How to Qualify and Prepare for a Private Bank Mortgage

What Interest Rates Do Private Banks Offer?

Private banks offer a huge variety of mortgage products and rates will vary depending on term, if you have opted for a fixed or variable rate and the type of product you choose. The higher your net worth and the more liquid you are, the more competitive rates a private bank is likely to offer you.

In the current market, the most competitive rates start at:

65% LTV:

• Variable rate: 0.95%+BBR

85% LTV:

• Variable rate: 1.24%+BBR
• 2-Year Fixed: 5.34%
• 5-Year Fixed: 5.29%

90% LTV:

• Variable rate: 1.39%+BBR
• 2-Year Fixed: 5.54%
• 5-Year Fixed: 5.49%

What Loan-To-Value Ratio Can I Get From A Private Bank?

Private banks offer high and low loan-to-value ratio (LTV) mortgages. It’s worth noting that a low LTV may still represent a very significant loan: 50% LTV on a £50 million prime London property still represents a £25 million mortgage. That said, higher loan-to-value ratios can be more possible with a private bank than with a high-street lender, and we regularly arrange 80%, 90% and in some cases 100% loan-to-value private bank mortgages, although placing assets under management will be a prerequisite to accesses such a high LTV. 

Are Assets Under Management A Requirement For A Private Bank Mortgage?

Not necessarily, especially if you are looking for a £1-2 million mortgage. For higher-value mortgages on prime and super-prime property, placing assets under management in return for a mortgage is often the norm, although, for very high-net-worth and VIP borrowers, private banks offer mortgages that don’t require assets under management. It’s also worth noting that while you may not be required to place assets under management, sometimes a bank will want that you start a banking relationship with them, even if it is just for your day-to-day banking requirements. 

Your broker will assess your financing requirements and asset base and will give you a subjective assessment of placing assets under management would allow you to access the best possible outcome. We will always talk you through all the options and possibilities in this respect, so you can make an informed decision based on what is best for you. We will also negotiate with private banks to reduce the requirements for assets under management as much as possible, if you'd like us to do so.

Can I Use Multiple Properties Or Assets To Access A Private Bank Mortgage?

Most private banks offer mortgages secured against a single asset (the property you are buying) for a mortgage, particularly if you are looking for a mortgage in the £1-2 million range. However, for high-value mortgages, the highest-quality borrowers (usually liquid high-net-worth individuals) and in cases where accessing a large mortgage isn’t possible without putting additional assets forward, we can arrange deals where two or more properties are put forward as security. In some cases, we can arrange this against UK and international properties.

Eligibility For Private Bank Mortgages

One of the main benefits of a private bank mortgage is that you can benefit from a tailored package, negotiated rates, and potentially a higher loan-to-value ratio than you might from a high-street bank or mainstream lender. Many people think that private bank mortgages are only available for (ultra) high-net-worth individuals and for very large property purchases, but this isn’t always the case. Most private bank mortgages start at around the £1 million mark (although some institutions offer smaller loans), meaning many borrowers are eligible for a private bank mortgage and the flexibility offered by a bank.

Are Private Bank Mortgages Regulated?

Wealthy individuals and non-UK tax residents purchasing UK property for occasional use (less than 90 days) as a holiday home, for example, will often be eligible for a high-net-worth exception mortgage. Anyone eligible for a high-net-worth exemption is usually able to opt out of unregulated oversight.

If you are looking for a private bank mortgage for a smaller property purchase, you'll probably be offered a regulated mortgage. To qualify, you will usually need to demonstrate your earning power and a good financial background: your ability to demonstrate the mortgage is affordable and that you meet stress-testing parameters remains key even though you are not borrowing from a mainstream lender.

If you are a high-net-worth individual, you may qualify for a high-net-worth exemption, which means you can access an unregulated mortgage. This may be beneficial as a private bank will consider you less on the basis of your income and more on your overall financial position, taking your net worth and asset base into consideration. There are many scenarios where a high-net-worth exemption mortgage may be beneficial, but it is especially useful if you have a significant net worth but comparatively little disposable income although you'd comfortably be able to make mortgage repayments. 

To qualify for a high-net-worth exception you will usually need to:

• Have an annual personal income in excess of £300,000
• Liquid assets of more than £3,000,000 (excluding the value of your main residence)

Top Tips: How To Prepare For A Private Bank Mortgage

 

Negotiations

We can usually negotiate more actively with a private bank than with a high-street lender. For many of our clients, this will mean maximising your mortgage while doing as much as we can to minimise your overhead costs, but there is also scope to negotiate rates, terms, and products fully to ensure you have a completely tailored mortgage. Private banks offer mortgage products like much of the lending market, but these can usually be considered as the starting point for negotiation, rather than something you take ‘off-the-shelf’. After negotiations, the end result is often a completely bespoke mortgage or a one-of-a-kind lending solution (even for lower-value property purchases), which is one of the main benefits of a private bank mortgage.

HNW Exemption

If you qualify for a high-net-worth exception mortgage, we will be able to hand-build a solution for you and this is likely to be a one-of-a-kind lending scenario. A mortgage product may loosely guide the starting point for negotiations, but we will be able to structure the loan completely to your requirements, including taking into consideration any corporate structures, multi-currency income, using additional assets as security if required, and so on. Private banks offer mortgages as solutions, and even if you have a very complex financial background, we can usually build a package for you, even if you want to borrow a significant amount or if you’ve been turned down for lending elsewhere. 

Private Banks Vs. Other Lenders

Not every individual purchasing a high-value property is the right candidate for a private bank mortgage. Boutique lenders (and in some cases, high street lenders) have moved into the large mortgage space in past years and many offer very competitive rates in comparison. As always, the way to get the best mortgage possible is to ensure you have access to personalised advice on your situation and access to as many lenders as possible so you can compare rates, terms and products from the whole market.

Application Process

It’s also worth noting that while private banks have a reputation for being more flexible lenders, this doesn’t mean they are casual in their approach to underwriting mortgages or assessing your suitability for a loan. In fact, the application process can be lengthier and more detailed than with a high-street lender, even if you have a vanilla background on the basis of higher mortgage amounts - we can help speed this up. 

You will still need to provide complete information and supporting evidence of your financial situation, background, and credit history. The more complicated or less ‘standard’ your financial background or income is (if you are self-employed, you generate income from a trust, your income comes predominantly from alimony, rental income, pay yourself dividends rather than a salary from your business, etc) the more documentation you will need to provide a private bank to get a mortgage. Expect to need to document complete tax returns, agreements, source of income and official evidence of investments, assets and debt and liabilities as well as supporting documents - for example, you may need to show that you have declared a large cash gift and so on.

Products

Private banks can offer broader mortgage products than other lenders: high-loan-to-value or interest-only mortgages, for example. However, you will need to explain why you want a specific type of mortgage - a 90 or 100% loan-to-value mortgage may be a possibility for wealthy, liquid borrowers looking to optimise their cash flow and/or fiscal position,, but is unlikely to be a viable route if you have good income but you haven’t got a large asset base or enough capital to put towards a larger deposit on the basis of not having saved.