On paper, securing a 100% loan to value mortgage for a client with no income seems like an impossible feat—whilst we regularly arrange mortgages for clients with unusual income structures, it is rare we approached by clients with no clear income whatsoever. This is essentially a mortgage with no deposit, which is very unusual in the modern finance landscape.
However, I encountered this exact scenario when assisting a recent client. My client had worked for a major investment bank for many years, and had decided to leave the bank and spend several years unemployed to spend more time with his family.
He was looking to purchase a family home in the desirable area of Hampstead in North London, and had found a property valued at £825,000. His extremely successful career meant that he had in excess of £6million savings in the bank, so he could clearly afford to buy the house outright if he needed to. However, as we have reported before, buying a house in cash just because you can afford to is often not the most effective use of funds.
This was my client’s view—he wanted to keep his cash flow high by taking out a loan on the property, and was therefore wondering if he could secure a large mortgage with no deposit. But despite his demonstrable wealth, his lack of income meant this would need to be dealt with thoughtfully. I therefore approached a private bank who agreed to take a view on my client’s cash assets. This is one of Enness’ key strengths; in order to gain access to the private banks you will need a broker with a strong prior relationship, which is something we pride ourselves on.
After I outlined my client’s situation, this lender allowed my client to invest £1.2million with them for five years, and then arranged a Lombard loan of £825,000 against the portfolio invested. This meant my client could use the loan to buy his property—at an interest rate of just 1.5% over the Bank of England base rate. This essentially created a 100% loan to value mortgage as the assets he had placed with the lender would theoretically be generating an income.
This was a creative solution, but a fantastic result for my client as it meant the funds he invested would earn a strong return, essentially paying off the interest on the loan.