Million Pound Mortgages
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Million Pound Mortgage
Hiren Varvadekar and Jack Tarrant chat about million pound mortgages and what’s involved in getting a mortgage of this size.What is a million pound mortgage? How do I qualify for one?
A million pound mortgage allows borrowers to borrow up to £1m to buy a property. The amount they can borrow will of course depend on their income, credit score and the value of the property they want to buy.
A lender will typically calculate the size of a residential mortgage based on how much the applicant earns. Most will offer around four to five times your annual salary, so to qualify for a million pound mortgage, borrowers normally need to earn around £200,000 a year. Some lenders will stretch to a salary of £180,000 if borrowers have a perfect credit and a large deposit.
What types of million pound plus mortgages are borrowers taking?
As advisors we would always look at the individual circumstances. But we’ve had clients taking a normal fixed rate product, where you pay a set interest rate for two or five years to cover both the interest and some of the capital. That’s a normal repayment mortgage on a fixed rate.
But with larger amounts like this, borrowers often have more complex circumstances. They may have assets they are going to sell in a few years. So they might take an interest only mortgage, or part interest only, and then pay back a large chunk off the mortgage.
Other clients might have a large savings balance but don’t want to use it. What they can do is offset this against the interest charged on the mortgage. So overall, there are three main types – repayment mortgages on a fixed rate, interest only mortgages and a small number of offset mortgages.
What are the monthly repayments on a million pound mortgage on a two-year and five-year fixed rate?
The cost of a mortgage for more than a million pounds would of course depend on the deposit the client has, the interest rate and the term of the mortgage.
Many mortgages are around 25 years, but clients can borrow over a period between five and 40 years, depending on their age and the circumstances.
Can I get an interest only million pound mortgage?
Yes, you can get an interest only million pound mortgage. It will depend on a few things. Some lenders need you to have a minimum income – but you will almost certainly meet that requirement to borrow this amount of money.
It’s also important to have enough equity in the property. When a lender lets you borrow on interest only, they want to know that you can repay the loan. If you have cash in the property, when you sell it then you can pay them back. With interest only, you’ll start off owing £1 million and in 20 years, if you only pay the interest, your mortgage balance will still be £1 million.
You can have certain repayment methods to repay the loan. Some clients have a large pension that will give them a lump sum. Or they may have assets that they’re going to sell or investments worth a certain amount that should grow in that period.
Different lenders have different policies on this. You’ll usually need a slightly higher deposit for an interest only mortgage and the right repayment method to tick the lenders’ boxes.
Can I get a £1 million mortgage for a Buy to Let property?
Potentially, yes. Unlike residential mortgages which are assessed on applicant’s income, Buy to Let mortgage lenders look at the rental income that property will generate.
Borrowers typically need to cover a minimum of 125% of the monthly mortgage repayment with the rent. In some parts of the UK it would be tricky to generate enough rent to make a Buy to Let on this scale feasible.
Researching rental value is important for Buy to Let. These mortgages also involve a higher deposit – usually a minimum of 25%. There are private banks who may be more flexible on this.
Some high street mortgage lenders set minimum income requirements, while private lenders will be more willing to accept bonus payments or money gained from property, savings, pensions or other avenues.
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What fees are there on a million pound mortgage?
The fees on these aren’t necessarily any different to a £200,000 mortgage. Not many fees are based on a percentage of the amount that you’re borrowing. They’re usually a fixed fee.
Fees will be related to the mortgage product that you choose. These will range from a mortgage product with no cost to a mortgage product with a fee of £1,499. These fees allow you to get a lower interest rate from the mortgage company.
They might offer a fee-free product at 4.5%, but if you pay £1,500 for the product you might get 4.2%. When you borrow more money, those slight differences have a massive impact on the cost to you.
With borrowing at £2 million and more, there are specific, large loan products and they come with slightly higher fees.
Do mortgage lenders accept income from commission and bonuses for a million pound mortgage?
Potentially, yes. If the borrower’s income includes discretionary bonuses or irregular earnings, it may be more difficult to get a mortgage from a typical high street bank.
For people whose wealth is tied up in assets or paid in irregular sums, we may need to work with a private bank to get a £1m loan.
Will mortgage lenders accept income paid in a foreign currency?
Yes, a number of lenders will accept foreign currency income in the affordability tests. But they will usually want to reduce their risk of foreign currency fluctuations.
Let’s say, for example, you earn 110,000 euros a year – that’s £100,000. They’ll look at reducing that amount down and only count £80,000 of the income in case currency fluctuates in future.
That’s a risk you don’t face when you’re paid in pounds. If you’re paid in an unusual currency, getting a mortgage will be more difficult. But for a major global currency, a couple of high street lenders will definitely consider it.
How can a mortgage broker like Yellow Brick Mortgages help when it comes to million pound mortgages?
There are of course several advantages of using a broker. One of the main things to highlight is that when rates are going down, a broker will be flexible in exploring the deals available – even after the initial mortgage agreement.
Unlike banks, a broker will adapt to the reduced rate and switch clients to more favourable deals right up to completion. The flexibility that brokers offer in making sure the client always has a competitive deal is one of the key advantages.
Brokers compare mortgage options from a vast array of lenders. At Yellow Brick Mortgages we are all-of-market for first charge mortgages, so we have a lot of lender options that we compare in the best interests of the client.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
Approved by The Openwork Partnership on 17/1/2025.
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