When it comes to working with high net worth individuals (HNWIs), we understand that income is often not the best reflection of wealth. HNW clients often have complex income streams or tax planning arrangements in place, meaning that their taxable income can be lower than they might need to evidence in order to achieve a certain level of borrowing. Although they may be relatively income poor, clients are often asset rich. Many of our clients have wealth tied up in a portfolio of investments, offshore trusts and long-term investment policies such as pension plans, as well as property and other assets such as vintage cars, art, yachts and jets.
Many clients feel that borrowing money is – in their opinion – a very smart investment, as they can gain a much better return elsewhere with the liquidity they retain in their portfolio. However, lenders are required to assess certain elements of an applicant’s situation and can only offer a loan if certain affordability criteria have been met. In this type of scenario, we might still be able to help them achieve the loan amount that they want to borrow by using the High Net Worth Exemption. Our Associate Director Caroline Burke outlines the basics…
What is the High Net Worth Exemption?
This relatively little-known provision from the Financial Conduct Authority allows any individual with a net income of £300k+ and/or assets of no less than £3m access to the High Net Worth Exemption. This means banks can exercise more flexibility in assessing a client’s ability to borrow within the confines of responsible lending.
How can I find out if I qualify?
Some lenders require a Statement of High Net Worth to be completed by their client’s accountant or tax advisor. However most private banks will assess whether the client meets this criteria themselves, meaning the client will need to be able to evidence their income and/or the assets that they hold (e.g. by providing recent statements evidencing the value of their savings, investments, and pension).
Of course, the first step in working out if a client qualifies for this is to work with a mortgage adviser who understands this space and has a strong network of relationships within private banks. Our team has both and can present your case effectively to a lender; one of the many reasons it pays to have an expert in large loans on your side.
If you think you might benefit from the High Net Worth Exemption, we may be able to secure you the finance you require. Don’t hesitate to get in touch with our team of experts today to find out more.