Million pound mortgages may make up just a small sliver of the overall mortgage market, with just 0.3% of all mortgages granted in 2018 being in the seven figures, but they’re undoubtedly on the rise. In fact, there was a 9% increase in seven-figure mortgages between 2017 and 2018 alone.
If you are in the fortunate position where you can afford a property worth more than £1 million and require a large mortgage to complete the purchase, you’ve come to the right place. Whether you’re looking to buy your dream family home or invest in a property valued over £1m, the million pound mortgage guide we’ve put together below should help.
It will give you an idea of whether you could qualify for a £1m+ mortgage, what kind of lenders are available to you and what they like to see in mortgage applications for over a million pounds.
How to get a million-pound mortgage
You may be a good candidate for a £1 million plus mortgage if your annual income in its entirety is at least a quarter of the entire amount you’re looking to borrow and you are able to put down a sizeable deposit (at least 25%) on the property you want to buy.
This is because, while banks can provide 95% LTV mortgages for less valuable properties, they tend to require a higher deposit paid upfront for properties valued over a million pounds since this is a good indicator that you can afford to pay them back the capital you’ve borrowed.
However, there are ways to get a million pound mortgage even if you don’t meet these criteria exactly, especially if you work with a mortgage broker specialised in million pound mortgages who has strong relationships with a variety of more niche lenders who can be more flexible with their underwriting criteria.
High street banks vs. niche lenders
You can get a million-pound mortgage from a number of lenders including high street banks, private banks, niche building societies and specialist banks. However, million-pound mortgages are not all created equally with these different types of lenders.
Getting a £1m+ mortgage from a high street lender
High street banks have in the past struggled to lend such big lump sums, but these days, most of them do offer mortgages for a million pounds or more. That being said, many of them cap out after £3 million.
To qualify for a million pound mortgage with a high street bank, you’ll need to present a fairly uncomplicated income profile. Underwriters for high street banks take a tick-box approach to mortgage applications, which can work either to your advantage or disadvantage. It means the whole process is easier for you to understand but that your application can also be rejected due to the structure of your income with little room for negotiation.
Additionally, while a high street lender can take assets outside your annual income into account, these usually can’t make up for more than half of your affordability checks, while this can rise up to 100% for private banks.
As a rule of thumb, high street banks often offer the most affordable interest rates on million pound mortgages, but you’ll have to meet their rigid criteria to qualify.
£1+ mortgages from private banks and niche building societies
Meanwhile, more niche lenders can take a flexible approach to your application and affordability checks, taking into consideration your wider profile and asset base rather than just your regular income. Things can be negotiated, rather than your application being denied because you don’t meet a very specific set of criteria.
These facts make mortgages from private banks especially attractive to expats, self-employed people and those who receive much of their income through bonuses. With their high level of flexibility, it’s no wonder that private lenders make up the lion’s share of the million pound mortgage market.
Interest-only mortgages for investors are also more widely available with niche lenders. High street lenders may, at best, offer 50% of your mortgage on an interest-only basis when you put down a deposit over 25%. Meanwhile, private bankers can commonly offer mortgages that are 100% interest-only. As for the interest rate on your mortgage, this, too, is usually negotiable to an extent based on your personal standing, assets and income.
When applying for a mortgage with a private bank or a more niche building society, you’ll need to provide them with details of your income, including wages, dividends, bonuses and commissions. If you’ve got a more unconventional income structure, you’ll need to be prepared to hand over two years’ worth of bank statements for your personal accounts for assurance.
Some private banks require you to be introduced to them by a mortgage broker they have an existing relationship with. This might make private banking seem like something reserved for the elites, but in reality, you don’t need a villa in the Mediterranean to work with these lenders – just a mortgage broker who is able to offer you a truly whole-of-market view of the financial products available to you.
Why investors should aim for an interest-only mortgage
We recommend opting for an interest-only mortgage to all our property investment clients who have this option available to them. With an interest-only mortgage, your monthly payment will cover only the interest on the capital borrowed and you can make repayments on your loan when it suits you without penalties.
This makes interest-only mortgages great for property investors because they allow for so much flexibility: your bills will be smaller for months your buy-to-let property is empty and you can make large penalty-free repayments when it best suits you, like when you sell on another property in your portfolio or receive a bonus at work. This kind of flexibility is especially important when your mortgage is for over £1 million.
Keep in mind that when you’re applying for an interest-only mortgage, your lender will require a credible and realistic repayment strategy for the capital borrowed. This is something your mortgage broker can advise you on.
Interest-only mortgages can be harder to come by in the residential market, but for high-value loans, some lenders are willing to consider it.
Working with a high net worth mortgage advisor
If you’re interested in taking out a mortgage for £1 million or more, you’ll need a mortgage advisor experienced in working with high net worth individuals to get a good picture of the financial products available to you.
Here at Cox & Co, our mortgage brokers have a great deal of experience in securing large mortgages from a number of different types of lenders for our clients. We work together with our clients to understand their goals and financial standing in order to negotiate the best possible mortgage deal for them with the wide network of lenders we have relationships with.
To find out if you could qualify for a million pound mortgage, get in touch with our financial advisors today.