We often see very wealthy clients who have considerable assets but struggle to find a mortgage due to their income profile. You know the client profile I’m talking about; you probably come across them a few times a year.

They typically have a big valuable house, perhaps purchased by their parents or inherited. On the accounts side, they tend to have lots of cash, investments, or pensions. They own a great business but draw little income, or the company is overseas. Perhaps they have recently sold a business or have started a new one after a successful career. They tend to be retired or not working.

They would be the perfect client, if it were not for one thing – they have no UK taxable income. Or a meagre personal income relative to their needs.

This near-perfect client asks you for a mortgage secured against their home. You know that this is a regulated mortgage, and that income is paramount to the whole process. But there isn’t enough, it isn’t provable, or is structured in a way that most lenders will not accept.

Here are our six solutions to help your client secure their mortgage:

Secure a HNW exemption

Mortgage lenders are permitted to loosen affordability rules on regulated mortgages if a borrower is an HNW individual. This is defined by the FCA as a customer with an annual net income of no less than £300,000 or net assets of no less than £3m.

Some private banks will request a HNW certificate. This document confirms that the client meets the FCA criteria during the application. It can help to smooth things over throughout the whole process too. It is used instead of or alongside the client’s proof of income, to determine whether the mortgage is affordable and showing how the interest payments could be met.

Some lenders use ‘cash burn’ as the income calculation. For example, if a customer has assets of £10m, say in an investment portfolio, which produces a 3 per cent return. This is £300,000 per annum that notionally could be used to service the mortgage interest, satisfying affordability and serviceability requirements.

Other lenders use common sense – if someone has £10m in assets and wants to borrow £1m that is probably fair enough.

Consider unregulated mortgages for non-UK residents 

If the borrower is a non-UK resident and the property is only to be used occasionally, lenders are permitted to treat this as an unregulated mortgage. This means that income and affordability requirements do not need be fully assessed in the same way as a regulated mortgage.

An example is a Middle East resident who buys a property in Mayfair to use for his and his families’ holidays. Whilst this will be a property which he will personally live in, it isn’t a regulated mortgage according to the FCA definitions.

So, again, lenders can look at the client’s entire circumstances in deciding whether to grant a mortgage. This includes their liquid and illiquid assets, property, and business holdings or even reputation or family connections. Personal income can be part of the underwriting process too, but the lender can lend without having to prove a certain level or assess more comprehensive affordability.

This is an excellent solution for international HNWs who buy property as an investment and not under predefined reasons such as a home or a buy to let – the lenders who offer it are just very few and far between.

Going for pre-paid mortgages

Another way to satisfy income and affordability requirements under a regulated mortgage contract is to pre-pay the interest for the agreement’s duration. If the mortgage is paid in advance, there is no need to show how the monthly payments would be met. So there is no requirement to prove income at a level to satisfy the FCA’s rules on affordability.

For example, say the client is looking for a £1m mortgage at a 3 per cent interest fixed-rate mortgage, over a 5-year term.

Here the client would put £150,000 with the bank on completion (£1,000,000 X 3 per cent – £30,000, X 5), which would be held in a locked account for the mortgage duration. These funds are then used to pay the monthly interest as it becomes due.

If you want to try this method, there are some things you should be aware of. Often lenders want to see enough income to cover the borrower’s lifestyle and living expenses, as well as other assets in the background.

There are very few lenders who will offer this solution, and it needs to form part of a longer-term strategy rather than used in isolation. For example, this could be used to cover the first few years of a new job where bonuses are expected to grow. Or it could be used for an entrepreneur who has sold one business and is starting a new venture.

Look into securities-based loan options

Sometimes we look to other assets to find a solution to the clients’ mortgage needs. This can come in the form of securities backed loan – sometimes referred to as a Lombard loan.

For example, we secure the loan against the client’s liquid assets – say an investment portfolio, stocks and shares or other securities. This is a big market, dominated by private banks and many specialist lenders. Interest rates can be very low if the security is high quality (for example, £10m worth of Facebook shares). Or can be priced in line with the risk for other share classes (for example, unlisted shares pre-IPO or high loan to value)

Generally, loan values are less than 60 per cent for single stocks. And they can go as high as 95 per cent for very liquid assets (cash or Facebook shares). Interest rates will be between 1 and 4 per cent. Interest only and loans are based on the security on offer rather than the profile (income) of the borrower. This could be a great option for the asset-rich client, with a low income.

Try out a cross-charged or alternative security 

Another example is to look at non-residential/ regulated property and see whether they can be used as part of the security package for a mortgage or as a separate transaction to raise the required funds.

For example – commercial property, buy to let investments, overseas property and so on. Maybe there is a better opportunity to raise the mortgage against property owned in France or Spain and use those funds for the UK transaction.

Bridging finance could be the best solution

If all else fails, there is always bridging finance. But this needs to be used in a very controlled and thought-out way, focusing on how the bridging loan is excited as soon as possible.

Regulated bridging finance still requires an analysis of income and affordability; however, this can be sidestepped by allowing the interest to roll up or be paid on the loan’s redemption.

An example of why bridging finance could be used is if an HNW homeowner, with low income, needs liquidity for a short term and predefined term – to make a business investment or pay a bill before committed funds come in.

The UK mortgage market can be very rigid in many respects, especially when it comes to regulated aspects. However, there are solutions available for HNW and international borrowers. I’ve listed the top six tried-and-tested ways here. But of course, nothing beats an experienced mortgage broker who truly understands the market and client.

Islay Robinson is chief executive officer of Enness Global Mortgages