How can you finance a million pound house? How big are the biggest mortgages and how much do they cost?
In many parts of the country, a million pounds is not considered a vast sum of money, in terms of house prices. Certainly in London it can be the price of a relatively modest family home.
Aaron Strutt of Trinity Financial says that on the whole, banks and building societies are keen to help borrowers finance expensive properties and they are certainly still offering loans of £1 million and above. However, he warns: “Rates are much more expensive than they were and are still going up for the moment. Ideally, buyers would be able to raise a deposit of at least 15% to 25% if they are buying a £1 million+ home. If they have a smaller deposit, the rates get much pricier.”
So you’ll need a deposit of between £150,000 and £250,000 in order to be eligible, and of course you’ll need a large salary too, since lenders generally offer a maximum of five times income. Strutt says that “the cheapest larger mortgage loans are discounted deals through some building societies or the five- and ten-year fixes.” Fixing for five or ten years is a daunting prospect at the moment, and he admits that most of his clients are taking two-year fixes, but some are locking in for five years. “Some lenders still offer rates starting with a five but increasingly they are beginning with a six,” he warns.
But taking out a large loan doesn’t necessarily mean that you’ll get a different deal. “Many lenders offer the same fixed deals to borrowers looking for £100,000 mortgages as they do to those requesting £1 million mortgages. Others price their rates differently, with slightly higher rates for £1 million to £5 million.”
Strutt’s advice to someone buying a million pound property is the same as his advice to anyone else: “If you find a property you like and want to apply for a mortgage, it is important to get the rate secured as quickly as possible. The lenders are giving very little notice that they are changing their prices, and the rate increases have been substantial.” While rates are increasing, it’s possible that asking prices might start to come down soon, meaning that your million pound budget might stretch a little further. In these turbulent times, it’s hard to predict anything – but it’s worth remembering that the property market has withstood a lot of turbulence in the past and still remained buoyant. People will, after all, always need homes.
