Million Pound Mortgages
Million Pound Mortgage – how a broker can help
Decades of property price rises have meant that million pound properties are no longer the rarity they once were. As a result million pound mortgages are not uncommon but there are a few requirements you’ll need to meet to get a loan of this size.
How do I qualify for a million pound mortgage?
Mortgages are calculated based on the applicant’s income. Most lenders will offer you around four to five times your annual salary to buy a home. So if you wanted to qualify for a million pound mortgage you would normally need to earn around £200,000 a year. Some lenders might stretch to a salary of £180,000 if you have perfect credit and a large deposit.
The challenge is to prove your affordability, as not all lenders will accept discretionary bonuses, foreign income or irregular earnings in calculating the loan amount. Some buyers find that while they are rejected by a high street lender, private banks will accept them for a million pound loan.
What would a million pound mortgage cost per month?
The cost of a mortgage over £1 million will depend on the interest rate, the deposit you put down and the term of the mortgage. While most mortgages are for 25 years, it’s possible to borrow over five years right up to 40 years.
As an example, however, a 25 year mortgage for a home costing £1.2 million with a £200,000 deposit would have a monthly payment of circa £4,700 at a 3% interest rate. On an interest-only basis, monthly repayments would be around £2,500.
What fees are there on a million pound mortgage?
Mortgage fees vary widely depending on the lender. Sometimes they are a fixed sum typically costing circa one or two thousand pounds, while with others they are a percentage of the overall loan. On a million pound mortgage, an Arrangement Fee of 1% would be £10,000 – so the size of relevant fees is something to pay close attention to.
Other fees to allow for are Valuation Fees, which can reach £1,500, and Booking Fees which are usually a flat charge. Make sure you understand the size of any fees included.
You will also need to budget for Stamp Duty, which reverts to normal from 1 October 2021. At that point the Duty due on a £1,000,000 property will be £43,750.
Can I get a million pound mortgage for a Buy to Let house?
Buy to Let mortgages are not assessed on income like a residential mortgage. Instead, lenders look at the total income that the property will generate as rent. You will usually need to be able to cover the monthly repayments on your mortgage to 125% through the rental income.
Lenders will also require a larger deposit for Buy to Let mortgages – usually around 25% Private banks may be more flexible on deposit size.
High street mortgage lenders often set minimum income requirements and again, there can be restrictions on the type of income they will accept. Private lenders may allow you to factor in bonus payments or income from property, savings or pensions.
Can I get a million pound mortgage as an interest only mortgage?
Interest-only mortgages today are more popular in the Buy to Let sector than for residential mortgages, but they are available on both mortgage types.
An interest-only mortgage will have much lower monthly repayments, but at the end of the mortgage term you will not have reduced the debt and you need to repay it in full. Meanwhile, with a capital repayment mortgage, at the end of the term you will have paid off the debt and the home is fully yours.
Because of this, lenders need proof that you have a viable ‘exit strategy’ – a way to repay the loan in full from an investment plan or other capital. This can be investment portfolios, equity in other properties or even selling the security property at the end of the term.
How can a Mortgage Broker help?
The role of a Mortgage Broker is to simplify the process of buying a property. We will do all the research on your behalf to find the most suitable mortgage options. That means comparing interest rates, mortgage criteria, fees and costs – which, on a million pound property, can save you a significant amount of time and money.
Another advantage is that a broker will know which private finance providers to consider alongside the high street banks, and potentially find a more appropriate mortgage that way.
Assured FG are fully authorised and regulated by the Financial Conduct Authority for mortgage advice. Get in touch for an initial, no-obligation consultation.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.