Have you asked yourself how to get a million pound mortgage recently? The first thing to say here is the million pound mortgage mark does not represent anything more than a psychological barrier in the eyes of many borrowers. So, if you are reading this expecting to discover a plethora of complicated rules, regulations and obligations that apply to all lending over the million mark then you may be pleasantly surprised.
That said, this area of the market does require careful navigation and a good knowledge of credit policy. It follows that with the right broker you can borrow as much as 90% of the property value, potentially on an interest-only basis. For example, the Enness Private Office team recently secured a million pound mortgage with just a 10% deposit for a client to purchase a £3million London flat. If you’re looking for something similar we’d be delighted to help.
So let us now assume you are looking for a million pound mortgage or higher and you’ve found that perfect property. Our attention must now turn to your income and wider asset base – specifically how to make the best use of it to secure a loan on the terms you want. We deal with three very distinct “types” of lenders who operate in the large loan field and all have differing approaches. Therefore, it is perhaps appropriate to discuss them separately to establish how to get a million pound mortgage.
What different types of million pound mortgage lenders are there?
Niche building societies
Niche building societies are a middle ground and they will generally lend around the £3-5million mark. Their pricing tends to be a little bit higher than the high street, but in return, they will take an old fashioned approach where we as brokers can pick up the phone, discuss the case, and if there’s a few niggles, we can potentially straighten it out. Rates would be above the 2% mark, on a 20-25 year term.
Private banks offering million pound mortgages:
Private banks are much more flexible, and can work with complex cases. Despite the intimidating title of “private banking” these lenders bear, they typically open their doors to more people than you may think. Contrary to stereotypes, you don’t need a yacht in Monaco or a villa in St Tropez to gain access to private lenders.
What you will need is a genuine willingness to engage in a banking relationship that goes beyond just the mortgage. Many private banks will want you to place assets under management (AUM). Now, that’s not to say the bank won’t lend unless you invest with them – some will. The reason a wider banking relationship is so important to many of these lenders is simple – they lend on the client’s wider profile and asset base, not just on income.
Therefore, a general rule is that the more you hold with the bank the surer they can be that the client is “worthy” enough of the lending. Private banks take up a large chunk of the million pound plus market because of their willingness to look beyond income (although it cannot be disregarded entirely) and this flexible approach is real plus point. Placing AUM will also allow you to secure a better rate; with AUM, you could look to achieve a rate of between 1.5-1.75% + LIBOR. Without AUM, rates could be in the region of 2% + LIBOR.
A million pound plus loan is also the entry point for many of the banks we work with, so you can be assured of the experience and competence of dealing with high value transactions and understanding complex income structures.
Needless to say interest-only lending is widely available on this platform, as is the ability to consider 100% of your bonus income for affordability. This is a real plus point compared against many high street banks employing a homogeneous formula where you will need at least 3 years’ history with the same employer – and even then a maximum of 50% of your bonus can be used.
If you have had difficulty asking a high street bank to understand or accept your income structure (which may be formulated in a complex fashion) and you’re looking for a large loan then a private bank could be for you. If you’re unsure, don’t hesitate to drop me a line and I’ll be happy to talk through your options.
Conventional/Challenger Banks that offer million pound mortgages:
It is possible to secure a million pound mortgage on the high street, because mainstream banks have increased the amounts they can lend. They typically now cap out about £3million, but you’ll need to have a very straightforward profile and no complications in your case to qualify. High streets lenders typically use tick-box criteria which leave little room for negotiation.
The structure of this spectrum of the million pound mortgage market is much more straightforward than a private bank mortgage. It is your income and ability to “afford” the loan which is the sole driver of acceptance. This extends into how the lender will categorise your income. For example, if you receive bonus income as part of your total remuneration you may run into difficulty in this instance as most conventional or challenger banks only accept 25-50% of this as allowable income.
However, one possible advantage this type of lender will have over its private counterpart is the product interest rate. On the high street, rates can be sub 2%. Whilst this may look appealing, most lenders require the loan to be on a full capital and interest repayment basis, making it expensive on a monthly basis and therefore potentially less appealing. On the other hand, this will guarantee to repay your mortgage over it’s term.
The more conventional lender does have a role to play in the large loan space – if you fit their often rigid criteria and are indifferent to interest-only options then they may be the right way to go. There really is no wrong or right answer in this instance and we are aware that everybody’s preferences and situations tend to differ.
If this has sparked further questions about how to get a million pound mortgage, or if you would like to speak to an adviser, about a specific set of circumstances and how best to take it forward, I would be delighted to hear from you.