High street lenders shied away from offering large mortgage loans in the wake of the financial crisis. Lending a large sum to a single individual is seen as more risky than spreading the risk over several smaller loans. Recently though, buoyant property prices have coaxed these lenders back into the large loan market and buyers looking to apply for mortgages of £1m plus are finding themselves with more choice than ever.
But this isn’t to say that applying for large mortgage loans is a cinch. Depending on your circumstances there may be several factors of which you need to be aware. Here are our top 5 tips for applying for large mortgages.
1. Be prepared to prove your income
For those whose income streams are simple this isn’t much of an issue but applicants for large mortgages very often derive their income from multiple sources. Those with complex income streams (e.g. those applying for contractor mortgages) may find that the best rates aren’t available to them or even that some lenders will reject their applications out of hand.
If your income stream is less than straightforward – say, for example, it’s largely made up of bonus payments – make sure you’re prepared for a longer than usual process to get your application underway.
2. …and your outgoings
Affordability is a key criteria for lenders of large mortgages. High outgoings or loan to value ratios can send up red flags for some lenders which stop your mortgage application in its tracks.
Some lenders are more flexible: Halifax, Nationwide, Santander and Woolwich have specialist underwriting teams for large mortgages who are prepared to do more to understand the situations of wealthy clients.
Nevertheless, carefully documenting your outgoings is a smart move regardless of which lender you’re approaching.
3. Beware arrangement fees
Some lenders charge much higher fees than standard for arranging large loans – especially the newer underwriting teams at high street lenders who are only just returning to the large mortgage market. These fees can sometimes run into tens of thousands of pounds for arranging mortgages of £2million or more.
4. Consider private banks
For those looking to take out large mortgages private banks (e.g. Barclays Wealth, RBS Private and UBS) were almost the only option during and in the wake of the credit crunch. These private lenders are still operational and can still offer the best interest rates for loans of £1m+ – as little as 2.1 per cent for the right clients – but they do often require the transfer of assets under management in order to secure those rates. (Sometimes this can be as much as 50 per cent of the loan value.)
5. Use a specialist mortgage broker
Whether you’re uncertain of which lenders to consider, how to present your income and outgoings, or whether or not you’re eligible for the best rates, a specialist mortgage lender can greatly ease the process of applying for a large mortgage.
A mortgage broker specialising in large loans will often have pre-existing relationships with both high street and private banks. This means that not only do they know exactly how those lenders like applications to be presented to them but they can also negotiate on behalf of their clients to access deals that would otherwise be unavailable.
If you’re looking for a mortgage of £1m plus get in touch with our mortgage specialists at Springtide Capital today to find out how we can help.