When it comes to getting a large mortgage, it’s important that you get it right. Choosing the wrong fixed-, tracker- or variable-rate deal can result in you paying significantly more than you need to – a mistake that could cost you thousands, even over just the first few years of your loan.
Of course, when shopping around for a mortgage the first factor you will want to take into account is “will this lender agree the mortgage I need?”
Large loans are a specialist area. If you have significant earnings, many underwriters simply don’t have the expertise to decipher where your income comes from and are nervous about agreeing a larger loan.
Working with a professional who understands the issues surrounding large loans can help here. For example, larger mortgages are one of our specialist areas and we work closely with a range of lenders who are happy to consider clients with higher incomes and borrowing needs.
Then, it’s important to consider the financial aspects of the deal. While many Sunday newspapers might warn you to “beware of high fees” when it comes to taking out a mortgage, paying a higher fee can offer huge benefits if you’re looking for a large mortgage. Read on to find out why.
Why paying a higher free can benefit you
Once we’ve established that there is a choice of lenders happy to agree the mortgage you need, there are two key factors to consider when taking out a large loan:
- The interest rate
- Any associated fees
Fees for mortgage deals vary sharply. The most recent analysis from Moneyfacts found that, in November 2020, the average product fee was £1,078.
Around a third (34%) of deals had no fee at all, while at the other end of the spectrum some lenders charged £1,999 or more for certain fixed-rate deals.
Source: Moneyfacts, based on analysis of 1,840 fixed-rate mortgages
While you might baulk at paying a four-figure sum for a mortgage deal, doing so could save you a significant amount.
Here’s an example.
Using Moneyfacts data from 23 April 2021, the best two-year fixed-rate deal on the market (to 60% loan-to-value) is a 1.21% deal with NatWest. This has a £995 fee.
If you wanted a £500,000 repayment mortgage over 25 years, and you paid the £995 upfront, your monthly payments on this deal would be £1,932.27.
The best equivalent two-year fixed-rate deal with no fee is at 1.55% with Leeds Building Society. Here, your monthly repayments would be £2,011.45.
Over two years, the fee-free deal would cost you £1,900.32 more in terms of your repayments. So, as you can see, paying a £995 fee in this instance would have left you around £1,000 better off.
Of course, on larger loans, or if you take out an interest-only loan, the savings can be even more pronounced.
Using the same example above for a £1 million loan would see you save around £2,800 if you paid the £995 fee rather than took the fee-free option.
Working with a large loan specialist can help you get the best all-round deal
Large mortgages are a specialist area and, often, high street lenders don’t have the expertise or underwriting flexibility to help higher net worth clients.
Working with a professional can really add value. We can:
- Tailor personalised finance for high-net-worth borrowers
- Consider a range of deals, and establish which is the most cost-effective for you in terms of both costs and fees
- Agree loans of £1 million and more
- Help you if you’re a foreign national buying in the UK
- Work closely with underwriters if your income streams are complex
- Assist with complex ownership structures
- Work with lenders that you may not be able to access directly.
To find out what we can do for you, please get in touch. Email [email protected] or call us on +44 (0) 20 3786 7270.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
