For decades, debt-free property ownership has been a defining feature of many family office balance sheets. Prime residential assets in London, Paris, Monaco, and the South of France were deliberately acquired without leverage, reflecting a philosophy rooted in capital preservation, discretion, and long-term intergenerational security.
That approach was reinforced during the ultra-low-rate era. With borrowing cheap and asset prices rising, many families saw little need to extract equity. Holding unencumbered property provided psychological comfort and operational simplicity, particularly for assets viewed as permanent holdings rather than financial instruments.
In 2025, that mindset is shifting. Despite higher interest rates, an increasing number of family offices are reassessing the opportunity cost of leaving substantial equity dormant within prime real estate. The decision to re-leverage debt-free property is not driven by financial stress. It is a strategic response to a changing macroeconomic environment, evolving investment opportunities, and a more sophisticated view of balance-sheet management.
Willow Private Finance works closely with family offices, private banks, and specialist lenders to structure conservative, low-risk borrowing against unencumbered property—designed to unlock liquidity while preserving control, privacy, and long-term asset integrity.
At first glance, borrowing in a higher-rate environment appears illogical. Interest costs are materially higher than they were only a few years ago, and central banks have made it clear that a return to near-zero rates is unlikely in the near term.
However, family offices do not assess borrowing decisions in isolation. They evaluate cost of capital relative to opportunity cost. In 2025, many families are facing a widening gap between what unleveraged property equity earns implicitly and what capital could achieve if deployed elsewhere.
Prime residential property remains a strong long-term store of value, but it is typically low-yielding. When significant capital is locked into debt-free property, it cannot be redeployed into operating businesses, private equity, infrastructure, credit strategies, or structured investments that may deliver superior risk-adjusted returns—even after accounting for borrowing costs.
In this context, higher interest rates have not eliminated the case for leverage. They have simply raised the bar for disciplined structuring and clear strategic intent.
Modern family offices increasingly view property as one component of an integrated balance sheet, rather than a static, standalone asset. This shift is central to the re-leveraging trend.
Debt-free property delivers security but little flexibility. Re-introducing modest leverage—often at conservative loan-to-value levels—can materially improve balance-sheet efficiency without undermining long-term risk tolerance.
By selectively borrowing against unencumbered property, family offices can convert illiquid equity into deployable capital while retaining ownership of core assets. Importantly, this is not about maximising leverage. Most facilities are structured well below lender maximums, prioritising resilience and optionality over headline borrowing capacity.
This approach mirrors how institutional investors manage real assets, applying leverage as a tool rather than an objective.
From a lender’s perspective, debt-free prime property held by a family office represents one of the lowest-risk forms of residential collateral—when structured correctly.
Private banks and specialist lenders are particularly receptive to borrowers who have historically avoided leverage. These clients often demonstrate strong governance, conservative risk management, and long-term asset stewardship. When such borrowers seek to introduce borrowing, lenders view it as a strategic decision rather than a sign of distress.
That said, underwriting remains rigorous. Lenders focus on asset quality, liquidity, and downside protection rather than headline valuations alone. Prime location, buyer depth, and jurisdictional stability are critical, particularly in ultra-prime markets where transaction volumes can be thin.
Borrower intent also matters. Facilities tied to clearly articulated investment strategies, capital allocation plans, or intergenerational objectives are significantly more attractive than opportunistic or poorly defined borrowing requests.
Re-leveraging strategies in 2025 are characterised by restraint. Loan-to-value ratios typically range between 30% and 50%, depending on asset type, location, and borrower profile.
Lower leverage supports several objectives simultaneously. It reduces refinancing risk, allows for longer tenors, and creates flexibility around covenant terms. It also provides comfort to family stakeholders who may be culturally resistant to debt.
Facilities are often interest-only, particularly where the objective is liquidity management rather than amortisation. In some cases, borrowers opt for partially revolving structures, allowing capital to be drawn and repaid as investment opportunities arise.
Crucially, these structures are designed to be durable. Family offices are not seeking short-term arbitrage, but long-term balance-sheet infrastructure.
Paradoxically, higher rates have improved the quality of re-leveraging decisions. In the low-rate era, leverage was sometimes applied indiscriminately. In 2025, borrowing decisions are more deliberate, better modelled, and more tightly aligned with strategic objectives.
Family offices are stress-testing returns, interest coverage, and liquidity scenarios with greater care. This discipline aligns well with lender expectations and often results in stronger credit outcomes despite higher pricing.
In many cases, the certainty of funding and structural flexibility now outweigh marginal differences in cost. Borrowers are prioritising reliability, discretion, and long-term alignment over headline rate alone.
Private banks continue to play a central role in re-leveraging strategies, particularly where assets and liquidity are already held within a single institution. They can offer attractive pricing and integrated wealth oversight, but may require asset consolidation or impose broader relationship conditions.
Specialist lenders have become increasingly important in this environment. They often provide greater flexibility around ownership structures, offshore vehicles, and asset-specific lending, albeit sometimes at a premium.
For many family offices, the optimal approach involves combining both—using specialist lenders for discrete assets while maintaining private banking relationships for liquidity management and broader wealth planning.
Willow Private Finance operates independently across both channels, ensuring that borrowing decisions are driven by strategy rather than institutional preference.
One persistent misconception is that borrowing against property in a higher-rate environment is inherently risky. In reality, risk is driven by leverage level, structure, and intent—not by interest rates alone.
Another misconception is that lenders prefer highly leveraged deals. In the ultra-prime space, the opposite is often true. Conservative leverage, clear governance, and long-term intent are far more important than maximising loan size.
Finally, some families fear that introducing debt compromises control. When structured properly, re-leveraging can enhance control by increasing liquidity and strategic flexibility without forcing asset sales.
Willow Private Finance specialises in advising family offices and ultra-high-net-worth clients on complex property-backed lending. We take a strategic, balance-sheet-led approach to re-leveraging, focusing on long-term outcomes rather than transactional borrowing.
We work closely with private banks, specialist lenders, legal advisors, and tax specialists to ensure facilities are robust, discreet, and aligned with wider wealth strategies. Whether the objective is investment deployment, liquidity management, or intergenerational planning, our role is to structure borrowing that preserves flexibility and protects long-term asset value.
In 2025 and beyond, re-leveraging debt-free property is likely to become a standard component of sophisticated family office strategy. Higher rates have not removed the case for borrowing—they have clarified it.
For families with substantial property wealth, the question is no longer whether to introduce leverage, but how to do so intelligently, conservatively, and in a way that enhances long-term control.
Q1: Why would a family office borrow in a higher-rate environment?
Because the opportunity cost of leaving large amounts of equity dormant can outweigh borrowing costs when capital can be deployed strategically elsewhere.
Q2: Is re-leveraging debt-free property considered risky?
Not when leverage is conservative and aligned with long-term strategy rather than short-term speculation.
Q3: What loan-to-value ratios are typical in 2025?
Most family offices borrow at 30–50% LTV, prioritising resilience and flexibility.
Q4: Do lenders favour borrowers with no prior debt?
Yes. A history of debt-free ownership is often viewed positively, indicating conservative financial management.
Q5: Can re-leveraged capital be used for non-property investments?
Yes. Many family offices use property-backed borrowing to fund private equity, operating businesses, or diversified investment strategies.
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About the Author
Wesley Ranger is the Director of Willow Private Finance and has over 20 years of experience advising family offices and ultra-high-net-worth individuals on complex property finance. He specialises in structuring conservative lending solutions against prime and ultra-prime residential assets, with particular expertise in balance-sheet optimisation, cross-border property finance, and long-term strategic borrowing.
Important Notice
This article is for general information purposes only and does not constitute personal financial, legal, or tax advice. Re-leveraging property involves financial risk and may not be suitable for all borrowers, particularly where market conditions or personal circumstances change.
Lending availability, terms, and interest rates depend on individual circumstances and lender criteria and may change at any time. Independent legal and tax advice should always be sought before proceeding.
Willow Private Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA No. 588422). Registered in England and Wales.
