Your Client’s Investments Are Illiquid: How Should a Property Purchase Be Funded?

First, Establish Why the Money Is Unavailable

“Illiquid” can describe several different situations. The client may hold an interest in a private company, a fund with restricted redemption rights, a long-term investment with a scheduled maturity or an asset that requires a buyer before cash can be realised.

Those circumstances create different lending questions. A documented payment expected after an established process is different from a distribution that depends on a fund completing future asset sales.

The investment adviser or relevant provider should establish the facts about access, timing and conditions. Willow uses that information to assess the funding requirement and any proposed repayment route.

A portfolio valuation can help explain the client’s overall position. It does not, by itself, demonstrate that funds will be available for a deposit, monthly payments or repayment of a short-term loan.

Establish the Actual Completion Funding Gap

Before choosing a product, calculate the amount needed for the purchase and the cash that is genuinely available. The purchase price is only part of that exercise.

The funding requirement should account for applicable purchase taxes, legal costs, finance fees and any other amounts needed to complete. The client and their financial adviser should also identify cash that is committed elsewhere or needs to remain available after the purchase.

Money held inside a company, trust or pension arrangement should not be treated as personal purchase funds without confirming whether and how it can be accessed. Relevant tax and legal questions belong with the client’s qualified advisers.

If another loan is proposed to provide the deposit, it must be disclosed to the mortgage lender. Its acceptability and effect on affordability need to be checked before the funding structure is relied upon.

Assess the Longer-Term Mortgage Options First

Illiquid investments do not automatically prevent a mortgage. Where the client has an acceptable deposit, the property is suitable security and the borrowing can be supported, a conventional or specialist mortgage may fund the purchase while the investments remain in place.

Willow can investigate how lenders assess the client’s income, existing commitments and repayment arrangements. This can be particularly relevant where earnings include bonuses, business distributions or other income that a standard assessment may not fully accommodate.

Coutts, for example, publishes a mortgage approach that can consider bonuses, carried interest and equity within its assessment. That illustrates a broader underwriting approach; it does not mean that every asset or projected receipt will be accepted. See Coutts’ published mortgage information.

The assessment still needs to establish how payments will be met. If an interest-only mortgage is proposed, the lender also needs an acceptable repayment strategy. Substantial wealth does not remove those requirements.

What if Investment Proceeds Are Expected Later?

A longer-term mortgage may still be worth considering even if the client hopes to repay part of it when investments become accessible. We can compare overpayment allowances, early repayment charges and the cost of keeping the loan for longer than initially expected.

This can help establish whether a mortgage offers a workable funding period without depending on an uncertain receipt arriving by a short-term maturity date.

Could Existing Property Provide Security?

If the client already owns property with equity, a further advance, remortgage or second-charge facility may be worth assessing. The available route depends on ownership, valuation, existing charges, lender criteria and affordability.

We would also examine the effect on the existing mortgage, including any early repayment costs and the combined borrowing commitment. Using additional property as security places that property at risk and should be considered as part of the full lending recommendation.

Bridging Finance Needs a Credible Repayment Route

Bridging may be considered where a purchase must complete before an evidenced source of repayment becomes available, or where another suitable exit can be established.

The important distinction is between financing a documented timing gap and borrowing in the hope that an illiquid investment will become accessible before the loan expires.

A future fund distribution, investment sale or business receipt may be relevant to the application. Its timing, amount, conditions and legal entitlement need to be evidenced to the proposed lender’s satisfaction.

Interest can be structured differently between facilities. Monthly payments require an appropriate payment source. Rolled-up interest increases the amount to be repaid. Where interest or fees are retained from the advance, the net cash available at completion is reduced.

Shawbrook’s published bridging information, for example, describes monthly or rolled-up interest options. Its offering is unregulated and should not be assumed suitable for an owner-occupied home purchase; the appropriate lender and regulatory treatment must be established for the case. Read the lender’s bridging information.

A delayed receipt can increase the carrying cost and leave the debt outstanding at maturity. An extension is not guaranteed. If the fallback is a mortgage, that route should be investigated before the bridging commitment is made.

Do Not Assume the Illiquid Investments Can Support a Lombard Loan

Portfolio-backed lending depends on the lender accepting the assets as collateral and assigning lending values to them. An investment’s reported value is not confirmation of borrowing capacity.

A private investment with limited transfer rights, no readily available market or uncertain realisation timing should not be assumed to qualify for a standard Lombard facility. Bespoke lending against such assets is a separate, case-specific assessment.

If the client also holds eligible liquid investments, a facility against those assets may be another route to investigate. Its costs, collateral requirements and potential margin calls would need to be assessed separately. It does not make the illiquid holdings themselves available.

Willow can establish whether a credible lending route exists and compare it with property-backed options. Decisions about investment disposals or changes to the portfolio remain with the client’s investment adviser.

The Quality of the Evidence Matters More Than an Expected Date

An anticipated liquidity event can be described in many ways: a manager’s forecast, a requested redemption, an accepted redemption, a contractual maturity or a completed sale awaiting settlement.

Those descriptions do not carry the same degree of certainty. The lender needs to understand what has happened, what remains outstanding and who controls the remaining steps.

Depending on the case, useful evidence may include provider correspondence, redemption confirmations, contractual payment terms or a solicitor’s explanation of a transaction. Documents should be requested through an appropriate secure process once the case progresses.

The amount available to repay the loan also needs checking. Gross proceeds may be reduced by existing liabilities, fees or tax obligations. The relevant advisers should confirm those deductions; Willow then assesses the resulting repayment position.

The aim is not to ask an investment adviser to guarantee an outcome outside their control. It is to distinguish documented facts from assumptions before the client takes on a fixed borrowing obligation.

Two Clients With Similar Wealth Can Need Different Funding

Consider two hypothetical clients seeking to buy a property while substantial investments remain inaccessible. Neither situation is a description of an actual Willow case.

For the first client, a lender may be able to assess short-term funding alongside a mortgage with suitable repayment flexibility. The documented payment does not guarantee approval, but it provides evidence for the lending decision.

For the second, relying on that distribution as the sole exit for a short-term loan would leave a material uncertainty. A longer-term mortgage supported by other income, borrowing against existing property or a revised purchase timetable may need to be considered.

The difference is the reliability of the funding and repayment arrangements. Similar headline wealth does not produce the same borrowing options.

Sometimes the Purchase Timetable Needs to Change

There will be cases where the client has valuable assets but insufficient accessible cash, no acceptable borrowing route and no reliable short-term exit.

In that situation, borrowing may not provide a workable answer. The client may need to discuss a later completion, a different purchase budget or waiting until funds are available with the relevant professionals.

A property deadline does not create lender appetite. Establishing the finance position before the client makes a binding commitment gives more time to address the funding gap and avoids treating an indicative discussion as confirmed finance.

Willow can explain the status of the lending assessment, the outstanding conditions and the realistic delivery requirements. The client’s legal adviser should address the contractual implications of the purchase timetable.

When to Involve Willow

An early conversation is useful when a client’s property plans are moving faster than their investment liquidity. It is especially valuable before a bridging solution is assumed or an expected distribution is treated as a confirmed repayment source.

An anonymous initial outline can cover:

• the property’s approximate price, location and intended use;
• the cash currently available for the purchase;
• the amount of finance required and completion deadline;
• the client’s broad income and existing borrowing;
• any other property that may provide security; and
• why investments are unavailable and what is known about future access.

Willow can assess the credible finance routes, identify the evidence lenders will need and manage the lending process where instructed. With client consent, we can coordinate with the investment adviser, accountant and solicitor as the structure develops.

Our role is to arrange property finance that fits the evidenced circumstances. Investment strategy and decisions about accessing or disposing of investments remain with the client and their appointed adviser.