High net worth mortgages

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Large and high net worth mortgages

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.

Lender

Accord

Aldermore

BM Solutions

Bank of Ireland

Barclays

Bath BS

Beverley

Buckinghamshire

Cambridge

Chelsea

Chorley BS

Co-op

Coventry

Cumberland

Darlington

Digital Mortgages

Dudley

Earl Shilton

Ecology BS

Family BS

First Direct

Furness

HSBC

Halifax

Handlesbanken

Hanley Economic

Harpenden

Hinckley & Rugby

Hodge Lifetime

Leeds

Leek United

Loughborough BS

Mansfield

Market Harborough

Marsden

Melton Mowbray

Metro Bank

Monmouthshire

NatWest

Nationwide

Newbury

Newcastle

Nottingham

Paragon

Penrith

Platform

Post Office

Principality

Saffron BS

Santander

Scottish BS

Scottish Widows

Skipton

Stafford Railway

Suffolk BS

TSB

Teachers BS

The Mortgage Works

Tipton & Coseley

Vernon BS

Virgin Money

West Brom BS

Yorkshire BS

Previous SVR %

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9.73

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8.85

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8.24

7.49

8.89

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9.19

8.44

8.75

8.49

8.24

7.99

7

6.94

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7.99

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7.79

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8.49

8.74

6.79

5.95

8.69

8.74

8.79

8.49

8.59

8.1

9.24

6.74

8.24

% Change

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0.45

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New SVR %

7.99

9.53

9.34

8.04

8.74

8.19

8.24

8.59

8.29

7.99

8.59

7.87

7.24

8.04

8.09

6.99

8.74

8.19

-

8.19

-

8.54

-

8.49

8.5

8.49

7.79

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8.24

7.99

7.94

8.64

8.39

8.99

8.69

8.5

8.39

7.99

7.74

6.75

-

8.45

9.35

-

7.87

8.04

7.43

8.54

8.25

8.24

8.49

-

6.2

8.44

8.49

8.64

-

8.44

-

8.99

6.59

7.99

Fee free since 1999

How L&C can help with high net worth mortgages

There are many specialist and smaller lenders operating in the high net worth market so the help of a mortgage broker can be invaluable. We have a team of specialist high net worth brokers that has a wealth of experience in dealing with large mortgages and private banks so understand high net worth criteria. We can arrange bespoke mortgages with private banks tailored to your individual circumstances, or if appropriate,recommend high street lenders which cater for those seeking larger mortgages. Get in touch today and see how we can help.

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Frequently asked questions

Can restricted stock units (RSUs) be used to calculate affordability?

Yes, there are private banks who will use RSUs in their calculations to arrive at the amount they will lend as long as there is a track record of RSU allocations (typically 2 to 3 years) which can be evidenced (typically through a vesting schedule).

Can 100% of bonuses be considered when calculating affordability?

Yes, with certain banks, 100% of cash bonuses can be considered for high net worth individuals although most will consider up to 75% of cash bonuses with a track record.

Will I need a 3 year track record of self employed income if I have been recently promoted to partner within a law firm (or accountancy firm)?

If you’ve recently been made a partner at a law or accountancy firm most private banks and some high street banks will take a pragmatic approach. Often they’ll use figures confirmed by the accountant to reflect what a partner with a similar percentage share would earn going forwards.

Can foreign currency earnings be considered for affordability?

Some high street banks and private banks can consider income denominated in foreign currency although there will be a list of acceptable currencies and a discount may apply to different currencies based on currency fluctuations.

Can I get a mortgage as a professional footballer on my current salary which is on a contract?

Private banks can consider these scenarios and will base their lending on current earnings on a professional sports contract as long as there is professional insurance cover in place.

Can assets held be monetised to provide an income stream to calculate affordability for a mortgage?

Assets such as an investment portfolio or a pension fund can be monetised to provide an income stream which can then be used to assess affordability.

Do lenders still consider pre funding?

This is very rare, although may in some unique circumstances still be possible to lend on a shorter term by ring fencing assets to service the interest over the term of the mortgage as long as there is a clear exit strategy and a compelling reason to do so.

Can I borrow on my new residential purchase whilst my current property is still on the market and may only be sold after the new purchase?

There are private banks who will consider these scenarios and may even be able to lend 100% on the new purchase by taking a cross charge on both properties with the condition that the current property will be sold within a year or two and a portion of the mortgage redeemed from assets realised from the sale. The loan will need to be affordable based on usual affordability calculations.

The residential property I am purchasing has an annexe on the grounds - will this be an issue?

Although this may limit the lenders to consider, it can be considered by some who are particularly flexible when it comes to considering complex property types

Can I borrow on an interest only basis on a mortgage with a small deposit?

There are private banks who can lend on an interest only basis with a small deposit to start with. However the structure will have annual lumpsum repayments built in to reduce the capital borrowed in line with annual bonus payments to help with cash flow.