High Net Worth Mortgages
Lee and Neezam share their expertise on High Net Worth Mortgages.
How does a High Net Worth mortgage work?
If we’re comparing them to non High Net Worth mortgages, there isn’t a tick box exercise that we need to meet with lenders, it’s more about the picture of the client in terms of their income.
Lenders like to kind of take a different approach in terms of how they assess High Net Worth mortgages, they do have a bit more flexibility in terms of the amounts they can offer. What we do as brokers is put together a picture for the lender. There might be a High Net Worth client who has not been in the UK for very long, for example, and they may be looking for a high Loan to Value mortgage, lenders can take a more flexible approach with High Net Worth individuals.
Each bank is different in terms of how they approach High Net Worth individuals but in terms of finding those banks that are more flexible with High Net Worth individuals, a mortgage broker will be able to help.
Why are mortgages for High Net Worth individuals so difficult?
When it comes to High Net Worth individuals, it’s understanding the full picture, such as what their assets and liabilities are, what their income is and where all the different sources of income are coming from. Sometimes how we evidence these things for High Net Worth individuals can be more complicated.
From a lending point of view, it’s actually a more high level decision made around the overall risk, so they may be looking at things like what deposit you’re putting in, what your nationality is and how long you’ve been in the country. Is all of your income UK based or is there overseas income and what are your assets that you’ve got. This type of risk calculation is generally more difficult because you need someone that takes the time to ask the right questions and get the right documents and presents it to the lender in the right way, because not every lender will take the time to do that. Right?
How much is considered to be High Net Worth?
It’s different with different lenders, and what we class as High Net Worth may not necessarily be income. It could be someone with a number of properties and there’s a number of different ways of assessing what is classed as a High Net Worth individual.
Generally High Net Worth is effectively anything above £100,000. That’s when lenders start to become a little bit flexible in terms of what sort of mortgage they can offer you.
The HMRC definition of a High Net Worth individual is anyone with assets valued in excess of £10 million, but they don’t have a precise definition either. So it’s no surprise lenders vary.
What can I borrow and what sort of deposit do I need as a High Net Worth individual?
It really does depend on quite a few different variables in terms of your set of circumstances. Ultimately, because the income is generally higher, lenders are a lot more flexible in terms of the multiples they can offer. A high street bank would offer four and a half times your income for example on an income below £100,000, whereas there are some banks that, if you have a higher income, offer five and a half or maybe even six times your income.
In terms of deposit, it’s generally pretty similar. Generally the larger the mortgages, the more deposit that is required. If we’re looking at a mortgage of a million pounds and you’ve only got a 5% deposit, it’s highly unlikely that you’re going to find options. For borrowing above £500,000, 10-15% is the typical minimum requirement.
Do High Net Worth individuals need life insurance?
Ultimately that is a question of what that individual wants to happen when they die, in terms of understanding their assets and liabilities. For example, someone with a portfolio of properties or stocks and shares, would need to decide whether they want their family to keep their home without the debt. Generally with High Net Worth, there’s one main earner, so you could quite easily argue that for a High Net Worth individual, it’s more important that they protect themselves, because the financial consequence of them not being here is felt even more.
It’s a case of protecting what investments you’ve got and whether they want to leave property to their children or save their stocks and shares for retirement income. Protection is one hundred percent needed generally, and again, it’s something we can advise on.
Can you get a mortgage on a million pound house?
Yes you can, subject to a number of criteria and your income and deposit. It’s highly likely that you’re going to need a minimum of 10-15% deposit on that sort of property, and you’ll probably be able to obtain a mortgage of around five and a half times your income. I’d really recommend speaking to a mortgage broker about that sort of level of borrowing.
Is that the same with a Self-build and Buy to Let?
Yes, you can get a million pound mortgage on both self-build and Buy to Let, but there’s different criteria for each. Self-build is a specialist area and requires a specialist mortgage broker. It is something that we assist on, but that does require a larger deposit, some land and potentially other assets or a large amount of savings.
You need a minimum of a 25% deposit for a Buy to Let, so for a million pound property the rental would need to be really strong to get the level of borrowing you require, for example, in the London and Cambridge areas of the country.
What does a Large Mortgage Loan mean?
A Large Mortgage Loan generally means you’re getting yourself into a lot of debt. Most lenders see anything over £500,000 as a Large Mortgage Loan. A lot of lenders have specific products for larger loans and slightly different criteria.
Is there anything else to consider as a High Net Worth individual?
There are a couple of little complications that come with being a High Net Worth individual. Although the income is of high level and they’ve got lots of assets, how they receive their income can be a bit of a struggle with some lenders. Always speak to a specialist Mortgage Broker because generally, they can help the lender to feel a bit more comfortable lending at that sort of level.
It’s always important to find a cost effective mortgage and interest rates, but it’s even more important on this level of borrowing to find the most competitive mortgage product based on your circumstances. Not finding the right product can be very costly at this level. We have access to exclusive deals, for example, that you wouldn’t find directly with the lender.
High Net Worth individuals generally find themselves in quite complicated situations when it comes to assets and liabilities, so just give as much information as you can to a broker. Some people hold back because they think something might go against them, or they’ve made an assumption. The more transparent you are, the easier it will be for the broker to find you the right lender.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages.
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