Non Standard Income & High Net Worth Mortgages

Mortgages based on assets and special assessment for High Net Worth individuals

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High Net Worth Exemption Mortgage

Mortgage lending for the purchase or remortgage of the main residence is a regulated form of mortgage lending, the rules require mortgage lenders to lend within a certain income multiples and ensure that the monthly payments are stress tested and affordable for the long term.

The FCA’s Mortgage Market Review however includes a ‘high net worth waiver’. This waiver provides flexibility for lenders to apply an exemption to high net worth clients – those with an annual net income of at least £300,000 or net assets of £3,000,000.

This exemption allows lenders to be more flexible and creative in assessing a borrower’s ability to afford the mortgage.

Theoretical income from assets

A lender will still need to justify their lending decisions to a credit team, however, the way in which affordability could be proven can be much more flexible.

For example, a lender could evidence affordability from the sale of assets, if a borrower is asset-rich by way of an art collection, property portfolio, or collectable cars.

These clients could be income poor as they no longer need to work or do not draw an income from their investments or business.

The lender will calculate the sale of assets over the term of the mortgage and could include further considerations, such as other borrowing, currency fluctuations, and capital gains tax.

The day-to-day cost of living will be another factor, even if the mortgage is affordable, how will the borrower pay for food, travel, and entertainment.

Most lenders will also require a surplus of income even after the cost of living is factored in.

HNW mortgage

Undrawn Pension income and investments

Borrowers with liquid assets may not draw the dividends or capital gains realised by their investments. A lender can apply an annual rate of return at a nominal rate.

For example, an equity portfolio of £500,000 at 5% will allow the lender to use £25,000 of annual income. This may top up a client’s earned income to maximise their mortgage borrowing rather than sell assets to reduce a mortgage or boost a deposit for a property purchase.

Undrawn pension pots can work similarly should the borrower be of pensionable age. The pension provider will confirm the estimated annual income which the lender can consider in their lending calculations.

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