"It’s important that intermediaries look to build relationships with specialist lenders before — not when — a high-value case lands on their desk."
For many brokers, navigating the mortgage market can be a relatively routine exercise. This is especially true of those who primarily work with straightforward clients and standard cases.
An element of predictability allows brokers to rely on well-established processes and procedures when placing these typical mortgages. However, every so often, a case will fall onto a broker’s desk that presents very different challenges. Large mortgages are a prime example of this.
Therefore, it’s important to be aware of the strategies and processes to employ to navigate the intricacies of large mortgages effectively.
Why are large mortgages different?
Large mortgages can typically be defined as a mortgage that exceeds £1 million in value. The reason brokers often encounter challenges when arranging them is not just because many lenders have a maximum loan value capped at a lower amount, but also because the borrowers of large mortgages may have financial profiles that conventional lenders are ill-equipped to assess.
Typically, high-street lenders have a lower risk tolerance and tend to avoid complex cases, especially those involving significant loan amounts, due to a variety of interconnected reasons.
What challenges do brokers face when placing a large mortgage?
The first challenge relates to the financial profiles of the borrowers – namely high net-worth individuals (HNWIs). These buyers often have irregular or non-existent income streams because their wealth may be inherited or derived from investments. Consequently, brokers face difficulties in providing lenders with clear proof of income as part of affordability checks, meaning they will not be able to proceed with mortgage providers that are reliant on simple, tick-box application processes.
Another challenge brokers frequently encounter involves the unique characteristics of high-value properties purchased with large mortgages, which can complicate the lender's underwriting process. In addition, these properties are frequently used for purposes outside of primary residency, which raises questions about their suitability as collateral.
For example, period properties are often more challenging to accurately value, maintain, and resell compared to typical properties, and there is a higher potential for fluctuations in market value. As a result, the level of risk for the lender is higher than for a run-of-the-mill residential property.
In combination, these factors mean that both the property and buyer profiles often fall outside the stringent lending criteria of the more conventional lenders. As a result, brokers are forced to seek finance from alternative sources – particularly if such cases are a rare occurrence – which means working with lenders who specialise in large mortgages that they may not have worked with before.
What additional documentation or information do lenders require for larger mortgages?
These lenders will have a higher risk threshold than their conventional counterparts, but they will require brokers to provide additional documentation when supplying a large mortgage.
For example, given the financial profiles of most borrowers seeking substantial loans, lenders typically ask for asset verification, including bank statements and details of investment portfolios, alongside standard requirements such as proof of income and credit history.
In addition, for high-value and historic properties, brokers must provide clear title evidence to assure lenders of their right to foreclose and sell in case of default, reducing lender risk. They will also need proof that the property is in compliance with the local area’s regulations in regards to property use, building codes and environmental standards. Non-compliance could diminish the property's value or marketability, posing a risk to the suitability of the property as collateral.
Brokers play a crucial role in helping their clients provide this information and documentation.
How can specialist lenders help?
It’s essential for brokers to be aware of the strategies they can employ to simplify the task of placing large mortgages.
Despite the need to provide additional documentation, cultivating an effective working relationship with a lender who specialises in large mortgages is a must. These lenders understand the unique challenges that a high-value loan presents, and often underwrite from the start of the process. This means that they are able to take into account the unique nature of the property and borrower involved with a mortgage application, and provide finance on cases that mainstream, conventional lenders would otherwise avoid.
Moreover, to ensure the smoothest possible outcome for the broker and borrower, it’s important that intermediaries look to build relationships with specialist lenders before — not when — a high-value case lands on their desk. Even if they only handle a multi-million-pound case once or twice year, proactive relationship building between appropriate lenders and the brokers will mean there is greater clarity as to how they could assist in the future and what that process would look like. That way, they are well placed for when those rarer, larger cases emerge.
After all, placing large mortgages undoubtedly presents distinct challenges that require brokers to adapt their approach. However, by understanding the nuances of the high-value mortgage landscape and cultivating a strong relationship with a lender that takes a bespoke approach to lending, brokers can ensure that they can place any case that comes across their desk – regardless of its size.
