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High Net Worth Mortgages - how to find the right deal
It can be surprisingly difficult for a High Net Worth individual to find a suitable and competitive mortgage deal. There are some unique challenges in obtaining High Net Worth Mortgages, but the right advice can make all the difference.
What is High Net Worth?
You are a High Net Worth individual if you have an annual income or net assets worth £500,000 to £25 million.
High Net Worth is a term coined by the financial services industry to describe wealthy people who often have complex financial situations.
Why can it be difficult to get a High Net Worth Mortgage?
Many high street lenders won’t approve High Net Worth individuals for a standard mortgage. A common issue is that this type of customer has irregular income – or sometimes no formal income.
Many mortgage companies’ lending criteria are restrictive. If you cannot demonstrate a reliable income, you will not get a loan.
Another issue comes if you are seeking a high loan amount. Many lenders will only fund properties up to £1 million in value.
What is the LTV % on a High Net-Worth Mortgage?
Most lenders only offer mortgages with an LTV (loan-to-value) of between 60% and 75% of the property cost – so you need a cash deposit of 25% to 40%.
But for many high net worth individuals, funds are tied up in assets rather than as cash. This can make raising the deposit challenging. Fortunately, some specialist lenders and private finance providers offer mortgages at higher LTVs, where you may only need to provide a 10% deposit.
Often these lenders are more open in how they assess income and will accept your assets as a basis for borrowing.
How will my income/wealth be assessed?
With standard mortgage applications, lenders base their offer on your annual income. Lenders often provide a loan of 4-5 times an applicant’s salary.
For a High Net Worth individual, this process may not be relevant. Perhaps you don’t receive a standard annual income, or your funds don’t come from a salary.
In this case, it will usually help to find a specialist lender that will take your assets into account for the affordability assessment. They may also be more flexible in considering your ability to repay the loan.
Special lending options for High Net Worth clients
If you are buying a high-value property, a lender might offer you an AUM or Dry Lending mortgage to satisfy their requirements:
AUM (assets under management) With this arrangement, your lender will seek to manage your assets such as stocks and shares portfolios and use them as security against the loan. This can get you a higher LTV or a total loan amount than you would otherwise achieve.
Dry Lending – here the debt is secured against the property you are buying, in the same way as a standard mortgage. If you are unable to keep up with the repayments on your mortgage, the home may be repossessed.
Large mortgage loan payments
Clearly, the higher the cost of the property, the larger the monthly repayments will be. A specialist mortgage broker like Pia will often be able to structure the monthly mortgage payments to suit your personal circumstances. Perhaps you would prefer an annual rather than monthly mortgage payment, for example.
Your mortgage broker will discuss these options with you and work with the lender to find the solution that best meets your needs.
How can Pia Financial Solutions help?
At Pia we have worked with many High Net Worth individuals to secure them a suitable mortgage deal. Some have been First Time Buyers, while others were seeking Buy to Let mortgages or creating property portfolios.
Our role is to manage every aspect of your property financing. We will talk to you about your specific financial situation and explore the mortgage market on your behalf. Then, we will narrow down the best options so that you can make an informed choice to achieve your goals.
Pia Financial Solutions are appointed representatives of The Openwork Partnership which is authorised and regulated by the Financial Conduct Authority (FCA). Our accreditations mean you can trust us to find the most appropriate and affordable products to suit your unique circumstances.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE