a high net worth individual as a customer with an annual net income of over £300,000, or one who has assets giving a total wealth of £3 million or more. Typically, these customers will have more complicated financial situations and income from many different sources such as a property portfolio or property investments.
As a result they may not have a large amount of liquid assets, but could provide other means of collateral. This is where, with the help of a high net worth mortgage broker, specialist lenders may be able to provide more bespoke mortgage solutions than those that would be available from many standard mortgage lenders .
Which lenders offer high net worth mortgages?
There are several high street lenders who will offer mortgages of £1m or above if you’re planning to purchase a high value property. Whilst these can be a good option if your income and outgoings are straightforward, a more bespoke solution might be required if, for example, some of your income is from bonuses or vested shares rather than a salary.
High street lenders might also not be suitable if you need to borrow a large percentage of the value of the property, as they will usually have a maximum loan-to-value, which effectively caps the size of the mortgage they are prepared to offer you.
In these cases, more specialist solutions may be required, such as a private bank. They can often be more flexible than mainstream lenders when it comes to high value mortgages, agreeing to lend based on individual circumstances and an assessment of overall wealth rather than sticking to more rigid lending criteria, although they may come with higher costs.
Why choose a private bank?
Private banks can help meet the needs of high net worth customers by really getting to know you and your unique circumstances like complex income structures. They can consider factors such as your source of wealth and the value of any assets you hold if you are looking for a high income multiple, whilst at the same time often providing competitive rates for a large loan.
Unusual properties, such as those with large acreage or outbuildings/annexes, and ownership structures including on and offshore trusts or Special Purpose Vehicles (SPVs) can be considered by private banks for high net worth mortgages, whereas they might not be considered by high street lenders on a standard mortgage application.
Who can apply for a mortgage from a private bank?
Generally, a private bank will be looking for customers to fall into the definition of a high net worth (HNW) individual as mentioned earlier. Some private banks may take a view on a customer who is likely to become a HNW individual in the future, but this will vary from case to case.
Assets under management vs dry lending
Some private banks might insist that you hold a minimum amount of assets and investments with them first, known as ‘assets under management.’ The amount of assets under management typically ranges from a minimum of £500k to 50% of the amount you’re looking to borrow, and could consist of various types of investments.
However,there are a growing number of private banks that will offer large mortgages without any assets under management, which is known as ‘dry lending'.
What else you need to know
If you’re taking out a high value mortgage through a private bank, typically the amount you’ll be able to borrow will be restricted to 60–65% of the property value. However, if you are in a particularly strong financial position, it is possible that some may consider as much as 95% of the property value, providing you agree to pay back some of the capital at various stages over a defined period.
Loan to values will tend to fall as the property value increases, so limits will be more restrictive on very expensive properties.
How much do high net worth mortgages cost?
If you’re taking out a large or high net worth mortgage there will usually be arrangement fees to pay, so it’s important to factor these into the overall cost of any deal. Arrangement fees will usually either be a set amount, or a percentage of the purchase price of the property.
If you are taking out a high value mortgage, a deal with a lower interest rate but higher arrangement fee may workout to be more cost-effective than a deal with a slightly higher interest rate but a lower arrangement fee. Remember that there will also be survey and legal costs to pay.
Private banks typically charge a 1% arrangement fee and survey and legal costs will also need to be covered separately.
