Lending for High-Net-Worth Individuals
Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages. In this article, he discusses mortgages for high-net-worth individuals.
The Financial Conduct Authority (FCA) defines a high-net-worth mortgage client as a customer with an annual net income of no less than £300,000 or net assets of no less than £3,000,000, or whose obligations are guaranteed by a person with an income or assets of such amount. Often high-net-worth individuals can obtain the funding they need via high street banks; Barclays, as an example, can consider loans over £5 million at 70% LTV and mortgages over £10 million at 65%. Many struggle via retail options, however, as their total wealth and affordability are not considered as part of their application.
High-net-worth individuals typically have multiple income streams that can be difficult to fully utilise with mainstream lenders. This is where private banks able to consider wealth holistically and a broker familiar with complicated income sources are essential. Examples of these would be bonuses; commissions; contractor income; company profits; stocks and shares; and earnings in a foreign currency, rental income or non-executive roles. A client’s biography is essential, with your adviser required to build a precise picture of your overall wealth, background, CV and business ventures.
Borrowing to buy a home or an investment property can be part of a wealth creation strategy, especially while interest rates are still comparatively low despite the recent increases in the Bank of England base rate. A mortgage enables clients to protect existing investments, preserve liquidity and ensure maximum tax planning can be accommodated. Subject to a valid repayment strategy, flexibility in the form of an interest-only mortgage may be required, which keeps your committed monthly payment low and may enable you to keep a valuable asset that you would prefer not to sell to fund the property purchase.
Investec private bank, for example, requires applicants to have £300,000 minimum yearly earnings and ideally a £1 million minimum loan size. Providing a customer has a suitable repayment strategy, they can potentially consider an 85% LTV on an interest-only basis in the right circumstances. Additional features can also be built into the facility, such as capital reductions to coincide with cash flow or lump sum repayments at the time of an annual bonus, for example. Investec provide mortgage funding for not only home lending, but also buy-to-lets and second homes.
In a high-inflation environment, amidst recent interest rate rises, borrowing significant amounts of debt can be a risk. Many clients with larger loans have been considering whether to fix into a longer-term product immediately, even if it incurs an early redemption penalty on the existing loan. It is important to review all options with your adviser to ascertain the best solution. Since the global pandemic many lenders have increased their mortgage offer validity period to six months, so if your existing product is due for renewal, you are able to review and potentially secure a new deal far in advance.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Some forms of buy-to-let mortgages and some forms of commercial lending are not regulated by the Financial Conduct Authority.
Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages. OnPoint Mortgages, a trading style of L&D Mortgages Limited, is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Registered address: 25 Homefield Road, Bushey, Hertfordshire, WD23 3AP. Registered in England & Wales under 10500099.