For brokers who do not work with high net worth (HNW) clients on a regular basis, it’s an understandable comment. But those who transact in this market more frequently will know that a HNW mortgage application involves much more than just a large loan size — it usually comes with layers of complexity and the need for a bespoke approach that is not available from the high street.
HNW clients are often reliant on their multiple layers of income and assets, which might comprise stocks, shares, carried interest, overseas investments and property.
Such clients might not be able to walk into their local bank branch and pick an off the shelf mortgage product, they require something custom made.
It’s this bespoke approach to multiple layers of complexity that makes private bank lending so fascinating and so necessary. Here’s an example of a recent case we completed at Investec Private Bank, which demonstrates the types of hurdles that can be involved and how we can overcome them.
The client was a senior investment banker who was moving back to the UK after a few years living and working overseas, earning salary and bonuses in US dollars. He was looking for an interest-only mortgage at a very high loan to value (LTV), repaid with capital reductions every year when he receives his bonus or when his stock vests – this requirement is quite typical for someone with the client’s earnings profile.
For many HNW clients in the investment banker space, earning the bulk of their compensation in bonuses and profit distributions is an elegant system. It puts their compensation in line with their firm’s performance and gives them skin in the game of their bank’s success. But it can throw a spanner in the works when they need to buy a home.
That’s because some lenders struggle to consider bonuses when looking at mortgage affordability. Many will only consider base salary or will only look at a fraction of a client’s bonus. Others will only consider bonuses paid in pounds, while some lenders won’t consider lending over 90 per cent LTV. And when you combine all of these layers, high street lenders are often unable to help.
As a private bank, however, we are able to take a look at the bigger picture, considering the entirety of a client’s circumstances and remuneration, to make an individual lending decision based on their personal circumstances.
HNW mortgages are not just about an appetite for large loans, they require specialist understanding to underwrite layers of complexity, and this is unlikely to be available in an off the shelf product.