In theory, it should be easy for high-net-worth individuals to borrow money. The reality is, it’s usually anything but straightforward.
The reason for this usually centres around income. Most traditional borrowing will have an underwriting process that focuses on the borrower’s income. In other words, the lenders will be looking at what income the individual generates, how regular that income is, and what expenses they must cover with their income.
It is, of course, a logical approach. Except that high-net-worth individuals often don’t have incomes or salaries that are typical or traditional enough to appease most mainstream lenders.
Usually, this will look similar to one of the following scenarios:
- When your client has unusual income (which can encompass anything from multi-currency revenue to regular income from ‘unusual’ sources, i.e., investments or assets)
- If your client is very wealthy but has retired, doesn’t work after selling a business, is an entrepreneur or similar
- If your client has what lenders will view as sporadic income, regardless of how significant the amount is (if your client is paid regularly, but on an unusual payment schedule, i.e., once or twice a year, for example. Most lenders tend to prefer monthly income)
- Income that lenders deem to be too ‘low’ (often despite the individual being very wealthy in terms of assets, having few expenses being able to live comfortably on their income)
We believe it’s essential to differentiate between liquidity and unusual income and your client’s overall wealth and assets. High-net-worth individuals often have an excellent overall financial position and little debt. Often, they will have few expenses or will keep their income deliberately low as they simply don’t need more revenue for their day-to-day living. However, finding finance can be a real challenge because their income can look quite different from mainstream borrowers. The result? You often have a client that needs to borrow money and has no way to do it without liquidating or disposing of precious assets.
Using Bridging Finance For Equity Release
If your client wants to access liquidity quickly, releasing equity from one of their properties is a great way of doing this, and a bridging loan is an ideal way of making this happen quickly. The underwriting process for bridging loans moves with exceptional speed, and your client will be able to access funds in 1-2 weeks – or just a few days, if required.
We will be looking at your client’s financial profile, why they want to borrow, the property they wish to use as security and their exit. If your client is financially stable, the loan is reasonable against your client’s property, and your client is on the sound financial ground in every other sense, income won’t be central to our underwriting process. We regularly lend to those with little or low income.
We are open to funds being used for a variety of purposes. You and your client will need to be clear on how they want to deploy funds and present us with a clear plan of action, but if we can lend, we will. We can lend amounts of £1 million or more against prime property in the UK, Channel Islands and select European locations.
Using bridging finance, releasing equity from a client’s home is fast and efficient, and you will be able to draw down funds quickly. Both borrowers and their advisors also find that bridging finance is less cumbersome to arrange than other types of finance. We don’t ask superfluous questions, and we will take the same approach with documentation requests: we will ask for what we need, rather than lots of information that’s not strictly necessary for our underwriting team.
Contact us if your client has little or low income but would like to release equity in a prime property they own. We will be happy to chat through potential scenarios and give more information about what we will be looking for and what your client might be able to lend.