- Client: Ultra-high-net-worth international client with a complex residency and financial profile
- Property: London residential property valued at approximately £4.5 million
- Challenge: Required 75% LTV interest-only finance for a second residential home, to be purchased through a limited company
- Finance: Interest-only mortgage at 2.8% above LIBOR for five years
Arranging a large interest-only mortgage for an international borrower can present a number of challenges, particularly where the property is intended as a second residential home and the borrower requires a high loan to value (LTV). Enness was approached by an ultra-high-net-worth international client looking to purchase a London property valued at approximately £4.5 million.
The property was intended to provide a base for the client when spending time in the UK. The client wanted to borrow at 75% LTV and structure the mortgage on an interest-only basis. The proposed purchase was also to be made through a limited company.
The combination of a high LTV, interest-only structure and corporate ownership created additional considerations for lenders. Unlike a buy-to-let property, where rental income and the eventual sale of the asset can form part of a clearly defined repayment strategy, an interest-only mortgage on a second residential home requires the borrower to demonstrate a credible means of repaying the capital.
The international nature of the application added further complexity. The client did not have permanent UK residency rights and had a financial profile that required enhanced due diligence. These factors meant that a lender needed to be comfortable with both the client's circumstances and the proposed ownership structure.
There was also a particularly tight timeframe. The transaction needed to complete within approximately six weeks, whereas applications involving high-value property, international borrowers and enhanced due diligence can often require considerably more time.
Enness approached a lender with experience of working with complex international clients and the ability to assess the application on its individual circumstances. The lender was prepared to consider the proposed 75% LTV and interest-only structure while undertaking the necessary due diligence.
Following negotiations, Enness secured an interest-only mortgage at a rate of 2.8% above LIBOR for a five-year term at the time.
The resulting structure provided the client with the required level of borrowing while allowing the mortgage to be structured on an interest-only basis. The case also demonstrated the importance of working with a lender experienced in complex international applications where timing and due diligence requirements are particularly important.
The case highlights how a large interest-only mortgage can sometimes be structured for an international borrower where a credible repayment strategy and suitable lender are available. High LTV lending, corporate ownership and overseas residency can all affect the range of lenders able to consider an application.
For international clients seeking high-value UK property finance, large mortgage specialists can help identify lenders with experience of complex ownership, residency and affordability requirements.
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, valuation and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances.
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. Interest-only mortgages require a suitable strategy for repaying the capital at the end of the mortgage term. Where borrowing or income is denominated in different currencies, exchange-rate movements may also affect affordability and repayment costs.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
