What Are Assets Under Management?
When it comes to assets under management, many lending institutions require that borrowers’ assets be transferred to their management before offering high-value borrowing against such assets. This can be a barrier to extensive borrowing for many high-net-worth individuals who are reluctant to move away from the existing banking and asset management relationships.
High net worth individuals are quite sensibly often reluctant to leave or relinquish the successful relationships they have in place simply to obtain mortgage borrowing for a high-value property purchase.
Whether that reluctance is through past experiences or many years spent finding the right banking and asset management arrangements, the thought of building new banking relationships makes them hesitant. Yet securing a loan that requires assets under management for security is no longer the only solution.
AUM and Dry Mortgages
High-value mortgages and property finance packages without a need for assets under management can be challenging to obtain. Yet an asset under management arrangement can make handling wealth more complicated and stressful for high-net-worth individuals seeking considerable sums for property finance.
For this reason, many high-net-worth individuals seek other options to raise the required finance or seek lenders that will grant large mortgages without the requirement for some or all of their assets to be placed under the lender’s management. Prospective borrowers seeking a high-value mortgage should undoubtedly seek the services of specialist high-value finance brokers to identify the best lending opportunities for them.
A specialist high-value mortgage or bridging loan broker has niche industry knowledge which will be invaluable when identifying possible lending sources that do not require extensive levels of asset management or are open to negotiating a different package for security against your borrowing.
Getting the right deal
For some high net worth borrowers, a dry mortgage may be possible, where the loan is secured solely on the property purchased. A specialist broker will present your case in the most favorable light to arrange the most beneficial terms on your behalf. Where AUM is an absolute requirement, your broker will be able to help you reduce the asset levels required.
UK banks are often found to be the most accommodating when it comes to granting large mortgages without demanding that a borrower’s assets be placed under their management.
The most successful scenario for borrowing to purchase high-value property without the requirement for assets under management is obtained by those seeking to buy a UK property using a UK lender. For property purchases outside of the UK, or where the lender is a European bank or bank based in another country, getting a dry high-value mortgage can be a complicated and challenging process.
Rigid rules are in place that restricts lenders’ terms available for borrowers seeking to acquire a dry high-value mortgage. Clients can almost certainly benefit from the services of a specialist high-value mortgage broker to negotiate with the lender to reduce the amount or value of assets under management required.
Their relationship with lenders and negotiating experience will seek to identify other suitable options to satisfy the lender’s security requirements.
Expert market knowledge of high-value mortgage lending is essential as lender introductions are usually the key to achieving high-value borrowing using dry mortgage lending or negotiating the best property finance and assets under management terms.
Dry mortgage lending removes the need for the borrower to change their existing asset management providers, with the loan secured solely on the property. Lenders have no right of recourse on reduced property values when lending on a dry mortgage should foreclosure be necessary.
Dry mortgage high-value property lending is a niche market that not every lender offers and it must be arranged from the outset. As such, lenders will look closely at the borrowing terms. Using a broker can assist borrowers in settling with the most favorable terms.
Options to reduce AUM requirements on high-value property mortgages
As with all lending, a bank must be comfortable with the lending terms and security within a borrowing deal, meaning a wide variety of terms and rates may be available depending on the property, status, and flexibility with assets used to secure lending terms. However, brokers have the knowledge and experience to suggest, offer and negotiate other terms with prospective lenders.
This may include putting forward additional security, entering corporate banking relationships for some businesses, or moving client trust structures to them. Many options can see a borrower with alternative routes to provide the necessary comfort required by a lender and thus reduce their demands on the level of assets under management demanded by them to lend.
Requesting total assets under management may be the starting point of negotiations, but the financial status and assets held by the borrower can reduce this need. For this reason, many borrowers or their economic team partner with specialist high-value lending brokers to ensure that their case is presented strongly and favorably to meet each lender’s security requirements.
Mortgage borrowing for high-value property purchases is an area where the skills of a specialist broker can see far more favorable outcomes and avoid doors closing. An effective broker will undoubtedly have the expertise to negotiate much reduced AUM requirements and dry mortgage terms than clients can obtain independently.
What are assets under management: conclusion
While the past has long seen it a requirement for lenders to demand assets under management as a condition of high-value large mortgage lending for those seeking to borrow for luxury properties, the market and lending are opening up to other solutions.
High-net-worth individuals are now increasingly keen to secure mortgages for luxury property purchases without needing to move all of their asset management or banking interests to the lender. Achieving favorable lending terms without such demands, or at least reducing the level of assets transferred to the lenders’ management, is growing in popularity.
Dry mortgages are increasingly becoming sought after as an all-or-part alternative to reduce or remove the requirement for total assets under management terms demanded by lenders lending for high-end property mortgages. For some high net worth individuals or those with a genuine reason or reluctance to put assets under management to secure a large mortgage, many other options are increasingly available to assist them.
With skillful negotiation and expert case presentation, it is possible to borrow using alternative security or banking means to purchase the property they desire. Many lenders will not accept direct applications or may offer more favorable terms when lending is negotiated through a lending partner and specialist high-value mortgage broker, making using a broker or lending partner a good choice.
