Private Mortgages Explained

Private mortgages are bespoke mortgage agreements usually aimed at borrowers who qualify for the high net worth exemption.

The lenders who offer them can be far more flexible than mainstream mortgage providers and aren’t bound by the usual lending regulations.

In this guide to private mortgage lending, you’ll learn how to get one of these mortgages, how they work, and why you should seek professional advice before applying.

What is private mortgage lending, and how does it work?

Private mortgage lending is a bespoke form of borrowing usually reserved for customers who qualify for a high net worth exemption, requiring an annual income of £300,000 or assets worth £3 million or more.

This type of lending can be far more flexible than a traditional mortgage agreement, as private lenders are not bound by the same restrictions as the mainstream market.

They can offer personalised mortgages on a case-by-case basis, and this often means customers can access deals that simply aren’t possible elsewhere, from higher income multiples to uncapped loan amounts.

Many lenders who offer private lending operate exclusively through mortgage brokers, so you might struggle to secure their services without the help of a specialist advisor.

Why choose this type of lending?

Private lending is a personalised service that the lenders pride themselves on offering enhanced confidentiality and discretion.

This is attractive to many high net worth individuals, but other reasons people choose this option include…

• To borrow based on much higher income multiples, from seven times income upwards
• To take out a much larger mortgage than they could on the high street
• To secure a mortgage against assets, such as a stocks and shares portfolio
• To negotiate the rates, terms and conditions from scratch

Depending on the amount you need to borrow, it may be possible to use a high-street lender as an alternative to a private mortgage provider.

This might mean paying lower fees and having easier access to your lender, but it could also mean missing out on a much more favourable bespoke deal that could be privately arranged.

How to get a private mortgage

If you meet the high net worth exemption criteria, there’s a quick and easy way to find a private mortgage lender.

Just follow these steps…

1. Speak to a high-net-worth mortgage broker

This is usually a non-negotiable step if you want access to private lenders, as most operate exclusively through intermediaries.

We work with brokers who specialise in private lending. They have the knowledge, experience, and contacts to help you find the right lender.

Make an enquiry with us, and we’ll introduce you to one of these advisors for free.

2. Get your documents together

If you’re borrowing against assets, you’ll need proof of your high net worth exemption and an assets and liabilities statement.

Don’t be too concerned if this all feels a bit daunting – your dedicated mortgage broker will be on hand to guide you through. You can also find a full list of all the general documents needed in our guide to mortgage applications.

3. Let your broker take things from here

Once you’ve been matched with a broker, they will introduce you to potential lenders who work privately.

One of the big benefits of using a broker for this type of lending is that they can negotiate a bespoke deal on your behalf, and from here, they will ensure you get the best rates and terms possible.

Do high street banks offer private mortgages?

Yes.

Many of the biggest high street lenders have private mortgage arms, including…

• Natwest
• Barclays
• HSBC
• Clydesdale
• Lloyds

To qualify for private lending with these banks and building societies, you must meet the high net worth exemption criteria.

Bespoke deals are available, but remember that high-street lenders tend to cap the amount you can borrow, even on a private basis. Around £10 million is not an uncommon ceiling.

The brokers we work with have contacts in the private departments of these mainstream lenders, which means they can access them directly and compare the deals they’d be willing to offer on your behalf.

This is another significant benefit of using a high-net-worth broker: they can compare what the private arms of mainstream lenders might be willing to offer you to that of private mortgage providers.

Taking out a second mortgage

It’s possible to take out a second mortgage on a private basis.

If you qualify for the high net worth exemption, the lender will likely be convinced that you can afford two mortgages at once and be comfortable offering you a bespoke deal.

The exact rates and terms you’ll be offered will be decided case-by-case.

Second mortgages are typically treated more strictly than first mortgages; the same applies to private lending.

This can mean higher interest rates, lower loan-to-value (LTV) ratios, and a stricter financial stress test.

Private buy-to-let mortgages

Private buy-to-let mortgages are available and assessed much like regular investment property mortgages.

As with private residential mortgages, these mortgages are offered bespoke. Still, the kind of deal you’ll be offered will be determined by the strength of the investment and the potential rental income.

There are no strict rules on what percentage of rental income you’ll need, especially if you were to secure the mortgage against assets.

Deposit requirements can, however, be higher than for private residential mortgages, which typically have a loan-to-value ratio of 90% unless secured against a very liquid asset like cash.

Commercial mortgages

Taking out a commercial mortgage through a private lender is also possible. In fact, private lenders have a disproportionately large share of the commercial mortgage market due to the often ‘bespoke’ nature of commercial financing agreements.

You’ll often find specialist private lenders behind the financing of some of the larger commercial mortgages; your typical high street bank or building society has much less appetite for that risk.

What if you have bad credit?

This isn’t a deal-breaker like it could be for a regular mortgage.

Lending criteria for private mortgages aren’t as rigid as those on the high street since private lenders are generally more concerned about the security property and the overall strength of the application.

They have the flexibility to offer finance to customers with all types of bad credit and will only be concerned if your adverse puts the deal directly at risk.

That said, if you have severe bad credit on your file, expect the lender to ask you about the circumstances surrounding it. Sometimes, it might impact the type of deal you qualify for.

Why use Online Mortgage Advisor?

Many of the lenders in this space operate exclusively through intermediaries, but the advice you need is available.

We work with brokers who specialise in high-net-worth lending and private mortgages. They have the knowledge, expertise, and lender contacts you need to secure the best bespoke deal possible.

Call us on 0330 818 7026 or make an enquiry and we’ll set up a free, no-obligation chat between you and the private mortgage broker who’s best placed to help you get the finance you need today.