Asset-Based Mortgages Explained

Asset-based mortgage lending is a bespoke type of finance for high-net-worth borrowers who want to secure a mortgage against their liquid assets, but it isn’t easy to come by in the UK.

If you’re in the market for an asset-based mortgage or simply want to know more about it, you’ve come to the right place.

In this guide, you’ll learn how they work, what kind of assets you can secure a mortgage against, and how to find a broker specialising in this lending form.

What is an asset-based mortgage loan, and how does it work?

An asset-based mortgage is a bespoke form of borrowing for high-net-worth individuals. It involves securing a mortgage debt against a valuable asset rather than the property itself.

Also known as asset-backed or securities-backed mortgages, this type of finance belongs to a category of high-value lending called Lombard Loans. These are credit agreements in which a fixed loan or overdraft is granted and secured against the borrower’s liquid assets.

While there are mainstream lenders who offer these mortgages in other territories, they can be more difficult to come by in the UK and are usually only available through specialist brokers.

What kind of assets can you secure your mortgage against?

Asset-based mortgages are usually secured against liquid assets, most commonly high-value stocks and shares portfolios.

It’s also possible to secure the mortgage against the following…

• Cash
• Gold
• Luxury yachts
• Luxury sports cars
• Private planes
• Art collections
• Other assets (provided they are valuable enough)

Since asset-backed mortgage lending is bespoke, lenders assess applications on a case-by-case basis.

This means that virtually any asset of the required value can be at least considered as security, and the deal you will end up with will depend on the level of risk.

Cash and gold are considered the lowest-risk investments, but their potential returns are also less than those of an asset such as a strong stocks and shares portfolio.

Why high net-worth individuals choose these mortgages

The main benefits of a securities-backed mortgage are as follows…

• You can buy property without having to liquidate all or some of your assets
• You can get a mortgage if you’re cash-poor but asset-rich
• You could potentially get a larger mortgage
• The rates are typically lower than for regular high-net-worth mortgages

How to start your application

Here are the steps to follow to get an asset-backed mortgage…

Make an enquiry with us online, and we’ll set up a no-obligation chat between you and a high-net-worth mortgage specialist today.

Eligibility criteria and deposit requirements

As these mortgages are always assessed on a case-by-case basis, the lenders who offer them don’t have a criteria that is set in stone.

Mortgage agreements are always bespoke, but some requirements tend to apply across the board, and they are as follows…

• You must be a high net-worth individual:
  You must have an annual net income of £300,000 or assets worth £3 million or more to meet this criteria.
• Minimum asset value:
  Most private mortgage lenders will only enter a deal worth at least £1 million. Beyond this, the lender must be confident that the asset’s value will be high enough to recoup its losses if you default on the agreement.
• Minimum deposit amount:
  You’ll need a deposit of at least 5-10%, but only if your asset is low risk, such as cash or gold.
  Deposit requirements for a stocks and shares portfolio usually require a larger deposit of around 25%, as they can be more volatile.
• Credit history:
  Credit history requirements are not predetermined for asset-backed mortgages, but if the lender finds bad credit on your file, they will likely assess the circumstances behind it. For high net-worth individuals, lenders are far more flexible with what they can and can’t accept, though severe adverse credit might affect the deal you get.

What kind of interest rate to expect

Asset-based mortgage rates are always bespoke and will be set based on the overall risk the lender is taking by allowing you to secure a mortgage against your assets.

The rates are typically lower than those for standard high-net-worth mortgages, and they can start at around 1%.

The lowest interest rates are usually reserved for very liquid assets, like cash or gold, and can climb to anywhere between 2% and 4% for other assets.

Lenders who offer these mortgages are always open to negotiation where rates are concerned, but you’ll likely need a specialist broker to head up the negotiations on your behalf.

Which lenders offer these mortgages?

In the UK, asset-based mortgages are offered exclusively by private lenders. Most of these mortgage providers don’t deal with the public and can only be approached through a broker.

Private mortgage lenders are well placed to meet the needs of high-net-worth individuals, and if you meet these criteria, they can operate outside of usual lending regulations.

They can approve much higher loan amounts and offer bespoke rates and deals.

Even if you find a private lender offering asset-backed mortgages, it is not recommended to approach them directly.

If they’re willing to speak to you, you might not get the best deal if you limit yourself to just one mortgage provider.

One of the main benefits of applying through a specialist high-net-worth mortgage broker is that they have deep working relationships with a wide range of private lenders and can compare the rates they’d be willing to offer you for this type of mortgage to ensure you get the best deal.

Refinancing an asset-based mortgage

Most asset-based mortgages offer an initial one-year deal that can be renewed every 12 months, but you can refinance your agreement at any time.

There are many reasons to refinance.

To give a popular example, the asset you’ve secured for your mortgage may have risen in value, and you may want to borrow against its increased value.

Some borrowers also decide to switch to a standard high-net-worth mortgage based on a multiple of their income, and this is possible with your current lender or a new one, as long as you qualify for a regular high-net-worth mortgage with the provider you choose.

To refinance and get the best deal, you’ll need the help of a specialist mortgage broker, who can negotiate a bespoke remortgage agreement for you.

Getting a mortgage based on combined assets and income

If you meet the high net worth criteria and your wealth comes from income and assets, there’s a middle ground to consider: applying for a mortgage based on combined salary and assets.

You might consider doing this if you are concerned about securing the entire mortgage debt against your assets or if you cannot get the mortgage you want on your income alone.

Some lenders will allow you to declare a percentage of your assets in addition to your income for the affordability checks.

This would allow you to take out a standard high-net-worth mortgage based on a multiple of the combined amount without putting the asset’s total value on the line.

If you decide this is a better fit for you, it may also be possible to refinance an asset-backed mortgage onto an agreement based on combined income and assets.

Get matched with an asset-based mortgage expert today

Applying through a specialist mortgage broker is usually mandatory if you need an asset-based mortgage, as most of the lenders who offer them only offer finance through brokers. But the good news is that, with our help, you won’t have to lift a finger to find one.

We offer a broker matching service that will quickly assess your needs, circumstances, and assets and pair you with a high-net-worth mortgage broker specialising in asset-backed mortgages. They will have the expertise you need to land a great bespoke deal.

Call us on 0330 818 7026 or make an enquiry, and we’ll set up a no-obligation chat with your ideal mortgage broker today.