The latest Million Pound Property report from Largemortgageloans.com shows that these high-end property sales in Great Britain increased by almost 58% in 2010, compared with 2009. In the past year, 7,451 million pound properties were sold in Great Britain, compared with 4,725 in 2009.
Whilst 90% of the million pound property sales were in London and the South East, which saw a 60% increase, year on year, growth was not confined solely to this area of the country. The West Midlands million pound property market saw a 100% increase in sales from 2009 to 2010 and East Anglia’s sales increased by 80% in that time.
This is a sector seeing massive growth in an otherwise deeply depressed mortgage market. So what can brokers do to develop their businesses to make the most of the opportunity?
Generating large loan leads
Firstly, such clients can be referred from a variety of sources, including high value estate agents, solicitors, accountants, or IFAs. Brokers need to build local business relationships with those professionals who already service high net worth individuals and then convince them of their ability to place large and complex mortgage cases to secure the best deal for the client.
Large loan referral services
But what about the actual placing of such cases? Most brokers can be forgiven for not knowing where to start, because acquiring experience, expertise and key contacts with global private banks operating in this niche takes many years. The solution most likely to lead to a successful outcome, one where the introducer and client are delighted by the speed and quality of service and the rate obtained, is the use of a large loan referral service, such as that offered by specialist large loan brokers.
Such large loan referral services allow introducing brokers to:
a. grow their business, by accessing a growing sector of the market
b. improve their client service, by being able to offer bespoke property finance not available via high street lenders
c. increase their revenue, by taking a share of the lender’s commission, simply by introducing the case (all compliance, advice and administration activities are carried out by the specialist large loans broker)
Having covered ideas for generating large loan leads and suggested the optimum way of successfully placing those leads, let us look at an example of how the referral process actually works with a real case.
Case Study – an ‘Offshore Mortgage’
A mortgage broker based in Kent recently acquired a new client, a Ukranian lawyer, who earned a £150,000 salary. Her husband had retired from the City and now managed a portfolio of US micro-cap stocks. Despite building the portfolio up from £500,000 to £4m over 7 years, he had no UK income and all the money was offshore. The clients had been renting in Kent and had the chance to buy the property for £1.4m. They wished to borrow 104% of the purchase price in order to cover Stamp Duty. They also wished to arrange this mortgage without bringing any money into the UK and thus incurring tax liabilities.
The solution
Not being experienced in dealing with a case of this size and complexity, the broker referred the case to Largemortgageloans.com. It was immediately obvious that the salary of £150,000 would not support a £1.456 m mortgage (purchase price + Stamp Duty). So our mortgage experts decided on a ‘two-part’ approach to the loan.
After researching the market, an offshore private bank was found willing to lend 70% of the property’s value (£980,000 on £1.4million) secured on the property.
The balance (£476,000) could not be secured on the US micro-cap stocks, because such stocks are too volatile to act as sufficient security. However, the client agreed to encash £700,000 worth of stocks, then invest in Blue Chip companies in the US, Canada and Hong Kong (not the UK because of the tax liability). The private bank was then willing to lend just under 70% LTV (£476,000 on £700,000) secured on the overseas Blue Chip stocks. Even the arrangement fee was in dollars, making this a truly ‘offshore mortgage’.
Deal highlights
Amount 1: £980,000 at Bank Rate plus 2% – secured at 70% LTV on the £1.4million UK property
Amount 2: £476,000 at Bank Rate plus 1.5% – secured at 70% LTV on the £700,000 Blue Chip portfolio
Loan to Value: 104%
Term: 5 years
Type: Interest only
Loan purpose: Purchase of main residence
Arrangement fee: 0.75%
Referring broker’s commission
The private bank paid Largemortgageloans.com 0.375% in commission, totalling £5,460, which was split with the introducing broker.
Top tips to take advantage of the growing million pound property market
1. Build up relationships with other professionals who provide a service to high net worth individuals and introduce your facility to arrange large and complex mortgage loans.
2. Use a large loan referral service to harness the expertise, experience and private banking contacts of established specialist large loan brokers. Increase your revenue, by taking a share of the lender’s commission, simply by introducing the case.
