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Beware-of-the-ticking-time-bomb-of-interest-only-mortgages,-warn-EU-Property-Solutions

Mortgages For UHNW Global Audience

17.06.24

There are just over 600,000 ultra-high-net-worth individuals globally, and the number of wealthy individuals worldwide is expected to increase by 28% by 2028. An ultra high net worth individual is often described as someone with a net worth of at least $30 million. These individuals belong to the richest segment of the global population and control a significant amount of wealth. They also live in the world’s most expensive properties.

In the world of real estate, super prime refers to properties located in the most desirable areas and which far surpass the standard in terms of amenities and overall quality. In global capitals, a super prime property generally comes with a price tag of £10 million and upwards, representing the top 1% of the property market.

Whilst they can often afford to, most wealthy people don’t pay cash for properties because they can make a better investment with their money elsewhere. Ultra high-net-worth individuals likely have the ability to generate substantial returns on their investments, so if the return on an investment portfolio is higher than the interest rate on a mortgage, it makes financial sense to use their cash to invest elsewhere. Often it’s previous decisions like this that led to the accumulation and generation of wealth previously.

Even the richest can be cash poor and many wealthy individuals have their money tied up in assets, investments and businesses. Put simply keeping a mortgage can help maintain liquidity and cash flow.

In some countries, mortgage interest can be tax-deductible, so it can be beneficial to take a mortgage and offset the cost of borrowing. Borrowing can also allow individuals to purchase a more expensive property, and during high periods of inflation, the real value of the mortgage debt is eroded, whilst the property appreciates. Regularly paying a mortgage can also help maintain or improve credit score.

Look for a specialist mortgage broker familiar in dealing with the unique requirements of clients who have substantial assets or high incomes, and who can access private lenders and banks which exclusively serve wealthy individuals (often not accessible directly by borrowers).

To ensure their credentials in dealing with similar clientele and super prime property transactions. A top broker will offer a personalised service, and tailor a solution that best suits your needs and complements your overall wealth planning goals.

Despite growing inflation, interest rates and affordability all affecting the general housing market, a recent report by Knight Frank confirms that global super prime (US$10m plus) markets have been more resilient.

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