High Net Worth Mortgages: Tailored Large Mortgage Solutions for HNW Individuals
Accessing a high net worth (HNW) mortgage isn’t always straightforward and it can sometimes be a bit more complex than a standard mortgage. A big part of the complexity is down to how lenders understand and perceive your income. Furthermore, some lenders may not offer large loans and others may not want to put so much capital into one property as it’s a higher risk.
However, you don’t need to worry, there are plenty of specialist lenders available who offer products to high net worth individuals. Accessing them isn’t always straightforward, so using a mortgage broker can allow you to be paired with a suitable lender. In addition to this, brokers can help prepare your application to put you in the best position when applying.
- What are high net worth mortgages?
- Who classes as a high net worth individual?
- How do they differ from conventional mortgages?
- How to get one
- What lenders are available to you?
- How Asset-Backed mortgages benefit high net worth individuals
- High net worth and large-loan mortgage types
- Benefits of using a mortgage broker
- Frequently asked questions
What are high net worth mortgages?
Large or high net worth mortgages are specialist products designed for those who usually want to borrow anything . In order to do so you will typically need to be classed as a high net worth client by your lender.
Individuals are normally high net worth because they are high earners or they own assets that have significant value, or both. Due to this, they can borrow much more than the average borrower.
Who classes as a high net worth individual?
So, what is a high net worth individual in the UK? Well, the Financial Conduct Authority (FCA) defines a high net worth mortgage customer as:
“A customer with an annual net income of no less than £300,000 or net assets of no less than £3,000,000.”
Due to the significant amount of money involved, these individuals will usually be in a more complex financial situation. Although, these customers are subject to the same lending regulations as anyone else, their financial complexity can make it tougher to find a mortgage.
HNW mortgages also tend not to have a set income multiple like a standard mortgage because their income structures often don’t fit the standard criteria for mortgage underwriting.
Therefore, it’s most likely that they will need to work with a specialist high net worth mortgage broker in order to find the right lender.
How do they differ from conventional mortgages?
These mortgages are tailored to meet the specific financial needs of high net worth individuals. Therefore there are a range of elements that differ from your standard conventional mortgage.
The first is the flexible payment options offered by lenders. On a typical mortgage you might opt for a fixed-rate option. However, many high net worth individuals may instead choose an interest-only mortgage. This is due to the reduced monthly payments this mortgage type offers, allowing for capital to be spent elsewhere.
Another difference is the loan-to-value ratio offered is likely to be higher. This means that these individuals can borrow more without needing to put down a larger deposit. This is because their net worth offers extra financial security through things like a high income or a large amount of assets, meaning lenders are happy to lend more.
A final difference is that the specialist lenders used for these mortgages are likely to offer exclusive benefits to their clients. Some of these benefits include:
- Access wealth management services
- Preferential interest rates
How to get one
As we have discussed above, getting a mortgage with a high net worth is not the same as getting a conventional mortgage. Instead, there are a few extra hoops you’ll likely need to jump through. Below we have highlighted some steps you would take on your journey to getting a mortgage.
- You would first need to find a mortgage broker, as many lenders in the sector aren’t directly available to the general public.
- After you have found a suitable mortgage broker, you can then begin to discuss your situation with an advisor and set out what you want to achieve.
- From here, your advisor will be able to go away and begin to research the market and find some suitable lender and product options for you. Don’t forget, an advisor could tell you that they currently don’t think right now is the most suitable time for you to get a mortgage.
- Once you and your advisor are happy with this, you can then begin to prepare your application. Don’t worry, your advisor will be able to take you through this step-by-step and work with your accountants and solicitors to get everything prepared.
- Finally, after you and your advisor are happy with everything, you can then look to apply. This can take some time as your advisor is likely going to negotiate with the chosen lender in order to get you the most favourable deal.
- If everything goes smoothly, you will then be offered a mortgage by the lender.
What lenders are available to you?
Due to the large amounts of money involved with these types of mortgages, meaning increased risk, it can be hard to find products from high street banks. While there may be a select few who you could use, using a specialist private lender or bank for your mortgage needs is much more suitable.
The main benefit of these high net worth mortgage lenders is that they better understand complex income situations and provide a personal service, leading to much more flexible mortgage terms. They will be able to look at applications on a case-by-case basis, assessing sources of income and any assets to help them determine how much you could borrow.
By doing so it’s likely that they will offer a higher loan-to-value on the property, meaning you won’t need to put down as much. These lenders also understand that your income allows you to comfortably make payments, and in turn, this reduces your risk exposure. This can lead to better overall negotiations on the product you will receive.
As with any type of mortgage, rates are continuously fluctuating. Therefore, listing the rate you could expect to receive would be impossible. To put yourself in the best position to find the most favourable high net worth mortgage rates, you’ll need to use a specialist lender.
Like we have mentioned above, these lenders will have a good understanding of complex incomes. Your mortgage broker will also likely be able to negotiate on your behalf with these lenders, as every application is assessed on a case-by-case basis.
In turn, this means that they are likely to offer you the most competitive product. If you want to get a more accurate idea of what products are available to you, why not reach out today?
How Asset-Backed mortgages benefit high net worth individuals
Getting a mortgage with a low income but high net worth is still possible. These types of loans are usually for those that are asset rich, meaning the majority of their net worth is from assets.
In this case, lenders will look at the value of your assets when determining how much you could borrow. Again, your options may be narrowed down even further when compared to someone who has a high income as well.
Many high net worth individuals in this situation will opt for asset-backed mortgages.
This type of mortgage will use high-value assets to be secured against the loan, instead of using your property as security. In turn, this saves the borrower having to turn their assets into cash to then buy the property.
Like most aspects of high net worth mortgages, high street banks and lenders probably aren’t your best bet. Instead, recruiting a mortgage broker with access to specialist lenders will be needed.
High net worth and large-loan mortgage types
Like any mortgage, interest-only high net worth mortgages mean that repayments will be kept to a minimum. This is because you will only be repaying the interest on your loan.
This can be a good choice for high net worth individuals looking to expand their property portfolio without having to liquidate assets to fund it. Instead, the additional money that you are not spending on mortgage payments can be used to fund other properties.
At the end of the term, you will then be required to repay your remaining mortgage amount. This could be funded by preplanned investments or the sale of another property you own for example.
Dry lending is a type of mortgage financing that allows high net worth individuals to use a property as the sole security of their loan to the lender. This is instead of transferring assets to the bank that will be used as security.
Ordinarily, private banks and lenders require these individuals to transfer their assets to the bank under their asset management teams. Then, these assets will be used as security on the loan. However, dry lending offers a way around this.
It’s very common for high net worth individuals to have a variety of sources of income from businesses and investments. Therefore, a complex income mortgage is likely necessary for these individuals.
Working with a broker in these situations is key as they will be able to pair you with a specialist lender who understands more complex incomes. Brokers will also be able to help you prove your income in the clearest possible way by working with your accountants and solicitors throughout the process, and in turn, giving you the best chance of receiving a competitive mortgage product.
So, if you have a complex income and are unsure where to start when looking for a mortgage, reach out today. Our expert team are on hand to discuss your needs over a free initial consultation.
The Role of Specialist Mortgage Brokers for High Net Worth Clients
There are a range of benefits that come with using a mortgage broker when looking for a mortgage as a high net worth individual. They include:
- Access to specialist mortgage lenders and products that aren’t directly available to the public, increasing your chances of obtaining a competitive product.
- Support throughout the whole application process, answering any queries you may have.
- They can help you prepare an application and paint it in the best possible light so you can receive the most competitive offer.
- Due to their experience and lender relationships, many brokers have the ability to negotiate for you.
How we can help you
We recognise the unique challenges and opportunities faced by high net worth mortgage clients. Our experienced mortgage advisors possess the in-depth knowledge and expertise to cater to your specific financial needs.
With years of dedicated service, The Mortgage Centres has established strong relationships with specialist lenders, ensuring access to tailored mortgage solutions. Trust us to guide you through the complexities of high-net-worth mortgages and secure the best possible financing options.
Frequently asked questions
Buying a second home can be a great investment for anyone. However, unlike a Buy-to-Let property, the second home will not be generating income. Therefore, it can be slightly difficult to obtain a mortgage on a second home.
This doesn’t mean it’s impossible to do. Working with a specialist mortgage broker can provide your best chance of success. Typically, private banks or lenders are the most suitable people to approach in this situation. As reiterated above, this is because they understand complex financial situations much better than high street lenders.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1,2 & 3
Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP)
Year Attained: 2001
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