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Having assets under management (AUM) is a standard requirement of most lenders when it comes to high-value mortgages. However, high-net-worth individuals are increasingly exploring dry mortgages, especially in the context of select lenders sometimes removing AUM or reducing how much is required in certain cases.
There are a million and one reasons why your clients might not want to put AUM to secure a large mortgage. Often, hesitation is a good thing: a preference for dry borrowing is often rooted in a positive banking experience. When HNWI’s already have a successful and fruitful relationship with their private bank, they can be very reluctant to put AUM with another institution. Often this is driven by the sentiment that new banking relationships will effectively muddy the water and make handling their wealth more complicated, stressful, and time-consuming.
Tentativeness to put AUM will likely be amplified if your client has had a bad banking experience in the past or if they have a complex background. Any individual who has taken a long time to find the ‘right’ bank can tend to be hesitant to put AUM with another bank, which again tends to be borne from an appreciation of their primary banking relationship.
Enness’ brokers are seeing more high-net-worth individuals and their advisors requesting a property finance package that doesn’t require putting AUM with a bank. In some cases, this is simply a preference. In other scenarios, it’s an absolute non-negotiable: if AUM is a requirement of a particular lender, your client may not want the mortgage.
In an ideal world, if your client wants a dry mortgage, Enness’ broker would be able to present an option every time it was requested. In the real world, this won’t be the case. Dry mortgages are a firm fixture in the high-value mortgage landscape, and AUM is often a requirement of lenders. Sometimes, dry mortgages are a possibility, and if this is the case, Enness will be able to secure one for your client. If they aren’t, however, Enness will be able to help your client reduce the assets that need to be put under management.
By and large, UK banks tend to be far more accommodating when it comes to granting large mortgages without AUM. If your client is buying UK property and is using a UK lender, Enness will usually be able to negotiate a dry mortgage for your client. Introductions here are essential – it’s not something every lender offers and must be arranged from the get-go.
In mainland Europe and other parts of the world, getting a dry, high-value mortgage will be more of a challenge. European banks often have rigid rules when it comes to AUM, for example.
When AUM is a requirement from a lender, Enness will work carefully with your client to look over the options. In these cases, your clients are likely to ask Enness’ broker to help reduce the lender’s requirement for AUM as much as possible.
Requesting AUM is usually a bank’s way of getting more comfortable in the deal. If this is the case, Enness will work with you and your client to look at other options that can be presented to the bank. These will depend vastly on your client and their assets but include putting forward additional security or offering banking relationships that would provide the necessary comfort and simultaneously reduce the amount of AUM required. Offering the potential lender your client’s corporate banking relationships or having them handle banking for your client’s trust structures can be options, for example. When your client’s case is presented strongly and negotiated effectively by a partner like Enness, your client can often enjoy a much-reduced AUM requirement when borrowing for a high-value mortgage.
If you have a client that would like to explore a high-value mortgage without putting AUM with a lender, get in touch. Enness’ team will talk you through the options that could be a possibility for your client.