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With more and more properties being valued at over a million pounds across the country, buyers, more frequently, are needing to know how to get a million-pound mortgage. They are far more commonplace than they once were - no longer the domain of private banks alone. Many high street lenders are prepared to offer this amount of money to people who meet the criteria, but it's important to understand what it takes before applying.
Essentially, it comes down to whether or not you meet the affordability and eligibility criteria. Many must make the choice between going with a high street bank or a private bank - the latter option tends to cater to more of this particular market.
There are pros and cons to both private lenders and high street ones:
To get your application off on the right track, consider the following steps:
Many high street lenders place income caps on high-value loans. For example, some won't offer an LTV beyond 75-80% where the borrowing is above £1 million, regardless of income and other factors. This means a deposit of at least 20% to get the finance you need.
Having said that, with a strong application and minimal risk factors you may be able to find a million-pound mortgage with similar deposit requirements to a standard residential mortgage. If you meet the criteria, you may be able to put up a deposit of just 5-10%.
Again, this depends on whether you opt for the private lender or the high street one. A conventional lender's affordability calculations are usually based on your salaried income. This means offering up to 4.5x your income (or up to 6x in rare cases).
They will also consider your fixed expenses as part of the 'stress-testing' process.
A private lender may take a more flexible approach. They tend to factor in things like yearly bonuses and other income streams on top of your salary. They may even consider assets you own like cars or other luxury items as security against the loan.
The interest rate you are offered will be based on the same factors as with any other mortgage application. Your mortgage lender will assess the level of risk in your application. This will include calculations based on the size of your deposit, the state of your credit report and any other risk factors they determine from your circumstances.
If you are an individual with a high net worth, lenders may be willing to offer a bespoke deal. This will personalise your rates and terms - this type of deal is usually very appealing to mortgage lenders when dealing with the right individuals.
Naturally, this depends on the type of mortgage arrangement you come to. For example, a million-pound mortgage could be taken out on a repayment or an interest-only basis. The mortgage term could be for just a few years or as long as 35 years.
By way of example, let's say you took out a standard residential mortgage on £1 million with a generous interest rate of 3%. If you paid it back over 20 years, you may expect to be repaying around £5,545 per month. At 4% interest, this would increase to £6,058 per month. And if you took a mortgage on the same amount with a 3% interest rate for a 10-year term, you would be paying around £9,655 per month.
The above examples are very broad - if you want detailed, tailored information relating to your circumstances, contact WIS mortgages and speak to one of our experts. You can also try our affordability calculator to get an idea of how much mortgage you might receive based on your income.
WIS Mortgages offer free advice and we cover the whole of the UK. If you need specialist advice for contractors and need a mortgage broker with zero fees, get in touch and we will help. Please note, as a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments.Contact Us