£1 Million Mortgages

The number of properties valued in excess of one million pounds continues to increase across the country. As a result, one million pound mortgages (and above) are not nearly as rare as they once were.

Traditionally the domain of private banks, today, more and more high street lenders are able to provide this level of borrowing.

To help you get the advice you need, we’ve put together this guide to £1 million mortgages, and here, you’ll learn how to get one, what the monthly repayments are likely to be and much more.

Can you get a £1 million mortgage?

Yes, assuming you meet the lender’s affordability and eligibility requirements for this type of lending.

It often comes down to the choice between the high street bank and a lesser-known private bank.

Due to their financial flexibility, private banks tend to make up a larger share of the million-pound mortgage market, but high street lenders are becoming increasingly open to lending on higher value properties – they shouldn’t be ruled out.

The benefits of using a private bank or specialist broker

1. A more flexible affordability criteria

The reason why private banks have traditionally dominated the high-value mortgage space is their ability to be more flexible in their acceptance criteria.

Private banks are often more willing to take risks, and will look more holistically at your assets, not just your income. They’ll factor in things like shares, bonuses and a variety of assets that a regular lender may not.

There are also private lenders who offer mortgages based on pension income.

This means that, if you have unusual income streams, are self-employed or hoping to get UK mortgage based on foreign income, they may be a better option than a high street bank.

2. They usually offer more financing options

The flexibility of the private bank often extends to the kind of terms it offers. You’re more likely to obtain an interest-only mortgage, or a higher loan to value (LTV) ratio.

3. They often specialise in mortgages for £1 million and over

The premium you pay is reflected in the service you receive. Aside from giving you a more ‘tailored’ customer experience, niche private banks can be more efficient when it comes to pushing the deal through.

After all, it’s what they specialise in.

The benefits of using a conventional lender

1. They’re easier to access

Many private banks require an introduction, or impose other exclusive criteria that you’ll have to fulfil before they even talk to you.

Not so with high street banks, who are much more open.

And just because they’re easier to get into, doesn’t mean that they’re less competent.

Some high-street lenders have their own specialist teams that only deal with large mortgage loans.

2. They’re often more straightforward

The ‘rigidity’ of the traditional lender can also be seen as its strength.

The mortgage application process is often easy to understand and their acceptance criteria is quite transparent – which means that, provided you complete your application thoroughly, and you fit the criteria – you’re likely to get approval.

3. There may be fewer fees to pay

The level of service might not be quite as high as a private bank, but this can very often save you money.

How much income will you need?

This really depends on whether you choose a high street lender or go private. A conventional lender will usually base its affordability calculations on your salaried income (up to 4.5 times your income in most instances, going up to 6 times in rare cases).

Some will consider a percentage of your annual bonus (but rarely the whole bonus).

They’ll also factor in your fixed expenses, which can involve everything from childcare to gym memberships – this is a process known as ‘stress-testing’.

A private lender can be much more flexible. They’ll likely consider your application on a case-by-case basis – looking at your salaried income on top of your yearly bonus, and any other income streams you may have, such as rental income from a buy-to-let mortgage or your pension.

Some of them will even consider assets such as cars or luxury items as collateral against the loan.

How to get a £1 million mortgage

Your first step should be to speak to a mortgage broker who specialises in large loans. Make an enquiry with us and we will match you with an advisor who has the exact credentials that you need.

The mortgage broker we pair you with will guide you through the following steps:

• Readying all of your paperwork
• Downloading your credit reports and optimising them
• Finding the best lenders for large loans and securing the best deal for you

Deposit requirements

Some high street lenders impose income caps on higher-value loans. As an example, many of them won’t lend beyond 75-80% LTV above £1,000,000 – regardless of your income and any other factors – which means you’d need a deposit of at least 20% to qualify for the finance you need.

That said, it may be possible to find a £1 million mortgage with the same deposit requirements as a standard residential mortgage, if your application is strong and there are minimal risk factors (such as bad credit) present.

Under these circumstances, you could theoretically secure a mortgage with 5-10% deposit.

How much your monthly repayments could be

This, of course, depends on the kind of arrangement you make. A mortgage on £1 million could be taken on a  repayment or interest-only basis, and could range from a few to 35 years.

The table below provides a series of examples of how various timeframes and interest rates can affect your monthly repayments.

The above is for illustration purposes only and you should consult a broker or lender for the most up-to-date information and rates.

Like with smaller loans, your perceived risk profile will also be a major factor in your monthly payments – as it can affect the loan to value (LTV) that the lender is willing to offer.

Things that can affect your risk profile include your credit history (and any credit problems you might have), the size of your deposit and the kind of property that you’re looking to buy.

What will the interest rate be?

The interest rate you end up with will be determined based on the same factors as any other mortgage application.

Your mortgage lender will decide what rate to offer you based on the level of risk the deal carries, and they will assess this based on the amount of deposit you have, your credit report and whether there are any other risk factors present.

If you’re a high net worth individual, the lender may offer you a bespoke agreement on your rates and terms, and these deals are typically very attractive to mortgage providers.

Buy-to-let mortgages

One million pound buy-to-let mortgages are out there, but the terms can be different.

As a general rule, lenders view buy-to-let as higher risk, and will expect you to put down a larger deposit. 25% deposit is fairly standard, though some of them will go down to 15% if circumstances are right. A private bank might be more flexible.

Minimum income requirements can also be a factor, especially with high street lenders.

Many mainstream lenders won’t offer a BTL mortgage to anyone who earns less than £25k – though some of them will decide based upon the projected rental yields, with 125-130% of the mortgage payments being the general minimum.

Some private lenders will decide by factoring in additional income.

For example, it may be possible to get a mortgage with bonus income factored in, or perhaps capital from property, savings or pensions.

A great many buy-to-let mortgages are interest-only, so keep reading to see what an interest-only mortgage on £1,000,000 might look like.

Interest-only mortgages

Interest-only mortgages of this size do exist, and are subject to similar restrictions that you’ll find on smaller interest-only mortgages.

You’re more likely to find interest-only mortgages offered by a private lender, though you shouldn’t rule out the high street completely.

As a general rule, you’ll need a slightly larger deposit – most lenders will only go up to 75% loan to value (LTV), though a small number will consider 80% or 85% in the right circumstances.

Remember: Some high street lenders impose LTV caps on high-value loans that supersede everything else. For example, they won’t lend above 75% on £1 million, regardless of any other factors.

The main benefit of an interest-only mortgage is the lower monthly repayments.

This is, of course, evened out by the fact that the entire balance is due at the end of the term of the mortgage.

Your lender will want you to demonstrate a viable repayment strategy – basically, they want to see that you’ll be able to pay off the large principal payment at the end of it.

The table below shows how a repayment mortgage and an interest-only mortgage on one million pounds compare.

Both are at 4% interest.

Get matched with a mortgage broker

There are brokers who specialise in arranging mortgages worth £1 million and more, and the best way to begin your application is by speaking to one of them about your options.

These brokers have the knowledge and experience you need to get the best deal available. For mortgages worth £1 million and up, there are specialist lenders who offer bespoke deals with much better terms than what’s available on the high street, but you often need a broker to access these mortgages.

We offer a free broker-matching service that will quickly assess your needs and circumstances to pair you with an advisor who specialises in £1 million mortgages. Call us on 0808 189 2301 or make an enquiry to get started today.