The Complete Guide To Asset Based Mortgages In the UK

Ever feel like your impressive assets are overlooked when applying for a mortgage?

Despite having millions in property, shares, and other holdings, lenders often ignore your actual wealth when deciding how much you can borrow. 

Traditional affordability criteria focus narrowly on income streams, not the bigger picture of your finances.

This disconnect between paper wealth and accessible credit affects many high-net-worth individuals in the UK today. 

Fortunately, asset-based mortgages now allow you to unlock your borrowing potential based on a wider range of existing assets – not just salaries and annual earnings.

This comprehensive guide explains everything you need to know about these specialist lending products – outlining eligibility, applicable assets, typical terms, and how brokers can help you access exclusive borrowing potential where conventional routes fall short.

What Are Asset Based Mortgages?

Asset based mortgages, also known as securities-backed mortgages, allow high-net-worth individuals to use their investments and other liquid assets as collateral for a property purchase or remortgage.

Rather than relying solely on your income, the lender will assess and lend against the value of your share portfolio, cash deposits, gold bullion, or other eligible assets when deciding how much you can borrow.

This type of bespoke lending can be ideal if you have a complex income structure that doesn’t meet mainstream mortgage affordability criteria. For example, you may take an irregular income from your business, be paid in foreign currencies, or have already retired.

An asset based mortgage allows you to unlock funds without liquidating your investments or assets. This means you can still benefit from potential portfolio growth whilst using your capital to finance property plans.

Am I Eligible for an Asset-Based Mortgage?

Asset based mortgages fall outside of normal regulation and are only available to high net-worth individuals, defined by the FCA as having either:

• A net annual income over £300,000, or 
• Net assets worth over £3 million

On top of this, you’ll need to meet criteria set by the individual lender, which is likely to include:

• UK residency status
• UK property as security
• A minimum asset portfolio value, often £500,000+
• Evidence of your HNW status

The lender will expect you to formally verify your income and assets, usually by providing an accountant’s certificate confirming your wealth.

What Assets Can Be Used as Mortgage Security?

Whilst criteria vary between lenders, most accept a wide range of investment assets and other liquid holdings, including:

• Publicly traded stocks and shares
• Investment trust and fund portfolios
• Cash deposits
• Physical gold or silver
• Fine art and collectibles
• Classic or prestige vehicles
• Cash value life insurance
• Luxury yachts
• Luxury sports cars

Essentially, any asset with strong resale value could potentially be eligible.

As a rule of thumb, the more liquid the asset the higher the LTV you may be offered against it.

Non-liquid assets like directly owned property wouldn’t usually qualify, whereas cash is viewed as the lowest-risk form of security.

What are Typical Loan to Values?

A typical asset based mortgage will allow you to borrow up to 50% against your portfolio’s current value. But remember, this isn’t a set rule – it can change depending on a few things.

• What’s in Your Portfolio. The lender will look at what you’ve invested in and how risky it is. If you’ve got a mix of safe investments, you might get to borrow more.
• How Your Investments Have Done. Lenders like to see that your investments have done well in the past. If they’ve grown steadily, you’re in a good position to borrow more.
• How Much Risk Does the Lender Like. Different lenders are comfortable with different levels of risk. Some are cautious and might lend you less, while others might be willing to lend more if they think they’ll get more back.
• What’s Happening in the Market. The state of the economy and market trends matter a lot. In good times, lenders might be more relaxed about how much they’ll lend.

The type of investments you have also makes a difference. If you’ve got cash or similar safe investments, lenders might let you borrow up to 80-90% of their value. 

But if you’ve got riskier things like stocks, they might only lend you about 25-30% to play it safe.

Each deal is tailored to you. While there are general rules, lenders will look at your specific situation. If you’ve got a strong, varied portfolio, some lenders might even let you borrow more.

Remember, each case is unique. So, it’s a good idea to talk to a professional who understands your specific situation and can advise you on the best approach.

How Much Can I Borrow Against My Assets?

There are no published maximum limits. 

If you’re quite wealthy, you might even get a loan worth millions of pounds. This all depends on how comfortable the lender is with your portfolio and your financial situation.

Usually, lenders start with a minimum loan of about £100,000. But, if you’re looking at specialists in asset-based lending, the starting point is often higher, around £500,000 or more.

The actual amount you can borrow depends on what assets you have, how much lenders are willing to lend against those assets (this is the loan-to-value or LTV), and how much risk the lender is okay with.

This can be a bit tricky to figure out, so having an expert broker can help. They can guide you through the options and find a loan that suits your needs.

What Rates and Fees Apply?

With asset-based lending, there’s no one-size-fits-all for interest rates. They are worked out for each person, taking into account your assets, financial history, and credit score.

Because you’re offering your assets as security, the interest rates can be competitive, often lower than what you’d get with a standard mortgage.

If your loan is backed by something like stocks, you’re looking at interest rates of around 2-4% per year usually. If your loan is backed by cash, the rates could be even lower, sometimes less than 1%.

There are also fees to consider. Most lenders charge an arrangement fee, which is typically 1-2% of the loan amount. 

This fee is for the lender’s work in checking out your portfolio, which includes getting independent valuations of your assets.

Can I Remortgage Onto an Asset-Based Loan?

Asset-based mortgages typically have a one-year term and can be renewed annually. Remortgaging is an option if you want to make changes to your mortgage. 

For instance, if the value of your mortgaged asset has increased, you may want to borrow more against its new, higher value. 

Alternatively, you might consider switching to a standard mortgage based on your income.

To remortgage and secure the best deal, consider working with a specialist mortgage broker. Their expertise can help you tailor a mortgage package that aligns with your specific needs.

Combining Asset-Based and Income-Based Mortgages

If your financial situation includes both income and assets, you may want to explore a mortgage that considers both factors. 

This approach might be suitable if you’re concerned about tying up all your assets in a mortgage or if your income alone isn’t sufficient for the mortgage you require.

Some lenders allow you to include a portion of your assets when assessing your mortgage affordability. 

This enables you to apply for a standard mortgage based on a multiple of this combined figure, without risking the full value of your assets.

If you already have an asset-backed mortgage but believe a combined income and asset mortgage would be more suitable, refinancing is an option. 

The key is to find the right balance and the best fit for your financial circumstances.

Is Asset-Based Lending Right For Me?

As discussed, asset-based lending can be a handy option if you want to borrow money without the usual income requirements. But, it’s important to think about the good and bad points before you decide:

Pros:

• Borrow More. Unlike traditional mortgages which are based on your income, asset-based lending can allow you to borrow more money.
• Potentially Lower Interest Rates. Sometimes, these loans can have lower interest rates than standard mortgages.
• Keep Your Assets. You won’t need to sell your investments or other assets to get cash.
• Quick Decisions. Getting approval for these loans can be faster than with regular high-street banks.

Cons:

• Asset Value Fluctuation. The value of the assets you use for the loan can go down, which is a risk.
• Margin Calls. If the value of your assets drops significantly, you might be asked to put up more collateral or repay some of the loan early.
• Less Regulation. These types of loans don’t have as much consumer protection as standard mortgages.
• Risk If You Can’t Pay. If you have trouble repaying the loan, there are fewer protections or options compared to regular mortgages.

In short, asset-based lending can offer more borrowing power and potentially better rates, but it comes with the risks of market fluctuations and less regulatory protection. 

It’s all about balancing these aspects with your financial situation and how comfortable you are with these risks.

Where Can I Get An Asset-Based Mortgage?

In the UK, when you’re looking into asset-based mortgages, you’ll usually find them through private lenders. 

These lenders aren’t typically out in the open for everyone. To get in touch with them, you generally need a broker’s help.

Private lenders are pretty useful for folks who have a fair bit of money. They have more room to manoeuvre compared to your standard banks, especially for those with higher net worth. 

This means they can sometimes offer bigger loans and tailor their deals to fit specific needs.

It’s not common to approach these private lenders directly. If you do find one, going straight to them might not be your best bet. 

There’s a chance they might talk to you, but you could end up missing out on a better deal somewhere else. That’s where having a broker can be handy. They know a lot of these private lenders and understand how they work. 

A broker can shop around for you, comparing different lenders to see who offers what. This way, you get a clearer view of your options and can make a more informed decision.

The Bottom Line

If you’re well-off but don’t fit the usual income box for a standard mortgage, asset-based lending can be a smart choice. 

It’s a way to get the money you need for property, using assets you already have and want to keep.

But here’s a key point: working with a broker can make a big difference. They know the ins and outs of this type of lending. 

They can find deals you might not get on your own and guide you through the process, making sure everything’s tailored to suit you.

If this sounds like it could work for you, why not get in touch? We can arrange a free, quick chat with a broker, with no obligation. They’re here to help you figure out if asset-based lending is the right move for you.