Have you found your dream house but are struggling to raise the money to purchase it quickly? Not to worry. If you happen to have a Ferrari or a Rembrandt lying around then you could join the world’s super-rich and finance the purchase using your luxury asset as a security.
So-called luxury asset lending — against valuable items, such as classic cars, fine wines, jewellery, artworks and yachts — is growing, particularly among business owners and asset-rich but cash-poor individuals.
Hugh Wade-Jones, managing director of Enness, a high-end mortgage broker, says clients are asking for more imaginative ways to help them buy a property by borrowing against existing assets. “Everything from a Rembrandt to a Jeff Koons can be considered when securing a mortgage,” he explains. “An artwork’s value will be carefully investigated in terms of the artist, its uniqueness, the demand for such a piece, sale records and any data gleaned from galleries and auctions.”
He says some lenders will require physical security of the piece or collection, but Enness works with a lender that will allow individuals to keep possession of the asset throughout the loan terms. The company also lends against jewellery, watches, luxury handbags, gold and fine wine.
Loans are usually short term and the owner can redeem the goods at any time by paying off the loan plus interest. If the asset has fallen in value, the lender usually takes the hit, which makes it crucial that assets are valued correctly in the first place. Interest rates are steep compared with typical bank credit.
Luxury asset lenders either store the assets themselves or place restrictions on their use. So, if it is in a museum already there is usually an agreement drawn up that stipulates the work cannot leave without the lender’s permission.