It is safe to say that the worldwide mortgage market covers a variety of different scenarios, different clientele and different financial situations. While most “off-the-shelf” mass market mortgage products offer enough variation for traditional markets, this is not always the case with high net worth mortgages and HNW individuals. Complex financial situations may require a bespoke mortgage arrangement to suit all parties. In general, there is often a greater need for flexibility, visibility and access to significant finance.
What is a High Net Worth Mortgage
The criteria according to the FCA is a mortgage for an individual who has a personal income more than £300,000 or liquid assets more than £3,000,000
If an individual meets these criteria, lenders are permitted to loosen some rules (for example on affordability). This can result in a much more tailored and personalised mortgage product being offered.
These solutions are offered predominantly from private banks or from specialist departments of global lenders.
How much do High Net worth mortgages cost?
As you would expect, mortgages are individually negotiated and are based on the circumstances in play.
- For simple mortgages up to £5m we may be able to use high street providers which will keep fees low and interest rates very low less than 1.5% for example
- For private banks with assets under management expect 1.5-2.25% per annum over Cost of Funds
- For private banks without assets under management the range will be 2.5 – 3.5%
- And for complex specialist cases anywhere between 3.5 and 7% is possible
Everything is based on the circumstances, we negotiate everything and the degree of flexibility and fit for purpose will be high.
Mortgages for people with large assets but little income.
It is possible therefore to arrange mortgages for individuals with little or low income (or insufficient provable income according to the rules surrounding affordability). This is possible if we can show that the client owns other assets which could be invested to create income, repay the loan or to give background support for the lender to be comfortable with the credit risk.
Other mechanisms for example pre-paying interest, releasing equity from the property to pay for the interest cover or placing assets with the bank as additional security can all be used to create the correct mortgage solution for the client.
Using an international balance sheet.
Our unique place in the market means we can deal with high net worth individuals from all over the world, can use global assets as security and we have the experience to deal with any profile, ownership structure or anything else.
We can secure mortgages against property all over the world to ensure we achieve the correct lending terms
Who are the best lenders for high net worth mortgages?
Many UK high street lenders have special departments for high net worth individuals and they can have special products and criteria. Pricing will often be competitive, criteria will likely be rigid, and applications will be subject to normal processes.
Private Banks can offer highly personalised and individually underwritten mortgages. Pricing will be on a case by case basis and terms of the mortgage can be adapted to meet the client’s requirements. Pricing will depend on several things. Placing other assets with the bank to manage will result in a lower interest rate overall.
Some specialist lenders also cater to high net worth borrowers. These are often used for high loan to value and other specialist parts of the market.
Finally, for very large mortgages, international lenders will enter the fold, using lending to attract valuable clients.
Why do high net worth individuals use mortgages?
For the vast majority of people the purchase of their home will be their largest investment and one unlikely to be matched in later life. When looking at HNW individuals, the situation is often much more complicated. They may have assets but limited cash flow, possibly trade on their bonuses/future income and need a financial package which takes all of this into account. This scenario requires more than the “off-the-shelf” option available to the masses.
How do we arrange high net worth mortgages?
The high net worth mortgage market does not have the breath of the mass market but the criteria are still straightforward. Before a mortgage can be arranged the applicant would need to confirm their income, assets and overall financial situation. As we touched on above, bespoke situations require bespoke solutions, which is where Enness Mortgages can offer valued assistance and guidance.
Our world-class team of industry experts have built relationships with an array of different mortgage providers across the board. We have access to in-depth data, flexibility when arranging mortgages and a reputation which opens doors for us and our clients. We have a lending panel which is unrestricted, allowing us to cater for all nationalities, political status and even the most complicated of financial situations. We can unpick troubled elements, refinance and put them back together on a firmer footing. We can also secure the use of a variety of different assets as collateral against high net worth mortgages.
Flexibility and durability
There will be scenarios where a short-term solution is required to protect the assets of HNW individuals which would be refinanced further down the line. We often see assets such as fine art, classic cars, jewellery, gold, fine wine and antiques used as collateral when looking to secure high value mortgages. These are often unique solutions for unique scenarios which we are able to micromanage, reducing the financial stress felt by our clients.
Utilising existing assets to reduce short to medium term financial strain is easy in theory but not so easy in practice. We will take a look at the overall picture, take into account assets and liabilities and advise the best way forward. Whether looking to purchase a new property, refinance or restructure your assets, there are ways and means of doing this. Some may require “out-of-the-box thinking”, bringing together various financial arrangements.
We have come across most scenarios you can think of, created bespoke finance deals of varying complexity but ultimately it is our flexibility which is one of our most powerful assets. There is a time and place for taking the traditional route as there is a time and place for a bespoke offering. If you are looking to raise mortgage capital, restructure your assets or undertake a long-term refinancing arrangement, give us a call today for a no obligation chat.