High Net Worth Mortgages

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Your home may be repossessed if you do not keep up with your mortgage repayments. 

High Net Worth Mortgages  

Graham Sharkey talks us through High Net Worth Mortgages

How does a high net worth mortgage work?

A high net worth mortgage is a specialist mortgage tailored specifically for the needs of high net worth individuals. They can sometimes struggle to secure finance at the highest possible levels for their circumstances through the mainstream high street lenders because they won’t take their total wealth into consideration when calculating affordability.

When you deal with a high net worth lender, they’ll apply a unique set of lending criteria to the actual circumstances, which means they can be more flexible in their lending decisions and ultimately lend larger loans against higher value properties.

Why are mortgages for high net worth individuals so difficult?

From a client’s perspective they won’t necessarily feel difficult if you have a good broker, but from a broker’s perspective they are a little more complicated because the financial makeup of the client may be quite complex. Their financial circumstances could include things like offshore investments, family trusts and many other styles of income that aren’t straightforward or traditional. 

Once the facts surrounding the client’s circumstances are known, we need to ensure we approach a lender with the appetite for that type of client. Most traditional mortgage providers are set up to process large volumes of standard mortgage applications and the standard affordability criteria can be inflexible if you’re deemed a high net worth individual.

How much is considered high net worth then?

The financial regulator defines high net worth mortgage customers as someone with a net income of at least £300,000 or net assets of at least £3 million. Clients in that position may sometimes actually have enough money to purchase a property outright so wouldn’t even need a mortgage, but that would limit their liquidity for other possible investment opportunities. 

What can I borrow as a high net worth individual and what sort of deposit do I need?

Every lender has their own affordability checks, which obviously plays a key factor when they conclude how much they’re willing to lend. High street lenders cap their lending at 85% of applicants borrowing no more than 4.5 times their annual income. That leaves only 15% of lending where income multiples can be higher so some lenders will then cap at 5 times your salary; a handful will lend up to 6 times your income in the right circumstances. 

High net worth mortgage borrowers can be assessed differently to mainstream customers. Some lenders just take the value of assets into consideration and their unique circumstances means they could get a mortgage based on sometimes more than 7 times their income, as well as bespoke terms and conditions.

As far as deposit is concerned, typically 25% would be required, but some lenders would be happy to go higher or take additional charges against other assets to reduce the cash deposit required.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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Our key aims are to fully understand what you are looking to achieve, create a solution tailored to your needs, deliver results through an excellent service and build a relationship for life.

Do high net worth individuals need life insurance?

Absolutely. Wealthy individuals will still need to consider insurance and there are many factors when determining how much protection they may require. One area to consider would be asset protection. There could potentially also be business protection if they own or are a shareholder in a business. 

So many wealthy people may be asset rich, but would their families have easy access to enough cash liquidity in the event of their death for things like the inheritance tax bill which is payable pretty much immediately? Sometimes policies are put in place for the sum of the inheritance taxes they predict will be payable in the event if the unforeseen happens.

Can high net worth insurance cover my listed property and who insures high value homes?

High net worth insurance is a collective term which describes insurance products designed to protect people with high value homes and possessions. This includes not only the property but jewellery, antiques, collectibles or overseas properties. It can also cover items for those that travel frequently.

People with significant personal assets often can’t be covered by a standard insurance policy, so these clients need a more bespoke policy, tailored to the exact requirements of the individual. These insurers are more accommodating of properties which are not necessarily traditionally built properties,but maybe several hundred years old or listed properties.

We have access to a number of insurers that can specifically cater for these clients and their properties to ensure they’re fully covered.

Can you get a mortgage on a million pound house?

Yes, subject to meeting lender criteria, but it’s quite a common situation nowadays. The number of properties valued in excess of £1,000,000 continues to increase across the country.

Can you get a million pound mortgage on a self-build?

Yes, the providers are less common, but lending is available for clients should they wish to take on that challenge. Mortgages are available up to and in excess of a million pounds for these circumstances. There’s only a handful of lenders in the marketplace, but subject to fulfilling the lenders criteria, this is very much achievable and we do have access to these lenders.

Can you get a million pound Buy to Let mortgage?

Yes, generally the returns would be greater through buying a number of smaller properties than one big one, but in circumstances where it’s needed, there are mortgages available up to and in excess of a million pounds. The rental income from the property would need to be very strong and the deposit would generally need to be 25% or more, but they are available.

How can a Mortgage Broker help somebody who is looking for a high net worth mortgage? 

In my experience, high net worth individuals are terribly busy people and they’re most precious commodity is generally time. A broker can add tremendous value to the process by saving that time, as it’s something they can just completely delegate to us.

We approach the right lenders and insurers and providers. Despite being wealthy individuals, everyone wants to save money. A broker will ensure they are recommending a competitive and suitable products from the limited lenders available within the market. 

High net worth mortgages are generally for large amounts and even the slightest saving in interest rate can equate to a substantial monetary saving over the life of the mortgage. So it’s important that the terms are the best available and a broker can ensure they get that.

Your home may be repossessed if you do not keep up with your mortgage repayments. 

Speak To An Expert

Our key aims are to fully understand what you are looking to achieve, create a solution tailored to your needs, deliver results through an excellent service and build a relationship for life.

Can you get a remortgage after bankruptcy or with a County Court Judgement (CCJ), Individual Voluntary Arrangement (IVA) or Default?

Having any of these on your credit file will affect your mortgage choices, but it certainly doesn’t rule out lending altogether. For CCJs and Defaults, the more historic the registration, the better chance there is of securing a mortgage. The date that it was resolved (if it has been) is also important, because some lenders will insist on it being resolved prior to application. We also need to consider the number of CCJs and/or Defaults a client has in total, the more you have the less choice of lenders that are available. Lastly the value of the CCJ or Default can also be a factor, and the larger the value, the less choice of lenders there will be.

For Bankruptcy and IVA it can be a bit trickier, but we can still apply for a mortgage, it has a lot to do with timing again. You won’t be able to apply until you’ve been officially discharged from bankruptcy, which usually takes about twelve months. For IVAs, lenders have been known to lend during an IVA if it’s conducted satisfactorily, but it’s much easier if you’ve completed it before applying. 

The mortgage assessment will follow very strict guidelines so the rest of your application needs to be very strong, so it’s important that your application is presented in the best possible manner to a suitable lender, which is where brokers come in. Each year that goes by your bankruptcy or IVA becomes less relevant and lenders are more likely to approve your mortgage with a lower deposit and on lower interest rates. 

If you’ve been discharged from bankruptcy for around four years, most lenders will view you as no different to anyone else. After six years any credit issues will drop off your file. With all these scenarios the larger the deposit you have, the easier it is to overcome these issues and find a suitable mortgage lender.

Can you remortgage with a Debt Management Plan?

You can whilst you’re still in a Debt Management Plan. Lenders will want to see that you’ve maintained the payments on the plan in a satisfactory way and you will need to leave a larger amount of equity in the property. 

You’ll need to obtain statements from the company managing your Debt Management Plan showing the outstanding balance, if you decide to remortgage whilst you’re in the plan. 

What deals and rates are available if you’re remortgaging with bad credit?

That’s a difficult question to answer accurately because the rates are reflective of the risk the lender is taking, and that risk is quantified by the amount of equity available in the property and the level of adverse credit. 

Somebody who’s missed a credit card payment on the odd occasion in the last year would achieve a much better rate than somebody who has just finished an IVA. For somebody with very light adverse issues and lots of equity, we may be able to get them through with a high street bank at normal rates. For something a bit more serious, like a missed mortgage payment, you’ll need a 15% deposit and probably be paying about 0.65% more on the rate of the best equivalent high street products.

Someone that’s in a Debt Management Plan with three CCJs in the last two years and three missed mortgage payments two years ago, would need a 20% deposit and could expect to pay around 2.5% more than the equivalent high street rate.

Are there many bad credit remortgage lenders?

Yes, there are a good few. There is less choice than if you didn’t have any adverse credit, and are sometimes referred to as subprime lenders or adverse credit lenders. They are comfortable lending to clients that fall into this category and they understand that sometimes there’s a good reason behind why people end up with Bad Credit.

How do I improve my credit score before remortgaging?

The key points to improving your credit rating that we’d recommend are to check your credit report, make sure the information is correct and that all of your accounts and credit cards are listed. If details look wrong you may need to contact the credit reference agency to correct this. 

Check any financial links and associations to other people, as their credit score can have an influence on yours. Be registered to vote, as if you’re not on the electoral roll, simply registering to vote will improve your credit score. It takes minutes and you can do it online. Pay all your bills by direct debits so you don’t miss any payments. 

Prove you can manage your debt if you’ve never borrowed money, as you may have a low credit score or not have any credit history. Applying for a credit card and paying the balance in full every month will gradually improve your score. If you have got lines of credit, bear in mind that if you’ve got too much unsecured credit it can be considered a sign that you’re living beyond your means so try to lower your use of unsecured credit to below 50% of the amount available to you.

How do I apply for a remortgage with bad credit?

Always use a broker as the process can be extremely confusing if you try to do it on your own. The only difference from a standard application is that you’ll need to prove to your advisor why and how the adverse credit occurred, as the lender will want to see that. 

The lenders we’ll be approaching are less likely to be familiar names, but they are still governed by the Financial Conduct Authority.

If you feel you’ve got bad credit, make early contact with a broker. Don’t assume you can’t get a remortgage. Let us look at your file early and put a plan in place either to help you better your financial position and repair the credit rating or help you with your mortgage requirements. The initial consultation is at no cost to the client. 

Your home may be repossessed if you do not keep up repayments on your mortgage.

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