Stricter mortgage regulation including the ‘Mortgage Market Review’ in 2014 and ‘Mortgage Credit Directive’ in 2016, means borrowing money to purchase a new home remains challenging even for the wealthy. The interpretation and application of such regulations (although well meaning) has led to ‘mortgage prisoners’ such as the self- employed and those requiring interest only arrangements.
So, how can we help a wealthy family or business owner navigate the property mortgage market?
Unlike the high street banks who apply a tick-box approach to lending, at Brown Shipley we are relationship-driven. A lending decision considers the overall financial position and long term future relationship with a borrower. The primary source of the family’s income and ultimately their wealth can often be a family owned business and we will look beyond a client’s tax returns at this source of income. What is the financial health of the business; do the financial accounts show undrawn profits and outstanding directors loans and therefore capacity for the business to pay you more if required?
A HNW client does not always need to borrow money; instead clients often choose to borrow in place of divesting from their investments, avoiding disrupting the longer term investment strategy of a portfolio. As well as being able to use residential property as a means to secure a mortgage loan, Brown Shipley can also use a client’s investment portfolio as collateral if it is anticipated the investment can generate a longer term return above the cost of borrowing and the rate of inflation and this approach is within the client’s accepted appetite for risk.
Establishing a loan secured by your investment portfolio is very straight forward, without the need to incur valuation or legal fees and often at a rate of interest that is lower than rates typically associated to property-backed loans. At the same time, you take away any liability from the family home and the risk is borne by your investments; you remain “in the market”, able to enjoy any potential capital appreciation and income.
We have a breadth of knowledge in developing sophisticated borrowing solutions for HNW individuals. We can provide flexible mortgages, loans and overdrafts to help you buy, re mortgage and improve a residential property. Multi-generational relationships are crucial to a valued wealth management relationship and we understand that wealth means more than money. We help you to focus on the governance of your wealth whilst supporting your family at an important time in their lives.
Think carefully before securing debt against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured against it.
All lending is subject to qualifying criteria. Brown Shipley reserves the right to decline any loan application at its sole discretion.