High Net Worth Mortgages

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High Net Worth Mortgages 

Kwasi Yeboah answers the most commonly asked question on mortgages for High Net Worth individuals. 

How does a High Net Worth mortgage work?

There are some differences, but in essence it is really the same as any other mortgage. You are being asked whether or not you can afford a loan and being lent money to purchase a property.

The most important aspect is that a lender feels confident that you are able to repay the loan, as well as that the property being purchased, or potentially built, is suitable security for that loan. One of the key differences between regular mortgages and Hight Net Worth (HNW) mortgages are in terms of the income multiples. This might be slightly higher for High Net Worth clients. Those considered high net worth can also use other assets as collateral for the loan, such as a sizable investment portfolio.

Why are mortgages for High Net Worth individuals so difficult?

High Net Worth individuals might have income and assets overseas, which is slightly less common for your typical mortgage applicant. This can present challenges for lenders when assessing individuals for things like anti-money laundering or political vulnerabilities.

There are also fewer lenders who are able to finance High Net Worth mortgages or their applications. In many cases, these individuals will have to make use of private banks to finance their purchases.

Lastly, the way that High Net Worth individuals purchase properties and vehicles could involve things like trust planning, so often you may need a number of other parties involved in the transaction, such as trustees and accountants.

How much is considered High Net Worth?

There is a figure given by the Financial Conduct Authority (FCA), and they consider someone who has a personal income in excess of £300,000 or has liquid assets of more than £3,000,000 as a High Net Worth individual. Liquid assets don’t include property, but things like investment portfolios or cash products are considered liquid.

Other lenders might have more stringent definitions, but they might have higher income multiples, so it is worth checking with your broker or mortgage advisor what the requirements are from lender to lender.

What can I borrow as a High Net Worth individual and what sort of deposit would I need?

This is not exactly a science and it can vary widely. It is not uncommon to see income multiples of anywhere from approximately six to eight times, sometimes more. This is because High Net Worth individuals can use assets as collateral, as well as hold a significant deposit for the loan. Lenders can in some cases view them as a more safe and stable bet than your average borrower.

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Do High Net Worth individuals need Life Insurance?

Absolutely, it is very simple, if you have a life to protect then you should definitely be thinking about Life Insurance. High Net Worth individuals can have very complex estates and the tax implications of dying without appropriate cover in place can be considerable.

I would almost always recommend that High Net Worth individuals should make sure that they are working with financial advisors and accountants to work out what their liabilities would be and what would happen in the case that they died without insurance and then make sure they’ve got appropriate cover in place.

Can you get a mortgage on a million pound house?

Yes, there will be someone who is willing to lend that sum to anyone they deem to meet their affordability requirements. With the growth of property prices it is actually not uncommon to come across million pound properties, and it is definitely more common than it was a decade or twenty years ago.

The pool of lenders for large loans is slightly smaller, and you may incur higher interest rates, as they represent a larger risk to the business, but you can absolutely get a mortgage on a million pound house.

What does a large mortgage loan mean?

A large loan is typically around a million pounds. It will slightly vary from lender to lender, and some of the high street lenders set that limit at £750,000, but on average it is about a million pound loan.

Do you think more young entrepreneurs such as influencers have anything to do with the increase in this type of purchase?

I do. There are a couple things to bear in mind, property has always been viewed as quite a safe haven for money. It is very easy to see your asset appreciate in value, so people, particularly young entrepreneurs, who might not trust the financial markets as much following the 2007/08 financial crisis, have begun making a real movement towards bricks and mortar investments.

Coupled with low interest rates, until very recently, historically low interest rates, it has made buying a property all the more attractive from an investment perspective.

Think carefully before securing other debts against your home.Your property may be repossessed if you do not keep up with your mortgage repayments. 

As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home.

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