You have the income; you have the assets, so it should be straightforward. The reality is that securing a high-value mortgage requires a high level of experience, knowledge, and determination.
The Ever-Changing Landscape of High-Value Mortgages
Let’s start by looking at what a high-value mortgage is.
In a recent article, we took a deep dive into demystifying high-value mortgages, defining them as a specialised type of mortgage designed for high-value homes. These mortgages accommodate the unique financial needs of high-net-worth and ultra-high-net-worth individuals.
Once upon a time, a mortgage was considered high-value if borrowing exceeded £1m. But in today’s current landscape, a mortgage is considered high-value when the borrowing exceeds £3m.
Why does the price tag matter you may ask?
If you require such substantial lending, you likely possess a more intricate financial profile that includes a complex income structure, and possibly intricate ownership structure.
Kem Kemal, Co-Founder and CEO of Henry Dannell, comments: “In my 21 years in the industry, I’ve helped many clients secure high-value mortgages. Having witnessed the evolution of lenders, and having worked with many exceptional underwriters specialising in this niche area, I came to learn that the client’s success in securing a high-value mortgage relied on the underwriter’s understanding of high-net-worth and ultra-high-net-worth financial profiles. With that, a crucial aspect was ensuring the underwriter received a well-presented overview of the client’s profile, including their income structure, assets, liabilities, and any complexities involved in the case. Understanding the market and knowing which lender is best suited for the case are fundamentally crucial. Advising high-net-worth clients is an art, demanding a high level of skill, experience and finesse.”
Market Dynamics Impacting High-Value Mortgages
Recent market shifts have opened up greater opportunities for clients seeking high-value mortgages.
Historically, private banks dominated the large loan arena as they understood the nuances involved. However, this dominance has become a thing of the past with many high street lenders now offering competitive terms for clients seeking a high-value mortgage.
Despite this, we are still met with the assumption that HNW or UHNW clients with a portfolio in the millions can only secure lending via a private bank. We frequently advise these clients that’s simply not the case.
Key Factors Influencing the Nuanced Landscape of High-Value Mortgages
While many believe dividing the loan amount required by your income is how it all works, it’s a common mistake. Another common mistake high-value borrowers make is turning to comparison sites to access the best rates. Unfortunately, comparison sites cannot determine whether you qualify for the required loan amount or if the lender will approve your application.
The majority of lenders offering high-value loans don’t publish their rates online. Of the £205 billion that will be lent this year in the mortgage world, 89% of that business will come via a mortgage adviser, because of the specialist nuanced nature of the loan.
Each client will require a different approach, a different lender and have access to different rates.
For Employed Individuals Receiving Bonus/Stock
For employed individuals with income, we will first need to assess how your income is structured. The typical structure combines a base salary and bonus. While this may sound simple enough, it is not the case, as the lender will need to have an understanding of how your bonus is structured. Is it a cash bonus or is it split between cash and stock?
If there is a split, then what is the split between cash and stock? In this scenario, we’ll need to understand the pattern that sits behind the bonus. In simple terms, we need to tell the story of your income – remember, it’s all about the presentation.
In these types of cases, we’ll often need to use future stock options or the vesting of shares to cement the lender’s decision and sign off on the mortgage. Many underwriters will use future stock options to satisfy any affordability concerns.
To tell the story of your income trends and how you have reached your level of earnings, we create a CV that showcases your journey to the lender. Capturing a client’s CV is the fun part, as we get to hear your full story and where your journey began. Not only is it a great story, but one that the lender needs to know. This approach also helps the underwriter feel like they know you.
For Self-Employed Individuals
For self-employed individuals, there’s a common perception within the industry, and even among self-employed individuals themselves, that obtaining high-value lending can be complex. However, this simply isn’t the case.
Perhaps you are a partner of an accountancy practice or law firm, a business owner or an equity partner in financial institutions. While your income structure may be far from the standard PAYE salary, nothing from a lender’s viewpoint has changed – they still need to understand your income patterns and contracts. The job of the adviser remains the same, to tell your story. The skill is in the adviser’s ability to ask the questions that unlock the answers.
Assets with No Verifiable Income – The Art of Notional Income
Clients within this category will likely have a portfolio under management with a private bank. At Henry Dannell, we are frequently contacted by private banks dealing with clients looking for a high-value mortgage who possess an extensive portfolio but lack provable income. Typically, they are looking to find their clients a more competitive term with a high street lender to avoid disrupting the client’s portfolio.
A viable and strong solution is Notional income. This is achieved by using a percentage of, typically 4%-5% of the portfolio value, as assumed or theoretical income.
There is now a range of UK high street lenders willing to lend based on notional income – representing another new shift in the market. Nonetheless, in this scenario, it remains crucial for the adviser to ask the right questions to fully understand your situation and effectively convey it to potential lenders.
At Henry Dannell, we have helped numerous clients in this space, from individuals who have exited their business to those who have left a city position with a stock portfolio.
What is the key to success in securing a high-value mortgage?
Working with an experienced mortgage adviser who understands how to:
- Gather client information by asking the right questions.
- Build a credit paper that discusses the nuances of the case and presents an argument to the lender as to why they should lend.
Kem Kemal, Co-Founder and CEO of Henry Dannell, comments: “The key to success as a HNW mortgage adviser is to have the confidence to speak to a HNW or UHNW client and ask them difficult questions about their income, assets, circumstances, lifestyle and expenditure. Taking pride in your work and maintaining meticulous attention to detail are essential attributes. Ultimately, achieving results requires strong determination and dedication.”
For more information or support arranging a high-value mortgage, please do not hesitate to contact our specialist team of advisers. We are here to assist you in securing the ideal high-value mortgage solution.
Please note: a mortgage is secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
