Thursday, July 4, 2013

Large Mortgages Do Not Always Require A Large Income

Until the present economic downturn it was not particularly difficult to arrange a very large mortgage in comparison to your income. But we all know where that situation led us and many people are still suffering in the UK, Europe and the US from the lax lending rules that most banks and lending institutions were applying. The effect of this laxity is still being felt and is likely to be felt for some time to come.
Many young professional people who would have been able to secure a good mortgage deal pre-recession are struggling to save enough deposit to buy their first property and this lack of activity at the bottom end of the market is having an effect on the whole market (perhaps with the exception of the prime London residential property market which is being supported by overseas investors looking for a safe haven for their assets as well as a chance to sample the cultural highlights of the capital). This lack of activity on the first-time buyer front has meant that many are stuck renting properties that, ironically, they could probably afford to buy and for which the mortgage payments would be lower than their rent.
It is especially difficult to secure a mortgage from the main high-street banks and lending institutions because of their continuing stringent lending criteria such as affordability calculations and income multiples, despite government schemes to make mortgages more readily available. It is equally difficult to borrow adequate funds for a house purchase from these same lenders if you want a large mortgage, particularly one in excess of £500,000 as many institutions have that figure as their maximum lending limit.
For high net worth individuals who can finance a large mortgage there are alternatives to the high streets lenders, such as private banks but what if you want a million pound mortgage to buy that dream home but, on paper at least, your income does not appear sufficient to cover the mortgage interest?
Those same private banks and also other lenders who do not simply impose a checklist when determining affordability are often prepared to take into account other aspects of your background when deciding how much they are willing to lend as a residential mortgage. For people with other significant assets or family wealth some lenders will review the bigger picture of your ability to repay the mortgage and will not impose traditional income multiples on your ability to borrow.
Mortgages from these types of lenders are not the "self-certified" or "non-status" mortgages that many self-employed people are obliged to take out, and which are invariably on very expensive rates of interest. They are simply mortgages where the lender will take into account your full financial circumstances in deciding how much you can borrow. And if your wider financial circumstances allow then it is possible to take out a million pound mortgage or more. So obtaining a large mortgage is possible, even if your income on paper, on your tax return or on your P60 would suggest otherwise.

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