It’s rarely a straightforward or simple task to arrange a mortgage, and the many boxes to tick and criteria to satisfy mean that it can often take several months to find a solution which works for you. When the mortgage itself is out of the ordinary, this process can often become much more complex; standard high street lenders are wary of lending their money to any but the most normal of buyers, and the thought of financing a mortgage in excess of a million pounds often falls outside of their skill set.
However, there are many people in the UK and abroad who need mortgages which fit this criteria, and don’t want to be treated as a difficult case by a mainstream bank. These buyers have specialist needs which must be met, and need a lender who can supply flexible, timely funds. Million-plus mortgage providers cater especially to this market, and their ability to operate free from the “check-box” mentality of many high street lenders mean that they can meet the varied needs of their clients. This is especially useful for high value loans like this, because there is no “one size” solution; the situations of buyers in this market can vary enormously from person to person, and a flexible approach is necessary to ensure that their needs are met.
The Million-Plus Approach
Let’s look at why a buyer in need of a million-plus mortgage benefits from the services of bespoke mortgage brokers and their expertise. It’s important to bear in mind that although the services on offer are set apart from the mainstream of mortgage providers there is still a robust market for high value mortgages. There are many lenders to choose from, who all offer different products to suit different individuals, so if one lender doesn’t suit a buyer’s situation there’s always a lender who will.
Expert Advice and Insight
The business of arranging and processing a mortgage in excess of a million pounds is not at all straightforward. In fact, the business of arranging any mortgage isn’t straightforward – to arrange a loan of this size takes significant effort and an experienced team to organise effectively, and this is what specialist million-plus mortgage brokers provide. The ability to advise at every step of the way, helping buyers to discern which loan offers the best deal and most favourable terms whilst also ensuring that the “behind the scenes” operations are kept under control is invaluable, and providers of high value mortgage are adept at keeping their clients well-informed and confident.
Completing a million-plus purchase requires a great deal of negotiation, and both sides in the deal are keen for it to be sealed according to the timeline they’ve agreed upon. Especially for commercial clients, it’s essential that there are no hold-ups when securing funds, because a misstep at this point in the deal can cause the entire contract to fall through. When relying on the services of mainstream banks you’re working with a professional team, but one which is used to handling the affairs of smaller, typical residential mortgages well below a million pounds. This can lead to complications in the procurement and transfer of funds, something that can sink a deal.
Working with a specialist supplier of high value mortgages means you’re in the hands of a team of experienced professionals working within the field they specialise in, who have the expertise and contacts to ensure your deal goes through on schedule. Million-plus mortgage suppliers pride themselves on their ability to meet a tight deadline, and give buyers confidence that their funds will be supplied bang on schedule.
Flexible Criteria for Lending
The circumstances of high net worth individuals are rarely similar; the situation of one buyer might vary wildly from that of another, even if they’re applying for mortgages of a similarly high value. Therefore, million-plus mortgages need to suit a range of clients, and providers of these loans must be willing to work to their customers’ specific needs. This is in contrast to the typically rigid criteria which meet applicants to high street lenders; they have a strict set of criteria which they lend by, and if you can’t tick their boxes then you’ll struggle to secure funding.
Lenders for million-plus mortgages are much happier to work with their clients to arrange a solution, and can meet the needs of many different customers. For instance, they’re able to arrange finance for individuals who are non-domiciled expats, who typically find it hard to satisfy mainstream banks. These lenders can also arrange funding for individuals with income sources beyond a salary – those who are self-employed, for example, or business owners. These borrowers often find it tough to satisfy the demands of mainstream lending when applying for a loan of this size; despite their individual situation, these banks find it hard to stomach the complexity inherent in these sources of income.
Specialist million-plus mortgage providers have access to lenders whose appetite is perfectly suited to the products they offer. They’re able to match investors with the products they prefer to invest in, which means that applicants for high value mortgages are always offered the best possible rates; the groups which finance their loans through the mortgage brokers are looking for exactly the opportunities which the mortgage brokers provide.
In addition, this helps high value mortgage brokers to arrange loans in a fast and secure manner. Unlike mainstream banks, million-plus mortgages are not something out of the ordinary for their investors and don’t constitute a special case – the lenders are looking for precisely this type of loan, which removes a potential obstacle to fast, flexible lending.
Flexible Financial Support
For mainstream banks, the typical approach to satisfying their lending criteria revolves around the personal situation of the borrower; their salary, their job security and their personal history. These aspects play an important part in determining who is a safe option for lending, and who could potentially pose a problem, but doesn’t tell the full story when applied to million-plus mortgage applicants. In many cases, these borrowers have more complex financial situations which involve a structure of liquid and solid assets, and diverse holdings.
Providers and brokers of million plus mortgages are used to dealing with a client base whose wealth is often diversified across many different formats, whether that’s stocks and shares, personal portfolios and pensions. Their experience in handling the affairs of individuals with more complex personal finances means that the process of arranging successful underwriting is clear-cut and smooth; there’s no complex back and forth while their team tries to work out whether the borrower is a safe bet or not. High net worth individuals are able to work easily with a team who can communicate clearly and effectively regarding intricate financial structures.
What Can A Million-Plus Mortgage Be Used For?
Providers of million-plus mortgages clearly meet the needs of their clients in that they’re able to arrange finance in a wide variety of situations. However, many mortgage providers are very choosy about the loans they approve, and will often restrict what their borrowers can use their mortgage to purchase. Does this approach also apply to the mortgage brokers who arrange million plus mortgages, or does their flexible approach also allow buyers to arrange finance for many different purchases?
Buying a New Home
It may sound like the most straightforward purchase imaginable, but buying a new home with a mortgage in excess of a million pounds puts you squarely in the stratosphere of residential mortgages. It’s not uncommon for commercial investors to purchase property worth well in excess of a million pounds, given the nature of business investment, but for a residential property to be worth this much means the purchase is very much in the minority of property values. In situations like this, there are many areas where the advice and experience of specialist high value mortgage providers comes in exceptionally useful; Stamp Duty Land Tax, for instance, increases dramatically for homes worth over a million pounds, and working with an expert allows buyers to minimise their exposure to additional expenses.
Additionally, the problems associated with buying any residential property also apply to buyers of high value homes. The nature of a property transaction means that the seller can pull out at any time, and if they feel like the buyer is dragging their feet or is slow to come up with funding they might drop out, leaving the buyer holding the bill for any surveys or contracts which have been arranged. To help ensure that this doesn’t happen, a million-plus mortgage supplier will work to keep the deal on track and on time, without causing any delays that could endanger the deal.
Commercial Investment and Buy to Let
Arranging finance for a commercial investment is a different proposition altogether from a residential purchase. In fact, in many cases there are significantly different rules which apply when a borrower is using their loan to finance a commercial investment, and this can make it difficult for buyers to find the funding they need. As a general rule of thumb, the terms of a buy-to-let or commercial mortgage require greater security from the borrower, in the form of a higher deposit and a higher interest rate. These reflect the greater risk the loan poses to the lender; if the borrower is relying on short-term tenants to pay their mortgage bill, they stand to lose money if their property falls vacant.
This type of investment requires even greater flexibility on the part of the mortgage provider, because the types of property which might need financing can vary so much more than with a residential mortgage; a commercial investment property might constitute premises for a business, a bed and breakfast or even a small hotel. Being able to meet the requirements of lending in these situations is an important part of a million-plus lender’s job, and mortgage brokers who specialise in this area will be able to provide finance in a wide variety of cases.
On a similar note, it’s also extremely important for commercial investors that loans are provided on time and in full; an opportunity can easily be missed if funds are late to arrive, or if the buyer struggles to have their loan approved. The services of a million-plus mortgage provider will help to guard against the possibility of a deal breaking down due to delayed finances, since they’re experienced with working in this market.
The buy-to-let market has been one of the most attractive areas for investment in recent years, driving thousands of buyers to set themselves up as landlords. This has boosted the national real estate market, but it has also increased property prices through competition and has begun to squeeze first-time buyers out of the market. In response, the UK Government introduced a number of measures to rebalance the situation by making it more expensive to own a buy to let property. These measures included a 3% additional Stamp Duty tax on all buy to let purchases (which is equivalent to £30,000 on a £1M purchase on top of the regular Stamp Duty charge), as well as reducing landlords’ ability to offset their mortgage payments against tax on their rental income. The introduction of these measures has made it less appealing to own a buy to let property, but although the buy to let market has slowed down it has not stopped, and for the right buyer and the right price, buy to let can still be a great investment choice.
The option to re-mortgage a property can often be valuable to an owner, but the ability to do so is always dependent on the value of the property. There are many good reasons to apply for a re-mortgage, such as the need to seek out a better deal or the desire to remodel or update the property itself, and being able to shift provider is an important part of the competitive system that keeps mortgage providers on their toes, continually offering the most attractive products to consumers.
Arranging a re-mortgage for a million-plus property is similar in many ways to a re-mortgage for a property worth much less; the owner can switch provider to find the deal that suits them best, and many owners do so every few years in order to maintain a short-term fixed or tracker rate mortgage, which most providers offer for a limited period of time.
Shopping around for the best mortgage deal can be a great way for a homeowner to save money on their mortgage bill, especially if their home is worth more than a million pounds. The rates on offer from specialist lenders usually compare very favourably to those from mainstream providers, and the flexibility and reliability of these providers also gives borrowers more confidence and more options to choose from when arranging their re-mortgage.
Official resources about UK financial regulation:
- Bank of England Website
- Prudential Regulation Authority
- Financial Conduct Authority
- The Financial Policy Committee
- Financial Services Compensation Scheme
Other useful unofficial mortgage resources
- Buy To Let Mortgage
- Foreign Currency Mortgage
- Help To Buy Mortgage
- Hotel Mortgage
- Listed Buildings Insurance
- Short Lease Mortgage
- The Bank of England
Research provided by Falbros