Refinancing Offshore Trust Property for Foreign National Living Overseas

• Client: Offshore trust with a foreign national ultimate beneficial owner living overseas
• Property: London residential property valued at £950,000
• Challenge: Complex offshore trust structure, overseas UBO, limited identification documentation, rental arrears and a relatively modest fundraising requirement
• Finance: £250,000 refinance at 26% LTV, at 4.25% above Bank of England Base Rate over a five-year term

Refinancing UK property held through an offshore trust can present additional challenges for lenders, particularly where the ultimate beneficial owner (UBO) is a foreign national living overseas. While the underlying property may provide substantial security, the ownership structure, borrower profile and source and purpose of the funds can all influence lender appetite.

Enness was approached by the trustees of an offshore trust which held a residential property in London on behalf of a foreign national living overseas. The trust was administered by a respected Swiss trustee company, while the ultimate beneficiaries were family members who lived and worked in the UK.

The property was valued at approximately £950,000 and the trust was looking to raise £250,000, representing a relatively low 26% loan to value (LTV). The majority of the funds were required to settle outstanding fees, with a smaller proportion intended to fund home improvements.

Although the relatively low LTV provided substantial equity in the property, there were several other factors that made the transaction more complex. The legal owner was an offshore trust and the UBO was a foreign national who remained resident overseas. This immediately reduced the number of mainstream lenders likely to consider the application.

There were also questions around the client’s identification documentation, as the UBO did not hold a valid passport at the time. In addition, the property had experienced problems with a tenant, resulting in several months of unpaid rent before the mortgage application was submitted. The rental arrears were subsequently resolved prior to the completion of the fundraising.

The relatively modest amount being raised created a further challenge. While private banks can often be more flexible when dealing with international clients and complex ownership structures, a £250,000 requirement would not necessarily meet the minimum lending levels of many private banks.

Enness therefore approached lenders with whom it had experience of working on similar complex structures. The objective was to identify a lender comfortable with the offshore trust, overseas UBO and proposed use of funds, while also addressing the identification requirements.

The identification issue was dealt with relatively early in the process. Alternative documentation was provided to satisfy the lender’s requirements, allowing the application to progress. The presence of an established and respected trustee company also provided additional comfort to the lender when assessing the structure.

Enness ultimately secured £250,000 of mortgage funding against the £950,000 London property, representing 26% LTV. The facility was arranged over a five-year term at a rate of 4.25% above the Bank of England Base Rate at the time.

The resulting structure enabled the trust to refinance the property and raise the required capital while retaining the existing ownership structure. The case demonstrates how the cumulative effect of several individual complexities can significantly reduce lender appetite, even where the underlying property provides substantial equity.

For clients holding UK property through an offshore trust, specialist international mortgage expertise can help identify lenders prepared to consider complex ownership structures, overseas UBOs and non-standard documentation, subject to lender criteria and appropriate due diligence.

Where conventional lenders are unable to accommodate the circumstances, a bespoke private bank mortgage or specialist lending solution may provide an alternative route, although minimum loan requirements and individual lender criteria will apply.

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, valuation, security, property suitability, due diligence and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances.

Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. 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. International property finance may also involve additional considerations relating to overseas ownership structures, currency movements and changes in lending conditions.