Many private banks offer mortgages to high net worth individuals as a core part of their offering. There are several reasons why an affluent person may want to explore obtaining a mortgage from a private bank. Foreign investors wishing to buy property in the UK might look to a private bank for a mortgage. Or an applicant may be a person like a hedge fund manager, who has a very high but uneven (and not guaranteed) income because of performance-related bonuses.
The key point in both these cases is that such individuals may not satisfy the lending requirements of mainstream lenders – despite the fact that they may be more than able to meet the repayment terms of the size of mortgage they seek.
Restrictions on mortgage lending have been progressively tightened in recent years, in a bid to stop the housing market from over-heating and to prevent borrowers from taking on more debt than they will be able to manage if the economy takes a turn for the worse. As well-intentioned as these moves are, they have left some people struggling to find a mortgage lender. The big banks have imposed strict rules on who may or may not be approved for a mortgage and this means that, despite being high net worth, many individuals may be turned down. Factors like the mortgage being intended for the purchase of a second property can further complicate things.
How it works
Private banks are often able to exercise far more discretion when it comes to approving mortgage lending. However, this depends on the institution having a good understanding of your entire financial affairs – such as your income over recent years, how your investments stand and pre-existing calls on your money – and so will usually prefer to offer mortgages only to customers with whom they have an existing relationship.
The other big reason why you might seek a mortgage from a private bank is, of course, wishing to borrow large amounts of money. High Street banks don’t cater well for mortgages above £500,000 so you are unlikely to find a loan at a competitive rate, if at all. The largest private banks offer mortgages in the tens of millions of pounds to eligible clients. What’s more, they are able to offer mortgages at competitive rates to the right clients; private bank mortgages aren’t necessarily a more expensive option.
Summary
Private banks offer far more sophisticated mortgage facilities than mainstream lenders. They will be more able to take into account the fact that you may have significant assets tied up in property or investment portfolios, and look beyond the bare metric of your base salary. At the more sophisticated end, private banks may be able to offer multi-currency lending and advice on tax-efficient property investment. Many today are also able to offer assistance on investor visas, managing both a compliant investment portfolio on your behalf and sometimes helping with the application process itself.
High net worth individuals may also find that a private bank will be more flexible on the financial terms of a mortgage if, for example, they do a lot of other business with the institution. You might be able to negotiate reduced rates or fees. Remember, however, that most private banks will ask that you have or make a significant financial commitment to the institution before you will be eligible to apply for a mortgage.
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