Guide to large mortgages

Which lenders offer high net worth mortgages?

Many mainstream lenders can lend on mortgages of £1m or above, particularly for cases where your income and outgoings are straightforward, and you can demonstrate you are able to afford a bigger loan. However, they may limit the amount you can borrow based on the loan to value, essentially capping the size of mortgage a lender is prepared to offer you as a percentage of the value of the property you are buying. High street options aren’t always best suited to you if you’re looking to take out a million-pound plus mortgage though, especially if your income stream is more complex. For example, if a large proportion of your income is from bonuses or vested shares you may not meet standard criteria. In these cases, more specialist solutions may be required, such as a private bank. These can often be more flexible than mainstream lenders when it comes to high value mortgages, agreeing to lend based on individual circumstances rather than sticking to more rigid lending criteria.

The private bank advantage

Private banks can help meet the more complex needs of high net worth customers by really getting to know you and your unique circumstances whilst at the same time often providing competitive rates. Unusual properties, such as those with large acreage or outbuildings/annexes, and ownership structures including on and off shore trusts or Special Purpose Vehicles (SPVs) can be considered by private banks. However, some private banks may impose conditions before they agree to lend to you. For example, they might insist that you hold a minimum amount of assets and investments with them first, known as ‘assets under management.’ The amount of assets under management, if required, typically ranges from £500k to 50% of the amount you’re looking to borrow. In some cases, moving your pension fund to the bank would count towards this amount. You should always seek professional financial advice if you’re considering transferring a pension, so you can be certain of the costs involved and that you wouldn’t be giving up any valuable benefits or guarantees.

What else you need to know

If you’re taking out a high value mortgage through a private bank, typically the amount you’ll be able to borrow will be restricted to 60–65% of the property value. However, if you are in a particularly strong financial position, it is possible that some may push this to as much as 95% of the property value, providing you agree to pay back some of the capital at various stages over a defined period. Loan to values will tend to fall as the property value increases, so limits will be more restrictive on very expensive properties.

Cost of larger mortgages

If you’re taking out a large mortgage through a high street bank, there will usually be arrangement fees to pay, so it’s important to factor these into the overall cost of any deal. If you are taking out a high value mortgage, a deal with a lower rate but higher arrangement fee may work out to be more cost-effective than a deal with a slightly higher rate but a lower arrangement fee. There will also be survey and legal costs to pay. Private Banks typically charge a 1% arrangement fee and survey and legal costs will also need to be covered separately.

Large mortgages for non-UK residents

If you’re not domiciled in the UK or are not a UK resident, you may still be considered for a high value mortgage from a private bank subject to satisfactory compliance checks. Foreign currency incomes can be used when assessing affordability but bear in mind that some banks will take a chunk off the stated income, typically between 10% and 20%, as a buffer against fluctuating currency exchange rates.

How L&C can help

If you’re looking for a large mortgage, L&C’s office in the City of London has well established relationships with private banks which don’t have a high street presence. We can arrange bespoke mortgages tailored to your individual circumstances, or if appropriate, recommend high street lenders which cater for those seeking larger mortgages.