Large Mortgages

If you’re looking to secure a high-value mortgage a standard high street mortgage lender may not be your best option. When it comes to the purchase of a high-end city apartment, a million pound house or even a luxury estate, mortgages often require a more bespoke approach.

In this article we’ll look at how to secure borrowing for high value property, and why to consider private banks and specialist lenders, alongside traditional high street lenders. Whether you’re buying for business use, or have a high-net-worth income structure, we’ll look at which lenders are most supportive of your finances.

What is classed as a large mortgage?

While loans upwards of £500,000 have typically been referred to as a ‘large mortgages’ in the UK, given the average property price in certain areas of the country, particularly southern England, £1 million

Due to rising property prices, even mainstream banks won’t class a mortgage as a ‘large loan’ until the borrowing exceeds £1 million, or even £1.25 million in some cases. However, for lending above that level you’ll typically need a private bank or specialist lender, as standard high street lenders are rarely equipped to assess complex income structures.

How income assessment changes for high-value loans

When it comes to assessing home loan applications that lenders consider to be large mortgages, most lenders would use a bespoke manual underwriting process. Often this includes the valuation of your overall net worth, including any assets. However, private banks also offer ‘dry loans’ (non-asset backed lending) for those who prefer not to tie up their assets in mortgage lending.

High-value mortgage borrowers often have more complex financial circumstances with multiple income streams that necessitate this type of assessment. While it may vary from lender to lender, the following factors will usually be considered in bespoke mortgage underwriting, alongside your salary or main income:

• Bonuses, whether they are one-off, or annual payments

• Stocks and shares portfolios

• Partnership income if your income is from an LLP

• Retained business profits, rather than dividends if you're a self-employed director

• Overseas income

• Pensions

• Income from family trusts

Lending multiples are often higher than those offered on a standard mortgage, with some specialist lenders even offering 6x your total income, and beyond. This varies from one lender to the next, so it’s always best to speak to a broker with experience in large mortgages and high-net worth lending.

AUM (assets under management) lending may also be an option. This is where a lender manages your stocks and shares portfolio, for example, and allows you to use this as security for your mortgage loan. A minimum asset transfer of £250,000 to £500,000 in investable assets is typically required to secure the best rates.

Loan-to-Value (LTV) limits for large loans

As a general rule, the larger the loan size, the higher the deposit a lender needs. However, it’s also far more common for lenders to accept high value assets at this level of lending, either alongside, or in lieu of a cash deposit.

The table below outlines typical maximum LTV expectations based on the size of the mortgage loan. Keep in mind that credit score will also have an impact on deposit size, and these figures are based on someone with generally good credit:

What size of income is needed to secure a large mortgage?

This will depend on a few factors, including how much you’re borrowing, your financial and credit profile, and which lender you approach. Each lender uses a different income multiplier to the next, and these tend to be bespoke, rather than fixed when it comes to larger borrowing.

However, using an average 5 x income multiplier, you would typically need:

• A combined or individual income of around £150,000 to borrow £750,000

• A combined or individual income of around £200,000 to borrow £1m

• A combined or individual income of around £400,000 to borrow £2m

However, keep in mind that underwriters will factor in your total wealth, not just your typical annual income. This may mean that you can borrow more based on retained business profits or assets, for example.

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Repayment structures for large mortgages

When dealing with large loan amounts, choosing the right repayment type is of the utmost importance. Many high-net worth clients favour interest-only repayment, as this can drastically improve your monthly cash flow. However, a strong and dependable repayment vehicle will be essential to utilising this option.

For larger mortgages you could consider:

• Capital repayment: This ensures the debt is entirely cleared by the end of the term, however, monthly payments are likely to be high at this level of borrowing

• Interest-only: Lenders usually permit this up to 75% LTV for high-net worth customers, however, they will require a credible repayment vehicle - for example, sale of the property, another asset, or a certain inheritance

• Part and part: This hybrid mortgage repayment structure combines both of the above. While you'll still need a strong repayment vehicle, some of the interest will be repaid over the course of the loan, meaning you won’t need to find as much at the end as with purely interest-only repayment

• Offset: An offset mortgage allows you to link a savings or current account to your mortgage. The savings balance held in this linked account is used to offset your interest. This means you only pay interest on the difference between your loan balance and your savings balance

Large buy-to-let mortgages

When securing a buy-to-let mortgage over £1 million, specialist lenders apply more sophisticated affordability models and stress tests, rather than relying strictly on the property’s rental yield. High-net-worth investors often receive far greater flexibility when it comes to managing their property portfolios efficiently.

Usually a holistic, manual approach to underwriting will be used, whether you’re looking to buy a high value property for personal use, or as a rental investment. However, often when it comes to buy-to-let property they will look at the overall net worth of your rental business, as well as your existing portfolio equity, alongside personal income streams.

If you’re buying investment property at auction, it’s often possible to use a regulated bridging loan to secure a property quickly, before transitioning onto a long-term large mortgage once the asset is functioning within your portfolio.

Do large mortgages have higher interest rates?

Not necessarily. In fact, if you have a significant deposit (giving you an LTV of 60% to 65%), you can unlock some of the most competitive interest rates on the market.

However, if you are borrowing at the absolute maximum LTV limit for a multi-million pound property, arrangement fees or interest rates might adjust slightly higher to cover the lender's risk.

You can compare the latest rates for large loans with our free mortgage sourcing tool below.

High-net worth exemption mortgages

If your financial profile meets the Financial Conduct Authority’s (FCA) definition of high-net worth criteria (having an annual net income of £300,000+, or net assets totaling £3 million+) you’ll likely qualify for a high-net worth exemption mortgage.

Although not a specific mortgage type, this regulatory exemption allows specialist lenders and private banks to step outside standard affordability frameworks. This means they can assess your income with greater flexibility, as determined throughout this article. It means they don’t need to work within strict income multipliers, and can take a holistic look at your borrowing power, using asset-backed underwriting.

Why choose Money Helpdesk for your high-value mortgage?

Because many of the best large-scale mortgage products are not advertised on the high street, working with an independent broker is crucial to securing the best terms for your circumstances.

At Money Helpdesk we look beyond traditional banks to access boutique lenders and private banking institutions who are set up to deal with complex incomes. Our advisers also know how to best package such multi-currency, or asset-rich income portfolios to satisfy the underwriting criteria of this type of lender.

If you’re looking to secure high-level finance for your home or business property, get started now to speak to an expert.