High Net Worth Mortgages
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High Net Worth Mortgages
How does a high net worth mortgage work?
A high net worth mortgage is specifically designed for individuals with significant assets or high incomes, who don’t meet the criteria for traditional mortgages. These mortgages typically cater for clients with complex financial situations, such as those with income derived from multiple sources or large, irregular income streams.
The options normally available include interest only mortgages, where the client only pays the interest due on the loan for a specific period – typically five to ten years – and then they repay the loan or refinance.
Lenders may also offer flexible repayment terms, which can be customised to align with income patterns such as annual bonuses or irregular cash flows.
There are also typically larger loan amounts than with standard mortgages. They’re often offered on bespoke terms because the lender individually underwrites the cases.
Because high net worth clients typically have a lot of investments and savings in the background, they can offset these against their mortgage to reduce the interest payable on the loan.
The final area is international mortgages, for clients with international assets and incomes. There are often options that cater for cross-border financing needs.
Why are mortgages for high net worth individuals so difficult?
You won’t be able to go into your high street branch and access these deals. This is specialist lending, which requires individual underwriters with a lot of experience.
These mortgages tend to be more challenging due to the complexity of the financial situation, diverse asset holdings, and the need for highly customised financial products. Lenders also have to navigate regulatory requirements and risk assessments. Often, too, these clients expect a more personalised service to meet their needs.
I would strongly recommend engaging with an experienced mortgage broker who understands the intricacies of this market. We can help high net individuals secure the most suitable mortgage options.
How much is considered high net worth? Who qualifies as high net worth?
The Financial Conduct Authority, which regulates the financial services industry in the UK, has a very simple definition. They say a high net worth mortgage customer is a customer with an annual net income of no less than £300,000 or net assets of no less than £3 million. So if you fit this category, you meet the entry requirements for a high net worth mortgage.
What can I borrow and what deposit is needed as a high net worth individual?
High net worth is a highly bespoke area of finance. The amount you can borrow depends on several factors, including deposit, overall financial profile, type of mortgage and lender criteria.
Lenders will require detailed income verification. It might include income from employment, dividends, business income and other sources. Some lenders offer asset-based lending, where your assets such as investment portfolios or secondary properties are used to secure the loan – and potentially reduce the deposit needed.
Due to the bespoke nature of the borrowing, lenders may be able to lend more or require a smaller deposit, depending on your asset and income profile, compared with a traditional mortgage lender.
A positive aspect is that In the UK, unlike the continent and often the US, it’s not normally a requirement for the client to hold investments with that mortgage lender as a condition of the borrowing. You might, however, be asked to open a current account with that lender. It’s worth bearing that in mind.
Do high net worth individuals need life insurance?
It depends on their individual circumstances. They may be happy to self-insure based on the amount of assets and asset-based income that they generate, or they may want to use life cover to pay inheritance tax bills.
That way they can pass the maximum amount from their estate to their family or charities, or ensure an orderly business succession for family businesses.
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We support clients through a daunting process, looking at your circumstances and taking time to understand your priorities. We then research the market for the most appropriate options based on those needs.
How does remortgaging work as a high net worth individual?
You often have access to more specialist banks and lenders, which come in a couple of categories.
You’ve got private banks such as Arbuthnot Latham and Handelsbanken. You’ll have specialist high net worth mortgage lenders, such as Coutts, and then the international banks, such as HSBC or Barclays International.
When remortgaging, high net worth individuals should work with professionals that understand their unique situation and can offer tailored advice. This also ensures you get the best possible terms and solutions that align with your financial strategy.
Can I get a Buy to Let mortgage as a high net worth individual?
Yes, as a high net worth individual you certainly can get a Buy to Let mortgage. In fact, your financial status might help you secure more favourable terms and conditions.
The underwriting process for high net worth individuals involves more detailed assessment of your financial situation and a thorough review of assets, income streams and credit history, which is not something that a traditional lender would normally do.
You may also receive customised terms, based on interest only borrowing, or tailored repayment schedules that are not available through traditional lenders.
Another aspect is that some lenders offer portfolio loans, allowing high network individuals to buy multiple properties under a single mortgage agreement. That can simplify management and potentially reduce costs, because they’re not necessarily charging administration fees and valuation fees on each individual property.
The last area is around property types. With high net worth individuals, lenders might be more willing to finance a wider range of properties including higher value homes, luxury apartments and even international properties.
What if I have bad credit as a high net worth individual?
I’ve experienced this with a client who unfortunately underwent a divorce and their partner ran up a very large overdraft. The client didn’t have access to the joint account and it resulted in adverse credit registered to them. It does happen, even though people believe that it couldn’t possibly affect them.
Even as a high net worth individual, bad credit can pose challenges when securing a mortgage and other forms of financing. But lenders will look at your overall financial strength and assets to help mitigate these issues. That isn’t something you can always do with a traditional lender where the computer says ‘no’.
You should be prepared for probably higher interest rates, but again, your overall financial strength might help us negotiate better rates than the standard bad credit terms. Lenders might also offer lower loan to values, which might mean you need to put a slightly larger deposit down.
There’s normally a comprehensive list of documentation required, but there may be more in terms of bank statements and assessment of affordability.
In terms of rebuilding credit, it’s important to address any outstanding issues, ensuring timely repayments and reducing overall debt. This is where a mortgage advisor can really help, because we understand these types of individuals. We’ve gone through previous cases, spoken to the relevant lenders before and can probably help you develop a strategy to improve your credit and secure favourable financing.
How can a mortgage broker help a high net worth individual?
Leveraging the expertise and resources of a skilled mortgage broker will help high net worth individuals navigate the complexities of securing a mortgage with more ease and confidence.
A mortgage broker can help you access exclusive products that aren’t available directly to customers and can be tailored to high net worth individuals. We have expertise in complex financial situations with multiple investment streams, international assets and sources of income.
There’s more personalised service. You won’t be dealing with multiple people as you might in a bigger organisation. There’s also the time saving aspect, because we handle the application from start to finish, saving a lot of hours and effort.
We’re also good at advising on structure – whether you should consider interest only combined with a fixed rate or a variable rate and how do you incorporate that into the broader financial plan?
Mortgage brokers are problem solvers by nature. So if you’ve got bad credit or you think that your income is too complex to understand, we will be a great resource to lean on. We will understand which lenders are more flexible to your circumstances.
Do choose a broker who’s got the experience of working with high net worth individuals. Look for brokers with proven track records and strong relationships with lenders – and read the reviews.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
