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Private Bank Mortgages

What is a Private Bank Mortgage?

A private bank mortgage is bespoke form of real estate finance offered by private banks to their high net worth clients. Given the existing relationship between the bank and the client, private bank mortgages are highly flexible and often go far beyond standing lending criteria. Private bank mortgages are most suitable for HNWI who have complex finances, large loan requirements or unique ownership structures.
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How Private Bank Mortgages Work

Private bank mortgages are highly flexible, meaning there are many different ways for them to work. There are, however, some common characteristics of private bank mortgages:

Ongoing Private Banking Relationship

One of the key characteristics of private bank mortgages is the fact that there is an ongoing relationship between the bank and the client both before and after the mortgage is active. This ongoing relationship enables the bank to offer greater flexibility to the client as the mortgage forms part of a greater offering to the client.

Assets Under Management

AUM is a necessary requirement of a private bank in order to obtain a mortgage. This AUM ensures a relationship between the borrower and the bank and can be used as collateral for a mortgage.

Personalised Underwriting

As part of the banks overall offering to their clients, they will offer personalised underwriting on private bank mortgages in order to ensure that the client has access to mortgage solutions that are tailored to their specific needs.

Greater Flexibility

Private banks are able to offer their clients a great deal of flexibility when it comes to mortgages. Complex income structures and non-standard properties are all considered under private bank mortgages.

Pricing

The ongoing private banking relationship as well as the AUM ensure that the private bank can offer their clients reduced rates on mortgages (often far lower than high street banks)

Private Bank Mortgages Vs High Street Lending

Private bank mortgages can be vastly different to high street mortgages. Where high street lending is often constrained to very strict underwriting requirements, private banks are very flexible in their underwriting, offering their clients a range of different products.

Types of Assets Commonly Used to Support Private Bank Mortgages

UK and International Residential Property

While private banks are comfortable taking a range of different assets as security, one of the most common is a traditional 1st charge over the subject property. The property may be based locally or internationally, depending on the bank’s jurisdiction. Most commonly private banks will provide mortgages to residential properties, but in some cases they may consider other types of property.

Investment Portfolios & Liquid Financial Assets

Another common form of security for private banks is a charge over a financial portfolio or cash in the bank. Facilities with more liquid security such as shares or cash are likely to come at a reduced interest rate, as they are lower risk than a charge over a property. While charges over financial assets are common, it is also common for private banks to take a cross section of securities, including a range of different assets.

Trust, SPV, and Holding Company Structures

Charges over trusts, special purpose vehicles and companies are also common forms of security form private banks. While they are very seldom the only security a private bank will take, they are often included in the overall security package.

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How Private Bank Mortgage Facilities Are Typically Structured

  • Loan-to-Value Ratios, Interest-Only, and Amortisation Options

    Private bank mortgages are highly flexible, enabling borrowers to take advantage of high LTVs, typically ranging from 50% to 80%, although some banks will go higher for the right client. Additionally, private banks are comfortable offering flexible mortgage structures such as interest only mortgages or part interest only mortgages.

  • Multi-Currency Lending and Asset-Backed Enhancements

    Private banks that operate in multiple countries will often offer their clients the option of taking out a mortgage in a range of currencies. This is particularly popular for US client investing in the UK.

  • Term Lengths, Refinancing Flexibility, and Exit Strategies

    Private banks offer highly personalised underwriting criteria, giving borrowers access to flexible terms, refinancing ability and exit strategies. Where traditional banks may only offer 2 or 5 year fixed terms, private banks can offer terms anywhere from a few months to over 10 years, although this will depend on their relationship with the client. Similarly, private banks give their clients greater flexibility when it comes to refinancing their loans, accepting a broader range of exit strategies than traditional banks.

FAQs

There is no set amount that can be borrowed through a private bank mortgage. Private banks have very flexible underwriting criteria, enabling them to offer their clients bespoke lending criteria, and, as part of this, they are able to lend very large loans to their clients.

Yes, private bank mortgages can be tailored to suit the needs of the borrower, regardless of the structure of the loan.
Yes, private bank mortgages are suitable for any HNWI, international or local, and private banks are used to lending to complex structures.

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