Large Mortgage Loans

As per statista.com, the number of mortgages in the UK has steadily increased over the last decade or so.

This means more and more people are looking to get large mortgage loans to buy high-value properties. But what exactly are large mortgage loans, and how can you get one?

Let’s dive into these topics today.

What Is A Large Mortgage Loan?

A large mortgage loan is a larger-than-normal amount of money borrowed to finance a property purchase. The exact threshold of a large mortgage can vary, but usually, any loan amount over £750,000 – £2 million is classified as a large mortgage loan.

To get such a large loan amount, you will likely need to be a higher-rate taxpayer in a high-income bracket. Since these mortgages involve higher amounts and, hence, higher risks for the lender, they can require larger deposits and higher interest rates.

Large Mortgage Loan Types

1. Interest Only Mortgages

In this type of mortgage, you just need to make regular interest payments, and the principal amount is paid using a repayment vehicle, such as selling the property at the end of the term.

In order to be eligible for such a loan, lenders will need you to have a minimum income, usually of about £75,000 per year, along with a 25% deposit amount.

Interest-only mortgages usually have a higher deposit amount as the lender will want to minimise their own risks through property equity.

2. Repayment Mortgages

This is a regular mortgage, where you’ll need to make regular repayments for the principal amount and the interest.

For these loans, you’ll need to make at least a 10% deposit in most cases, but if you can deposit 15% or more, you can get access to a greater range of products.

3. Variable Rate Mortgages 

In variable-rate mortgages, interest rates can go up or down based on the Bank of England’s Base Rate, the lender’s Standard Variable Rate (SVR) or other potential benchmarks. 

These mortgage types usually include trackers that move in line with the base rate, along with discounted rates that are set a certain level below the SVR.

4. Fixed Rate Mortgages

These mortgages provide a fixed interest rate for a specified term and lead to more predictable and stable monthly repayments. While this type of mortgage enables you to budget better, it leads to losses if the interest rate goes down.

5. Part-repayment, Part-interest Mortgages

This kind of mortgage allows you to minimise monthly repayments by making part of the mortgage interest-only while still allowing you to build and maintain equity in the property by repaying the principal.

This way, they offer greater flexibility and let you use your income for reinvestment rather than using up most of it for mortgage repayments. 

Investing in this way can also help you build a repayment vehicle for your mortgage.

6. Offset Mortgages

An offset mortgage allows you to subtract your savings from the outstanding loan balance, paying interest only on the difference amount. Offset mortgages are very useful for high-earning individuals who have sufficient savings. 

Depending on your unique situation, one of these mortgage types might suit you best. We recommend contacting us here at Lendingline for complete guidance in these matters.

Specifics Of Large Mortgage Loans

Most UK high-street lenders can offer mortgages up to £5 million, with some stretching up to £10 million. The maximum loan-to-value or LTV ratio for a large mortgage loan is usually 85%.

The minimum deposit amount for a large mortgage is typically around 15%, and some lenders also consider loans against assets. The average interest rate for these mortgages varies between lenders.

There are, of course, several specialist lenders who offer bespoke rates based on the applicant’s situation.

Typically, there are two methods by which a lender can offer you a large mortgage loan. These are explained below:

1. Assets Under Management (AUM)

This is common in the case of private bank mortgages and is not typically offered by the mainstream.

In this arrangement, the lender will want to manage your other assets, such as your stock market portfolio. These assets provide the lender with greater security, and hence, they can offer you a higher LTV or consider a larger income multiple.

2. Dry Lending (traditional lending for higher mortgage loans)

This is similar to a traditional mortgage, where the lender takes security over the mortgaged property without taking over the applicant’s other assets.

Finally, for a large mortgage loan, you might be able to make special arrangements with your lender for annual payments instead of monthly payments. This way, your mortgage payments can coincide with yearly bonuses (if any) and reduce some of the financial pressure.

Of course, this is all lender-dependent and circumstantial. 

Qualification Criteria For A Large Mortgage Loan

In general, large mortgage loan eligibility is assessed in the same way as regular mortgages in most cases. The lender will typically consider your credit history, employment history, and existing assets. Your age, income, and existing debts will also be important in this decision.

The most significant difference between a large mortgage loan and a smaller loan is that the lender will definitely require you to be in a higher income bracket to meet affordability for the required loan amount. This ensures you can afford the mortgage and higher deposit amount.

If you need to borrow more than £5 million and have a complex income source, such as various investments, you might want to consider a specialist lender who can assess your assets and decide on the loan amount accordingly.

At the end of the day, what matters the most is a good credit history and a suitable income stream that will allow you to pay back the loan which will be assessed by the lender at point of application. 

Frequently Asked Questions (FAQs)

1. Is it possible to get a large mortgage loan if you’re self-employed?

Yes. If you have a successful business and can show a steady profit history, then you can be eligible for a large mortgage loan.

2. How do mortgage brokers help with large mortgage loans?

As is clear by now, large mortgage loan approval is a complex process with many factors at play. Brokers can help by bringing their specialised knowledge and experience to the table. They also have connections with lenders that can potentially help get faster approvals.

3. Is it possible to remortgage a large mortgage loan in the UK?

Yes, you can remortgage a large mortgage loan to obtain better rates and terms, release equity, or reduce monthly payments subject to meeting the lenders criteria. 

4. What are some of the risks associated with large mortgage loans in the UK?

The risks associated with such loans are as follows:

• Larger monthly payments
• Higher exposure to interest rate fluctuations
• Negative equity in case of declining property values

5. Is it possible to use a large mortgage loan for a purpose other than buying property?

In some cases, yes, you can use a large mortgage loan for purposes other than buying property. Such loans can also be used for property development, debt consolidation or home renovations.

We recommend consulting with a mortgage advisor to assess the viability of a large mortgage loan for these purposes.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.