Wealthy owners borrow against prime property for the same reason companies run leverage: to avoid selling an asset in order to fund something else.

How these loans are underwritten

Private banks lend against prime residential at conservative loan to value ratios, and the discount they apply is a market signal worth reading. Where a lender will advance against a city apartment but hesitates on an estate or a resort villa, it is telling you which of those it believes can be sold quickly if it has to be. The underwriting is a liquidity opinion dressed as a credit decision.

Pricing usually follows the broader banking relationship rather than the property alone, which means the same house can carry very different terms depending on what else sits at the bank.

What it means for an allocator

Arrange the facility while the position is strong and the income is easy to evidence, not when the money is needed. Credit against illiquid assets is cheapest and widest exactly when it is least required. And read the haircut the lender applies as independent diligence: a bank that will only advance a small fraction against a property has priced an exit risk the owner has probably not priced at all.