The complicated world of mortgages can feel like a minefield for anyone. However, the stakes are often even higher for those with a high net worth. Whether you’ve got significant assets you want to protect or an intricate financial portfolio already underway, finding the right mortgage is key to successfully managing your wealth.
This guide will explore the benefits of three different mortgage types for high net worth individuals (HNWIs), so you can decide which option is best for you.
What is the best high net worth individual mortgage?
The best mortgage for an HNWI will undoubtedly depend on your financial goals, risk tolerance and personal preferences. Below, our experts have outlined some of the benefits of three common mortgage types: interest-only, fixed-rate and tracker/variable-rate mortgages.
Interest-only mortgages
By only paying the interest on your loan for a set period, interest-only mortgages usually result in lower initial monthly payments. For high net worth individuals, these smaller payments allow them to instead allocate funds towards other expenses or investments.
However, it’s important to note that once this period ends, you will have to start paying back both the principal amount and the interest – which could result in higher monthly payments and greater financial risk.
With an interest-only mortgage, HNWIs can:
- Redirect any capital that would have gone towards principal payments into sought-after investment opportunities.
- Preserve capital and benefit from property appreciation on their home – without needing to tie up any funds in principal repayments.
- Take advantage of short-term ownership by selling the property before principal repayments begin.
- Enjoy the flexibility that comes with interest-only mortgages; this flexibility can be used to customise the mortgage so it aligns with your financial goals.
Fixed-rate mortgages
The predictability of fixed-rate mortgages is also attractive for HNWIs. Such stability allows high net worth individuals to plan for long-term financial investments without ever needing to worry about fluctuating interest rates.
Many HNWIs use fixed-rate mortgages to:
- Prioritise risk management in their financial strategy by removing the risk of rising interest rates and any potential increase in borrowing costs through the years.
- Diversify their portfolio by balancing riskier investments with a more stable property venture.
- Hedge against inflation with nominal mortgage payments that remain the same even if inflation fluctuates. This can result in significant interest savings over the long term if interest rates rise.
Tracker or variable-rate mortgages
With more flexibility in repayment options compared to their fixed counterparts, many HNWIs opt for variable-rate mortgages to have greater control over their finances.
Of course, there is the chance that monthly payments can vary over time, especially given this mortgage type’s reliance on changes in the market. However, many tracker mortgages also offer the option of switching to a fixed-rate mortgage at a later date; this allows HNWIs to lock in a fixed interest rate if they anticipate interest rates will soon rise.
Choosing a tracker or variable-rate mortgage enables high net worth individuals to:
- Have more control over their financial investment with competitive features like redraw facilities and offset accounts.
- Benefit from falling interest rates which can lead to significant potential savings if rates remain stable or decline over the years.
- Repay their loan early without penalties; this provides sought-after flexibility for those with fluctuating income or substantial cash reserves.
Each mortgage type comes with its own set of benefits for high net worth individuals, and as we’ve mentioned earlier, the right type for you will depend on your own individual circumstances. Consulting with a financial advisor who understands the unique needs of HNWIs, like the expert team at Agentis Wealth, can help you make an informed decision when it comes to choosing a mortgage that will protect your financial assets and net worth.
Why not reach out to us today and see how we can help?
