Just because a borrower is wealthy doesn’t mean it’s simple to get a mortgage – Malgwi

But it probably happens more often than you think, while the profile of a HNW may challenge your perception of a wealthy customer.

In many cases, people who fit the regulator’s definition of a HNW customer cannot get a mortgage from a mainstream lender because they do not meet standard income-based affordability criteria. Despite significant wealth, their incomes may be lower than you would assume, such as the company owner who draws a lower salary while keeping profits within their business, or the retiree with a modest pension income but significant investment assets.

At Afin Bank, we call these borrowers ‘asset-rich, income-light’; clients who have traditionally turned to the same private banks that manage their wealth to provide them with a mortgage, largely because bigger lenders have limited flexibility in their lending criteria.

With our HNW borrowers, we consider their overall asset base, which can include liquid and illiquid assets, when assessing affordability. This could mean property portfolios and land, pensions, investments and savings. In some cases, we will consider physical assets such as antiques, fine art and even classic cars, when they have been independently valued.

Some mainstream lenders will consider certain asset classes when reviewing affordability for HNWs, but because we individually underwrite each case, we will look at a broader range of assets and more complex wealth structures.

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Taking a pragmatic approach

Take the recent case of a borrower who wanted a £1.89m remortgage to refinance a bridging loan on their property. Because the client had recently stepped down from the law firm they had built, they had been rejected by several lenders because they did not meet their income-based affordability requirements.

However, we focused on another business the customer was a shareholder in, a private school, which had undrawn and retained profits. This meant we were able to base the customer’s affordability on those assets and give them the mortgage they wanted.

This deal required close working between our underwriters, the borrower, their accountant and their broker so we could confirm that there were no restrictions on the client accessing the profits. Importantly, it was a pragmatic approach to helping a high-quality client.

Pragmatism is key here, because the way people are earning their money and managing their wealth is becoming more diverse and complicated – whether it’s the successful entrepreneur, somebody with inherited wealth, or the international executive with both a UK and overseas salary alongside other assets.

Unfortunately, too many lenders are not keeping up with these dynamic shifts in borrower profiles, and as a result, brokers may find it hard to place applications. For HNW borrowers, there is a common-sense lending solution that intermediaries may find is suitable for more of their clients than they first realised.