We recently wrote about the benefits of the High Net Worth Exemption, a relatively little-known provision from the Financial Conduct Authority. It allows banks to exercise more flexibility in assessing a client’s ability to borrow within the confines of responsible lending, as long as they have a net annual income of £300k+ and/or assets of no less than £3m. This week’s case is a great example of the HNW exemption at play.
Our client approached the team looking to borrow £1.5m to repay a large personal debt to friends and complete a major renovation of their £10m home in Prime Central London.
Although aged 77, our client was still active on the boards of several companies and worked as a consultant. Therefore, although their income was strong, it would not be enough to support a loan of this size. Age was a major factor, as the majority of lenders would question whether the client would be able to maintain working at their current level for the next five years and therefore it was unlikely they would process the mortgage.
Although the client had an active and varied investment portfolio and a very substantial art collection worth circa £10m, they did not wish to liquidate these assets. Further complication was added by the fact that the basement of the client’s home, which was on the same title, was let to a local business.
Knowing that the HNW exemption was a viable solution, we approached a lender who was happy to offer a mortgage to the client and, in fact, offered two repayment options. One had a higher interest rate and no early repayment charge. The other offered a lower interest rate but would tie the client in for three years.
The client opted for the product with no early repayment charges as they hoped to receive a substantial amount of money from one of their investments in the near future, potentially enabling them to clear the loan.
If you are looking for lending later in life or would like to leverage your investment portfolio to secure finance, we are the team to help. Contact one of our expert advisers, who will be happy to discuss your situation on a free, no obligation basis.