In simple terms, the loan to value (LTV) ratio of a mortgage is calculated as a percentage of the property’s value. If for example, you were looking to secure a £1.5 million loan towards a £2 million property purchase this would be a 75% LTV mortgage. If you think of the risk/reward ratio akin to a seesaw, the lower deposit the high the risk, the higher the deposit the lower the risk. The risk associated with any mortgage is expressed in the interest rate payable.
Under normal circumstances, companies financing large mortgages, predominantly over £1 million, would not offer an 85% LTV. The situation is a little different when it comes to high net worth individuals because many will have sufficient cash flow or other assets they can use as collateral. Some may have limited cash resources in the short-medium term (we will come back to this issue) but assets which will more than cover their liabilities.
Even so, the number of mortgage providers who would even consider an 85% LTV mortgage is normally few and far between. Many providers will shy away from the perceived extra risk associated with 85% LTV mortgages and above. This is where we come in….
The main issue with high LTV mortgages is simple; the client has relatively small exposure with the finance provider taking on most of the risk. Whether looking at traditional loans or high-value mortgages, all finance providers will prefer the lender to be as committed as possible. Thankfully, not only do we have access to a range of traditional high-value mortgage providers but we have a close relationship with a private bank which is extremely active in this area.
In the past, we have negotiated a number of million-pound mortgages with an 85% LTV and even above in some circumstances. Access to this type of finance is generally restricted and many companies will act on an introduction only basis. This allows them to build up a select number of trusted third parties whom they can deal with. We understand their requirements, they understand our customer needs and more often than not we are able to meet in the middle and come to an acceptable arrangement.
There will be occasions where high net worth individuals are looking for £1 million mortgages, and above, but they may have restricted cash flow. They could be asset rich with limited immediate cash available which can cause issues. If you put yourself in the shoes of the lender, if they have assets but restricted cash flow in the short term, might this continue for some time to come? Even though they have assets, can these assets be liquidated at relatively short notice and obtain a fair market price?
This is the main reason why the number of mortgage providers able to offer 85% LTV mortgages and above is relatively small. Access to this level of funding comes with reputation and experience which is where we excel. We would welcome the opportunity to discuss high LTV mortgages in more detail, calculate theoretical scenarios or obtain real-time rates for real-time situations. Our experience is second to none although we will retain a sensible head when advising you of the pros and cons for your particular situation.
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