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What is a Private Bank?
Private banking differs from retail banking, because it typically caters to an exclusive clientele such as high-net-worth individuals. Whilst there is no precise and universal definition of what a high-net-worth individual is, in the UK, Her Majesty’s Revenue and Customs (HMRC) amended their definition in 2016, meaning anyone with assets valued in excess of £10 million will be categorised as such. However, it is up to each private bank’s discretion to determine their minimum threshold for individuals to be classed as being of ‘high net worth’. At a private bank, the client will be assigned a dedicated private banking team, whom they will have direct contact with, to discuss their financial decisions. There are many services offered by a private bank, such as deposit accounts with preferential rates and pricing, investment advice and wealth management, estate planning and, of course, lending.
What are the benefits of using a private bank for your mortgage?
Private banks offer a much more personal service, and thus can tailor solutions specific to your needs. They can consider your entire situation, as well as your future plans, to produce bespoke solutions for your needs. Private banks also tend to have much more flexibility in the options they can recommend and can offer you solutions that highstreet lenders cannot.
As well as this, private banks can offer very low mortgage interest rates which are incredibly competitive compared to highstreet lenders. Private banks can offer much larger mortgages, ranging from £1million into the tens of millions.
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How do Private Bank Mortgages work?
Private Bank mortgages can work a little differently to mortgages from high street lenders. As discussed above, a private bank will offer a much more personal and bespoke service, so they will want to have a much more rounded understanding of your situation and circumstances. They will ask for information in regards to your background and future plans, as well as your income level and held assets.
Some private banks will also have extra criteria for its borrowers, and it’s this that sets them apart from high street banks. For example, some banks will request that their clients can only come from personal recommendations. In essence, this means that you must be referred by an existing client of the bank to be considered. Perhaps not so unusual are minimum income requirements. This can be observed in some high street banks, however the minimum to be considered for a private bank can be much higher. In some cases, minimum income may be £1million plus.
What is an AUM, and will the private bank need this from me?
AUM stands for ‘Assets Under Management’. As discussed previously, some private banks will set minimum income requirements for mortgage applications. However, some private banks will have different requirements, such as requiring a certain amount of the client’s money to be invested with the bank. They may also ask you to place a percentage of your mortgage amount in an account held with them. The amount of AUM required by a private bank can be negotiable a lot of the time, and many private banks do not require them at all.