High Net Worth Interest-Only Mortgages

If you need to borrow a large amount of money for a property purchase and are considering an interest-only mortgage, it’s important to understand which lenders will be able to cater for someone who’s classed as high net worth.

This guide covers everything you need to know about the whole process.

Read on to find out how to approach the right lenders, where to find the best rates, and a thorough explanation on how this arrangement differs from a standard mortgage.

Can you get a high net worth interest-only mortgage?

Yes, it’s definitely possible. However, there are only a small number of specialist high net worth lenders out there who are able to deal with clients who fall into this category.

The application process can become much more flexible if you qualify for a special high net worth exemption.

The best mortgage deals and rates are often found with bespoke lenders who purely work with high-value clients. However, they will usually require you to be introduced to them by a trusted broker.

What exactly is a high net worth customer?

The FCA defines this as someone with a salary no less than £300,000 or assets worth at least £3 million. Meeting this criteria means you would qualify for a high net worth exemption and borrowing terms not available to the general public. In the context of mortgages, it’s also usually referring to properties worth at least £1 million.

This exclusivity means that each mortgage will be unique.

As a result, there are only a small number of lenders and private banks who are able to set up these bespoke arrangements. So, if you fall into this category, it’s essential to seek the advice from a broker who has the relationships to introduce you to these niche lenders.

How common are these mortgages?

This type of mortgage is more common for investment and buy-to-let (BTL) properties. Large residential interest-only mortgages can be rarer to find because they are deemed higher risk. If you are looking for a high-value residential interest-only loan, don’t despair.

There are still options available if you speak to the right lenders.

How this type of mortgage works

The process works in a similar way to a standard interest-only loan. But there are some key differences. The most important is that your situation will require a bespoke borrowing arrangement.

An interest-only mortgage means that you’ll just be paying the interest for the length of the mortgage, and the principal will remain at the end of the term. This means lower monthly payments compared to repayment mortgages. But, in order to qualify, you’ll need to prove access to a ‘repayment vehicle’, which is your plan to pay off the rest of the principal.

Due to the high property values you are likely dealing with, this repayment vehicle will have to be substantial. If you’re looking to pay off £1 million or more at the end of an interest-only mortgage, you’ll need access to a significant level of money or assets.

Some lenders will give you the option to pay off a portion of the principal during the initial term. And others will be more flexible on the funds or assets they’re willing to accept for a repayment vehicle. So, it’s vital you create a borrowing arrangement with the correct lender for your particular financial situation.

How a broker can help with a large interest-only mortgage

Lending to high net worth individuals involves a more nuanced approach. As a result, there are not many brokers or lenders who will have the expertise to set up a mortgage.

Here are the ways in which a skilled broker can help with your interest-only mortgage application:

• Introductions to appropriate lenders: many lenders do not have the capacity or expertise to create tailor-made lending arrangements. Also, the majority of high net worth lenders will only consider mortgages of at least £1 million. An experienced broker is going to make sure you’re speaking to the right lenders from day one.
• Find unadvertised loans: typically, high value lenders will not even advertise their capacity to offer custom large interest-only loans. Using a broker with existing relationships adds more credence to your application. It increases the chances you’ll be considered because lenders will highly regard their approval. Some won’t even deal with clients who don’t have the backing of a trusted broker.
• Application advice: you’ll need to have a sound reason for wanting an interest-only mortgage. A skilled advisor will help you relay this in the most positive way and introduce you to the lenders who will be the most accommodating to your situation.

The tailored lending approach means that it’s vital you deal with an experienced broker who knows this market and has existing relationships with appropriate lenders.

The brokers we work with have plenty of contacts and knowledge in this market niche. Just make an enquiry and we’ll introduce you to a specialist advisor for free.

Getting the best rates available

The eligibility criteria for interest-only mortgages can be fairly restrictive. However, there are some key differences involved for high net worth clients.

When looking for the best interest rates for large interest-only mortgages, here are some important areas you need to be aware of:

• High-net-worth exemption: in order to qualify you’ll need to prove access to an annual net income of over £300,000 or assets worth over £3 million.
• Affordability: the individual nature of these loans means that affordability will be calculated on a case-by-case basis. Your financial situation might involve a complex mix of income and assets, so it’s important to deal with the lenders who can create the best arrangement based on your finances.
• Repayment vehicle: you’ll have to be able to prove ownership of a suitably large repayment vehicle or plan to cover the outstanding balance left at the end of the mortgage term. Lenders will vary on what they’ll accept for this and have different preferences on what type of repayment vehicle they favour.
• Deposit requirements: typically the deposit for an interest-only arrangement will be higher, meaning a lower loan-to-value (LTV) ratio. Most lenders will require an LTV ratio of 75% or lower. However, the exact figures and rates offered can vary greatly depending on the lender and their willingness to tailor the arrangement to your circumstances.

Credit scores: although the criteria for a high net worth mortgage can be flexible, bad credit could still impact the deal you’re offered. So it’s worth downloading all your credit reports. Then, get your broker to evaluate the results and instruct you on any areas for improvement.

Alternatives to interest-only mortgages

Getting an interest-only mortgage is going to require access to a significant level of salary or assets. You’ll need this in order to qualify for the net worth exemption, but you’ll also need to be able to prove ownership to substantial amounts for your repayment vehicle.

Here are some further mortgage options to consider that you can discuss with your broker:

• Repayment mortgage: because the process for an interest-only mortgage can be more stringent, it may be worth considering a repayment mortgage. Depending on your specific asset ownership and liquidity situation, this could open up more lending options and removes the need for the repayment vehicle.
• Buying outright: you might also want to look into buying a property outright rather than getting a mortgage. But doing this could mean tying up a considerable amount of your money in that single property.
• Part and part mortgage: setting this up means paying the interest on the loan and some level of repayment. This would leave you with a lower amount of capital needed to pay the balance at the end of the term.
• Asset-backed mortgage: if you have a low income or salary but lots of money tied up in assets, then another route worth exploring is an asset-backed mortgage. Speaking to an expert broker is going to be your best way of seeing all the available options based on your circumstances.

Speak to a specialist high value mortgage broker

We offer a free broker-matching service, which means we can introduce you to an expert mortgage broker who has experience dealing with high value clients.

Their expertise means that they will guide you through the whole process and pair you up with the most appropriate lenders who offer the best interest-only deals for your circumstances.

Just call 0808 189 0463 or make an enquiry and we’ll arrange a free, no obligation chat between you and your ideal mortgage broker.