High Loan-to-Income Ratio Mortgage For High Net Worth Client

High-net-worth clients often require creative solutions to overcome lending limitations, from complex income structures, to high loan-to-value rations and loan-to-income ratios.

The Scenario

Our client, a high-net-worth individual working in IT sales, approached us with a challenging mortgage scenario:

• Their annual salary was just over £200,000

• Thier most recent annual bonus: £75,000

• Their partner's income: £24,000

• Property purchase price: £1,900,000

• Desired mortgage amount: £1,500,000 (78.9% LTV)

• They had two dependents under 15 (but no other debts)

All of the above brought their loan-to-income (LTI) ratio to 5.15, even when factoring in their annual bonus (which is a less reliable figure for lenders and is dependent on performance). Furthermore, most lenders will only take up to 60% of the annual bonus for affordability purposes, which in this case would increase the LTI to 5.39.

This is the size of the mortgage required compared to their income, and most high street lenders max out at roughly 4.5-5.

So for our client's case, standard affordability checks were falling short by over £100,000.

The Solution

After careful consideration and leveraging our extensive knowledge of the mortgage market, we identified an ideal lender for this case - one that offers some unique criteria that perfectly suited our client's needs:

1. Income Booster Product: This allowed us to increase the LTI from 5x to 5.5x.

2. Bonus Consideration: This lender accounts for the latest year's annual bonus in their affordability calculator, and uses 100% of the figure.

3. Extended Lending Age: They lend up to the age of 80 using employed income, provided there's evidence of pension contributions - this was key in keeping our clients' repayments low to begin with, as we could extend the term to close to 40 years.

We structured the mortgage as follows:

• Loan amount: £1,500,000
• Term: 38 years (client's current age is 41, taking them to 79)
• Monthly repayments: £7,700

Our client had also negotiated a significant discount on the property - approximately £300k. So, we also advised the client to remortgage after 2 years based on a new and likely higher valuation of the property, significantly reducing the LTV, securing a better rate, and reducing the mortgage term to avoid such a late retirement.

This case exemplifies the importance of in-depth market knowledge and creative thinking when dealing with high-net-worth clients. By understanding the nuances of various lenders' criteria, we were able to find a solution that not only met the client's immediate needs but also positioned them for future financial optimisation.