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There’s a lot of planning that goes into a high net worth mortgage.
On paper you think it is fantastic that somebody earns £250k, historically lenders would have loved that but nowadays they look at it and think there’s quite a big risk there if one person loses their income all of a sudden a high proportion of that is gone.
A lot of the work that we do is with specialist lenders trying to understand what problems might present themselves.
So for example, a client earned a significant bonus last year, he’s unlikely to earn the same bonus next year. But if you look at their track record, he seems to get a big bonus every other year.
So we need to look at a lender that will understand that income pattern for him. It’s going to be a mainstream lender, but it’s a lender that we know is happy with that type of situation.
Who Are High Net Worth Mortgages For?
“I would summarise somebody as a high net worth client that has the ability to earn a six-figure salary, but they may not do it on a regular basis.”
High Net Worth & Self Employed
A lot of work with high net worth mortgages is for self-employed people.
You pay an accountant to minimise your tax. Unfortunately, all lenders like to see income to be able to lend so we look at lenders then that will work off retained profits or that might look at income not taken out of the business, left in the business there’s a variety of different situations.
These mortgage applications just need a bit more time, effort and planning.
One thing we’re very keen on is not doing one mortgage and never speaking to that client again. We want to make sure that when you think of mortgages, you come back to Lime Tree.
From our point of view, what we’re trying to achieve is to understand what our client wants in the long term and it’s not normally just one mortgage, it’s something in five years’ time. So it’s putting in place mechanisms to be able to allow clients to plan for the future.
Property developers on paper, generally don’t have a great deal of money because whatever money they’ve got leftover, they reinvest back into the business to buy more land.
A really good example is that they spend all year building properties and not actually sell any and then the next year they may sell 10 or 15. So their income spikes are very significant.
Packaging Applications To The Lenders
There are instances where a lender will decline an application if it’s not packaged or explained to them in the right way.
It’s understanding the situation and being able to explain that across to the underwriters.
Before we do any business we to try to understand what our client’s CV looks like, so if they’ve done something for the last 10 years, then it’s likely they’re going to continue to do that.
From a lender’s point of view what they don’t like to see is someone who has gone from being a hairdresser for five years to become a painter overnight.
So getting that track record and an ability to be able to explain situations is where people go wrong when they try going direct to lenders.
The track record required will depend on each lender, We’ll normally ask for a five-year track record because I think that gives enough of a period to be able to work with
Some lenders will only look at what income was paid last year and have a bit of a short-sighted view. Other lenders will look at cases on an individual basis and then I’ve even got a case agreed with a lender quite with a projection. So they haven’t even earned it yet, but they’re projecting they’re going to earn it.
What If A Lender Declines An Application Based On The Way It’s Packaged?
If we think it’s the wrong decision, we speak with the lender to see if it can be packaged differently in a way that they better understand. We have a good track record of this and are able to get the lender to submit a mortgage offer in a lot of instances.
How many lenders are there?
We are totally independent and there are 128 different lenders out there and we’ve got access to the lot.