Capital Raise Against £5 Million Unencumbered Property

• Client: High-net-worth foreign national with significant worldwide assets
• Property: Unencumbered Prime Central London property valued at approximately £5 million
• Challenge: Wanted to release capital despite having relatively low personal income
• Finance: £1 million capital raise at 20% LTV on an interest-only basis

I recently assisted a high-net-worth client looking to raise capital against an unencumbered residential property in Prime Central London. The property was valued at approximately £5 million and had been acquired several years previously at a substantially lower value, leaving the client with significant equity.

The client had considerable wealth and assets internationally, but their personal income was relatively modest compared with the value of their overall asset base. They wanted to make use of the equity held in the London property by raising additional capital and placing the funds into an investment portfolio.

The requirement was to raise £1 million, equivalent to just 20% loan to value (LTV). The client wanted the investment structure to provide flexibility, including some control over how the capital was invested, while retaining access to the funds if their circumstances changed.

Although the low LTV made the property itself a strong source of security, the client's relatively low income and international asset base meant that a lender needed to take a broader view of their financial position. I therefore approached a private bank with which Enness has an established relationship.

The bank was prepared to consider the client's worldwide assets and rental income from properties held overseas alongside the London property. This provided a more complete picture of the client's financial position than simply assessing their UK income in isolation.

I was able to secure a £1 million facility at a rate of 1.5% above three-month LIBOR, which equated to 1.88% at the time. The mortgage was structured on a five-year interest-only basis.

The facility also offered flexibility around the investment portfolio, including no early repayment charges and the ability to liquidate the portfolio when required, subject to the relevant terms and conditions. This gave the client greater control over the capital while maintaining a relatively low level of borrowing against the property.

The case demonstrates how equity release can provide a way for high-net-worth individuals to access capital held within an unencumbered property. Where a client has substantial international assets and relatively complex finances, a private bank’s ability to assess their wider wealth can also be valuable.

For clients considering a capital raise against a valuable property, the appropriate structure will depend on their objectives, affordability, assets and the lender’s criteria.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances. Enness does not provide investment advice, and any investment decisions should be made with an appropriately qualified investment professional.

Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. Investments can fall as well as rise, and you may get back less than you invest. Past performance is not a reliable indicator of future performance.