High Net Worth Mortgage

Podcast approved by The Openwork Partnership on 18/07/2024.

How does a high net worth mortgage work? What are my options?

These mortgages work the same as one for £100,000 or £200,000. It’s all going to come down to how you earn your money, the lender criteria and the property, which I’ll explore more in the coming questions.

It’s very individual, so you definitely should go and see a broker. You could pick up the phone to your own bank – but they might not be able to help. It depends on the property and various other factors.

A lot of lenders offer the same products whether you’re buying a house for £100,000 or £2 million. I could sit here all day and go through each lender’s criteria, but it’s very individual.

Is it more difficult to get a mortgage as a high net worth individual?

It’s not the mortgage that’s difficult. It could be that we’re dealing with people that earn a lot of money, and we’re looking at high mortgage lending. They could be self-employed. It could be that the way that they take money out of the business might not seem enough on paper.

A broker could help with that. If they’re self-employed, we could look at net profit in the company as opposed to what they’ve actually taken and paid personal tax on.

You could also be looking at houses that might have seven or eight bedrooms – which aren’t the norm. A lot of lenders won’t allow that on their criteria. We might be looking at houses that have more than one kitchen. Again, many lenders don’t like that, and the same goes for annexes in the garden.

It can be a bit of a jigsaw puzzle with so many different variables. We need to do a full fact-find to discover how the client earns their money, what they’re looking to borrow and the sort of property they’re looking to buy. Then we piece it all together to find the right lender.

How much is considered high net worth and who qualifies as a high net worth individual?

This is actually a difficult question because we’re in the North West, and the average property price here is quite low compared to London.

Here, from £500,000 could be high net worth – but that’s an everyday price in the South.
Where you live is a major factor. If £500,000 upwards is high net worth here, it’s probably £1 million in other parts of the country.

Qualifying as high net worth is all down to how you earn your money and the size of your income.

How much can I borrow and what deposit is needed as someone who is a high net worth individual?

Your borrowing could come down to how you earn your money, the actual property or your credit score. You could have amazing earnings, but if your credit score is a bit low and you want to put a 5% deposit down, some lenders will want more.

It comes down to the individual. If you’ve got the earnings there and a good credit history, that’s a great start.

I had somebody come to me last year wanting to buy an old church. It’s a good example of a property that didn’t really fit any lenders. We had to go down the specialist route for that, and when we found a lender, the criteria didn’t fit the client.

So it’s that jigsaw puzzle again – finding the right lender with the right criteria. But as a rule, it’s the same as with normal mortgages. As long as everything else is there, we can find you a lender.

Do high net worth individuals need life insurance?

You don’t have to have life insurance. But I’m quite passionate about this, because in our job we do see terrible things happen when people aren’t insured and their families are put at risk.

We can’t make anybody take life insurance. It’s something we could only advise on. But when I’m putting somebody into the biggest amount of debt they’ve ever had, my advice is always the same. If you could afford the property, you should be able to afford the insurance that goes with it – hopefully, if there’s no medical concerns.

You should always get life insurance, especially if you’ve got a partner and children. If you’re the main earner you should always put something in place to protect them.

How does remortgaging as a high net worth individual work?

It’s exactly the same, as long as the money’s there and the property matches the lender’s criteria. If you are capital raising, perhaps do some home improvements, you’re probably looking to borrow a lot more than an average person.

On a £2 million property, you might want to raise £500,000. Whether you can depends on the maximum Loan to Value – which is the percentage borrowing versus the price of the house.

In simple terms, on a £100,000 property, if you were borrowing £80,000, you’re borrowing 80% of the property’s value. With remortgaging and capital raising for home improvements, to buy a second property, or even to consolidate debt, there are maximum Loan to Value ratios that lenders will allow you to borrow up to. Usually with capital raising for home improvements or debt consolidation, the maximum is around 85% or 90%.

If it’s pound-for-pound remortgaging, with no extra borrowing, it’s just the same as a regular remortgage. Again, there are some caveats. If it’s a £5 million property, we might be short on lenders. Most lend up to a certain limit – so the higher the property price, the fewer lenders are available.

But we always have specialist lenders to hand, and certain lenders have specialist teams for property prices over a set limit, as well.