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In the search for high value real estate financing, there are several ways to structure your facility. Whether you are considering a return of principal or interest-only mortgage, a loan with or without assets under management, or an equity-backed loan, we outline below what you can expect from each facility.
High Value Mortgages
An increasingly attractive proposition for private clients is a high loan-to-value (LTV) mortgage that keeps cash within your wealth portfolio.
By using a smaller deposit, high net worth individuals borrow a higher percentage of the property’s value as a loan, based on interest only or principal repayment. Unlike the rigid eligibility criteria of traditional lenders and big banks, the private banks and alternative lenders we can access take a holistic view of your financial profile, considering assets and wealth to assess affordability. With a healthy financial portfolio, confidence is then in place for lending.
Often private clients will have alternative methods of repaying the loan. For example, an impending asset sale or bonus income. As a result, a loan higher than the value of an interest loan is often seen as an attractive proposition, often established on an interest-only basis, reducing initial monthly payments, lenders understanding that these alternative repayment methods will be used to repay the loan. .
Loans with or without assets under management (AUM)
Traditionally, wealthy individuals seeking a large home loan from a private bank are advised to place AUM as collateral. However, as the market has become saturated and more competitive, many lenders are now offering large mortgages without AUM – basing applications on the overall customer profile and not just on the transaction in question or with the aim of securing the loan. ‘AT M.
A mortgage without AUM, also called dry ready, is when existing assets do not need to be transferred to the bank to secure a mortgage. Instead, the private bank assesses the affordability of each client taking into account their wealth, income and asset profile, regardless of where the assets are held.
Securities-backed lending is a facility in which securities are used as collateral, rather than other types of assets.
When purchasing a property, securities-backed loans can often be attractive to HNWIs as underwriting can, in some cases, be limited to the collateral used as collateral for the loan. With this flexibility, it can be an efficient underwriting process that makes equity-backed loans a popular choice when arranging home financing. Liquidity can be created quickly and relatively easily.
When exploring the facilities for HNW mortgages, getting advice from experts who are familiar with finding financing for complex situations is essential to ensure clients make the right decision. The experience and knowledge that an advisor can bring is invaluable.
With thanks to our colleagues and contributors at LDN Finance. Anthony Rose, co-CEO, co-wrote this article alongside Lewis Silkin’s team.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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