Large Mortgage Loans
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Large Mortgage Loans
Richard Campo talks all about large mortgage loans.
What is the biggest mortgage loan I can get?
There’s actually no limit. I’ve seen and heard stories of £40 million loans and more. What will limit the size of a loan is the value of the property itself. When you’re looking at very large loans with a value over £10 million, you will struggle to borrow more than 60% of the property value.
Where it gets a bit more interesting with this theoretical ‘no upper limit’ is how loans are structured. At this level you can do something called cross-charging. If you’re someone with tens of millions at your disposal, you can secure the property on your other assets.
For example, say you had a share portfolio worth £50 million that you don’t want to liquidise yet, but you want to buy a £30 million property. By securing that funding on your shares, you can potentially get to 100% of the value, because other assets are at play. It all depends on the property and your financial situation.
Who is eligible for a large mortgage loan and do many lenders offer large loans?
That’s been a huge growth area post COVID-19. It’s partly driven by the squeeze on affordability, with fuel prices going up, energy prices going up and the cost of living rising so fast.
Whether you earn £20,000 or £200,000, those costs are comparable – a loaf of bread is the same price. So banks have really pushed toward the large loan sector because people earning over £200,000 a year are a safer bet. They have a greater level of affordability.
As of today, there are 35 high street banks that offer a £1million+ mortgage. There are probably another hundred or so that are private banks. If you want to buy a very high priced property you may need a private bank, as high street lenders will stop lending between £2 million to £5 million.
How can I get a large mortgage?
If you earn a lot of money, it’s fairly easy. It’s all around your income and assets and affordability is slightly different.
If you were to have a 5% deposit you can buy property up to £1million and with a 10% deposit you can go up to £3million, so as long as you have the deposit, it’s not hard at all.
It’s in the income makeup of the individual where it starts to get complicated. Most banks have appetites for certain clients. For example, they might like the sector that you work in, or they might like your age – especially if you’re young and earning a lot. Jurisdiction’s a huge factor as well. At the top end of the market there are lots of people who are internationally mobile. If you’re not a UK resident, banks will map out their risk appetite based on all those factors.
It’s not difficult to get a large loan, but it’s complex. There are essentially three Cs involved in mortgages: Collateral, Capacity and Commitment. And in this ‘high net worth’ sector of the market there aren’t strict FCA (financial conduct authority) rules around it. Collateral here is generally good – a high value property – but it can be difficult to sell, which is where banks want bigger deposits.
Commitment is about your profile – whether you pay your bills on time and have a good credit standing. Capacity is around income which can be complex – so there are lots of different ways to structure things. You might cross-charge other assets, other property, shares, stock or any public listed asset here.
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What criteria do you need to meet for a large mortgage loan?
The beauty of it is that there aren’t any. Once you are defined as ‘High Net Worth,’ with £300,000 in income or £3 million in assets, then it’s a case of the bank putting something together to fit you.
If you’ve got a lower income than that, you can probably borrow around five to six times your income. Often people looking for large mortgages are business owners with multiple assets and income streams which may come from outside the UK. So it works in their favour that there isn’t such a reliance on criteria. Banks will take a more pragmatic view of how best to cater to that client.
Can you get a large loan if you are self-employed or a limited company director?
Large loans are disproportionately exposed to company owners. You may run a company that’s very successful or you’ve sold a profitable business. We have quite a few clients that have done this, particularly in the tech sector. They set up a company and within five years they they end up with a lot of cash – tens of millions sometimes.
That puts you in a strange position where you’ve got £20 million in the bank but no income. If you walked into Halifax or Santander they may not give you a mortgage, but it depends on your circumstances. I have one client who sits on the board of 12 different companies – but that’s not unusual in the high net worth area, so banks are more flexible.
Can you get a large loan with bad credit?
I mentioned the Three Cs earlier, and your credit rating is your commitment. If you had credit issues in the past, it’s not a show stopper by any means. It just means you need to be able to explain what happened.
It’s less of an issue for High Net Worth clients because entrepreneurs take more risks by their very nature. I’ve dealt with multiple clients over the years where they’ve been made bankrupt and had to sell their home. But then, five or ten years down the line they’ve learnt those lessons and gone on to run a very successful business.
I have never had a client I’ve not been able to place – even with major credit issues in the past. Strangely, if you’re dealing with a client who has never paid their credit card on time, that can be more of an issue than a prior bankruptcy, provided the client has since recovered.
How can a mortgage broker help in this area?
The main thing around this is that it does get complicated. Where brokers add a lot of value is in our depth of knowledge. It’s about awareness of each bank’s preferences.
A big thing is the industry you work in. We can match you with a bank that likes your line of work. The source of your wealth can also be tricky, particularly if you’re not a UK national. If money has been passed through your family or another historic source of wealth that can make things complicated too.
We also recognise that certain banks love working with people from a certain country, but the next bank won’t. That’s really down to their era of expertise. The world’s a big place and nobody is an expert in everything.
Another factor is demographics – different banks like clients of certain ages and profiles. When you consider how much variance there is in this, you don’t want to waste your time navigating all these factors to find a lender.
Finally, while affluent people may find it easy to get a large loan, how can they tell if they are getting a good deal? Brokers are really good at negotiating terms. We know the market and how to get you the most suitable borrowing agreement possible.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
There may be a fee for mortgage advice, however the precise amount will depend on your circumstances. If a fee is charge, a typical fee is £495.