High Net Worth Mortgages
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High Net Worth Mortgages - The Mortgage Mum
If you earn more than £150,000 a year or have more than £500,000 in net assets (excluding your home), that makes you a high net worth individual.
It’s interesting that often the more money people have, the less they like to talk about it – but when it comes to mortgages for this group of people, it’s really important to get the right advice.
Why is borrowing different for high net worth individuals?
If you have high net worth and are looking to borrow for a mortgage against net assets or other property, you’re often restricted to a few lenders or private banks. This is because of the way you prove your income.
It’s difficult to do this alone – you will need a broker who has relationships with private banks to negotiate terms for you.
Another big challenge for high net worth individuals is proving your income – which we’ll cover in a moment.
What are net assets?
These assets can be shares, trusts, hedge funds, even a yacht or private jet. And while not usually classed as assets, cars and art can also be used as leverage against borrowing.
So the first step if you’re looking for a high value mortgage is to speak to somebody who can identify your assets and give you a valuation.
How can I prove my income?
Lenders are typically looking for regular income, to reassure them that the mortgage repayments will be met. But a high net worth individual often has irregular income – it can come from bonuses or share dividends, hedge funds, or limited partnerships. Many lenders don’t accept this type of income or situation which is why we need relationships with private banks.
The right broker will know how to explore proof of income using your assets and find the right finance for you.
Why is flexibility important for high net worth mortgages?
If you earn your money in lump sums, you will want to pay off a big ‘chunk’ of your mortgage. With typical high street mortgages, overpaying by more than 10% incurs an early repayment charge – which can be a significant amount. You will want more flexibility about how you pay back the loan.
Does my net worth affect how much I can borrow?
Yes – and if you want a mortgage you will need a statement of high net worth. Often a lender will have a template that your accountant can complete and sign. This is used as your proof of income.
Is it hard to get a mortgage on a home worth over £1m?
There are many more million pound homes out there today – we have enquiries for £2 million homes too. But many lenders are not happy to lend that amount of money.
It’s less about your income and more about the lack of underwriting expertise. A £1 million mortgage usually means delays and lots of paperwork. That’s why we work with a specialist team that looks at private banks and specialist lenders.
Can I get a £1million mortgage on a self build?
Self build is becoming more and more popular. With a self build mortgage, after you borrow the money to buy the land, the rest of the loan is released to you in stages as the building progresses.
There are two main types of self-build mortgages:
Arrears stage payment mortgage
– you pay upfront costs and receive a percentage of the value at the end of each stage.
Advance stage payment mortgage
This is a cost-based loan where the lender releases the money to you in advance of each stage of the build. You don’t need as much cash at the outset.
Lenders will want to understand a lot about the build: what your plans are, your experience, and the people in your team. Self build mortgages are often interest-only which makes the payments a little bit more affordable.
Do high net worth individuals need life insurance?
Yes, absolutely, probably even more so because they have a lot to lose!
But also, if anything were to happen to you, it could cost the people around you money. Inheritance tax liability, for example, would be much higher for somebody with a lot of assets to hand over in the event of death.
How does life insurance work for high net worth individuals?
Life insurance pays out a sum of money if you die unexpectedly. Depending on the sum insured, your mortgage could be paid off so your family can stay in the property. But you don’t just have to cover your mortgage, the money can be used for anything you like.
Another product – family income benefit – provides those you leave behind with an income rather than a lump sum. Critical illness cover is also important, and income protection is worth looking at, to keep the money coming in if you’re unable to work due to illness or injury.
What kind of business protection is available?
If you’re a majority shareholder, you need to consider what would happen to your business if you weren’t around – Shareholder Protection could be an important type of insurance.
If you personally are crucial to the future of the business, you may need Key Person cover. Essentially you’re making sure that if you’re not there, the business can pay for somebody else to take over.
Talk to a broker
In any complex situation, it really pays to have a broker working on your behalf – and that’s even more true for a high net worth individual.
We understand the complexities of your situation. Your work might be international, you might be an expat. We also work with foreign nationals living in the UK where we deal with overseas personal guarantors.
There’s a lot to take into account, so you need someone with experience that will save you time and money and has great contacts. We can help you achieve your goals, so get in touch.
Speak to an expert
We will work at times that suit you and your family, carrying out appointments via video call, telephone or email, giving you the benefit of first class service, around your own schedule, and in the comfort of your own home. So let us handle your mortgage today and find out how well we can look after you, The Mortgage Mum way!
High Net Worth Mortgage (Part 2)
Hello, and welcome back to the Mortgage Mum podcast with me, Sarah Tucker. Today we’re going to be doing some questions and answers again, which worked really well in our previous episode. We’ve got some really good feedback from you on that.
Today we’re covering the topic of high net worth mortgages. This can sometimes fall into specialist finance, and as you may or may not have seen, we’ve recently launched The Mortgage Mum Specialist Finance as its own company. It’s headed up by myself and Shelley Walker, who’s managing director of that business.
I’d love to do another episode in future with Shelley as part of the specialist finance podcast. But for now, we want to answer your questions. We’ve had lots of them about how high net worth can be factored in differently for mortgages.
Can you get a mortgage as a high net worth individual on low income?
A really good question. It’s important to just caveat what high net worth means to the FCA and to lenders. A high net worth individual is somebody that is individually earning £300,000 or more, or has assets of over £3 million.
As a high net worth individual, your mortgage needs and how you’re treated within your mortgage application will differ. And obviously that does answer the question – you can get a mortgage based on your assets if you’re asset rich, but have a low income.
What types of mortgage and rates can I expect as a high net worth individual?
As you probably expect, I can’t talk about rates because they change so frequently. What’s really important to get across here is that it’s so individual.
Every mortgage is individual, and that’s even more true when you’re a high net worth individual, because how you make up your income, the types of assets you have and how you prove their worth is entirely different.
How that’s looked at by a lender, or often a private bank will be entirely individual. It’s almost a bespoke mortgage when you’re a high net worth individual. It’s very hard to give blanket advice when it comes to this category of mortgages. We see so many high net worth individuals, and they’re all entirely different in how they prove their income via businesses or assets and how they’re performing.
Plus, how banks look at those individuals can differ dramatically depending on what’s happening in the market. So the key is to be introduced to the right people and be presented in a way that’s going to support what you’re looking to do.
How does remortgaging work as a high net worth individual? Any differences in the process here?
Yes, and this falls into the specialist finance area of the market. So this is why we need to come back to these topics with Shelley to add some more colour.
In short, remortgaging as a high net worth individual is very bespoke. People might, for example, want to refinance one property while considering other properties they may own. So perhaps it would be looking at that entire picture. It wouldn’t necessarily just be remortgaging one house at a time.
Speaking very generally, remortgaging is still going to be based on income. And we would recommend you do it six months before your rate expires on any property. So it’s no different in that respect.
What can differ is how you prove your income. You’ve got a third party, often a broker, working to negotiate on your behalf. It’s very different to mortgage broking in the standard market where we’re piecing the puzzle together to make sure you fit. We are obviously advocating for you as a client, and trying to see which lender fits what you’re looking for.
Whereas in the high net worth space and the specialist space, we’re actually looking at your individual case, taking that to a private bank and having a one-on-one conversation. So it’s very different in terms of the broker that you need. You need to be building a really good relationship there.
Can I get a Buy to Let mortgage as a high net worth individual?
Buy to Let is not generally based on income. It’s based on the quality of the Buy to Let property, how much rent you’re going to be earning, how much deposit you can put down, and whether a lender is comfortable with those calculations.
If you are high net worth, private banking is again a good place to take your mortgage business. It does differ, but the premise is the same. To make sure it’s a good investment, you’re going to be looking at that property’s rental value and potential. So the fundamental business decision behind that Buy to Let is the same.
What if I have bad credit? Can I still get a mortgage as a high net worth individual?
Yes. Lenders will definitely ask you questions about the circumstances, but it’s unlikely to be a deal breaker for a high net worth individual. That’s quite an interesting point – perhaps people wouldn’t necessarily assume this to be the case.
There are obviously risk factors that will be looked at, but it’s nowhere near as restrictive as in traditional lending.
How much does a high net worth mortgage broker cost?
They do cost more money. What a mortgage broker typically charges varies hugely, by the way, depending on the business, the area and different incentives that companies offer.
In the high net worth space, the fee is typically a percentage of the loan amount plus an upfront fee. Because it’s such an individual, one-to-one service, you get what you pay for.
Your broker will be making a lot of calls, having a lot of meetings, and you’re paying for the value of that person’s relationships – they’ve spent many years building them. Those relationships are what will get you the best results.
What else do we need to know about high net worth mortgages?
I think it’s important to note that deposit requirements are typically higher on high net worth mortgages. On mortgages around £2 million, for example, 25% is a very typical deposit. The higher your mortgage, the higher the deposit that’s normally required.
For a £5 million to £6 million property, you’d probably be looking at 40%. It doesn’t mean it’s impossible with a smaller deposit, but it’s worth knowing that a bigger deposit is the norm in this space.
I wouldn’t necessarily not have the conversation about a high net worth mortgage if you haven’t perhaps got 25% – some lenders might be more flexible. But it’s worth mentioning because typically we talk about 5% or 10% deposits for mortgages – and this might be something that hasn’t been factored in.
High net worth is an entirely different area of the market, and so it definitely needs a little bit more air time. So just keep your eye out for other episodes coming soon – and ones with Shelley involved.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
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