Like high street lenders, private banks offer mortgage products just as high street and mainstream lenders do. However, where many mainstream lenders can be less flexible regarding the rates and terms provided through mortgage products, private bank mortgages can be viewed more as 'starting points'. As a broker, we can negotiate and tailor these specifically to meet your financing requirements.
In terms of products, lenders offer 'niche' mortgages that tend to be more relevant to wealthy borrowers but that are more challenging for mainstream lenders to provide. As well as 'standard' mortgages (i.e. capital and interest mortgages for vanilla borrowing scenarios and low loan-to-value), private banks also offer:
Interest-only mortgages can be ideal if you are a high-net-worth individual, and they tend to be more readily available from private banks than mainstream lenders. This type of mortgage will see you make interest payments for a defined period set by the lender before paying off the principal. Accessing such a mortgage depends on a borrower's ability to pay off the principal, and a bank will look at your means of doing so to offer these types of mortgages. As high-net-worth individuals can usually support (and document how they will repay) the principal, interest-only mortgages can be an advantageous way of borrowing if you have significant assets.
If your financial background and net worth/assets are significant enough, private banks can offer high loan-to-value (LTV) mortgages, which are generally considered anything above an 85% LTV ratio. Accessing a high LTV mortgage from a private bank can be easier than from other lenders, as they have a more holistic approach to assessing your wealth and suitability for a high-value mortgage and more flexible lending criteria (particularly under high-net-worth exemption rules). Private banks generally only offer high LTV mortgages to you if you have a specific reason for taking out this kind of product. If you have a very significant net worth but comparatively little income, you are expecting a large liquidity event in the future and so on. Banks will carefully assess your suitability for taking out a high LTV mortgage, focussing on your net worth, disposable income and wider financial background to make a lending decision.
Some private banks will offer pre-funded mortgages if you have low or complex income that might otherwise make accessing a high-value loan difficult. In this scenario, you'll pay your lender a certain number of years mortgage upfront. The rest of your mortgage is paid off with monthly repayments, as in a usual scenario. Pre-funded mortgages are designed to give the lender additional comfort in writing the loan, as it essentially reduces risk but allows borrowers to access a mortgage.
Most UK mortgages are regulated, and the relevant regulations lay out specific guidelines for how a lender can assess a borrower's affordability for a mortgage. This generally focuses on income, living expenses, liabilities (debt, school fees etc.), and your deposit. However, many high-net-worth individuals find that they do not meet these standard affordability rules for any number of reasons: if you have a significant net worth but relatively low income, sporadic income (i.e. you are a Chairperson that receives a lump sum payment once a year rather than a monthly salary) or because you deliberately draw lower income or dividends through a business to keep your taxable base low - there are any number of reasons why you might not meet affordability constraints.
Under the exemption (you will need to meet specific criteria with regard to your net worth and income to qualify), lenders can effectively offer you an unregulated mortgage based on your net worth and income rather than exclusively considering your income, expenses and deposit in isolation, as is the case for most borrowers. High-Net-Worth Exemption mortgages can be advantageous if you might not meet affordability rules under-regulated mortgage rules.
For non-UK resident investors looking to purchase buy-to-let investments, trophy homes or holiday homes in the UK, many private banks will offer what are known as occasional-use mortgages. Some lenders will view these as unregulated mortgages but often, private banks will not, provided your financial background supports this kind of borrowing. You may be able to bypass the regular income, expenditure and affordability process and have a mortgage based on loan-to-value, your net worth or your profile, as well as on the basis of the property only being used occasionally.
The above mortgage types are by no means exhaustive, and there are plenty of options regarding what a private bank will offer. Pre-paid interest and interest deposits are also options, for example, as are foreign currency mortgages and top slicing on buy-to-let investment purchases (where your salary or income will be considered to make up a potential shortfall on the difference between your rental income and mortgage payments, where lenders usually want to see a margin of around 150%) are also possibilities.
Where placing Assets Under Management (AUM) tends to be a prerequisite for European private bank mortgages, private banks operating in the UK are generally more flexible in this respect, both for UK nationals and non-resident investors. Usually, placing AUM will allow you to access the bank's most competitive rates. However, in some cases, you may have a preference for dry lending: taking a mortgage from a bank without pledging assets with them or having a broader banking relationship with them.
Not all private banks offer dry lending. Usually, your calibre as a borrower and your financial background (global assets, net worth, liabilities, income, the amount you are borrowing and the mortgage product you are seeking) will dictate whether dry lending is an option.
Both AUM and dry lending deals have different advantages. Placing AUM will often see you able to access a 100% loan-to-value mortgage and more competitive rates, with the bank aiming to manage your assets so that returns cover your mortgage repayment. Dry loans, which can be more expensive, are advantageous if you don't want to set up a new banking relationship but your usual private bank doesn't lend or if an alternative bank offers better rates than the bank with which you have your wider banking relationship.
Enness has access to every private bank that lends against UK real estate, meaning we can source the best rates and terms for you. Every mortgage we broker is tailored to our clients' needs and financial background, and we can work with UK residents, expats and foreign investors. We can arrange private bank mortgages from £1 million to several million pounds.
We are used to complex lending scenarios and can arrange a private bank mortgage even if you have an unusual background or financing requirements. Get in touch to discuss private bank mortgages or learn more about rates and terms.