£2.7 Million Equity Release For International Property Purchases
24th April 2023
Key Facts:
- Client: British National and Resident
- Net Worth: £20-25m
- Security: Self-build UK property worth £4,500,000
- Loan Amount: £2,700,000 (75% LTV)
- Product: 5-year SONIA tracker, interest only, paid quarterly
A client – a high-net-worth individual – approached us with the request to assist them release equity from a UK residential property, borrowing as much as possible in terms of loan-to-value ratio. The client’s objective was to use their primary residence in the UK as security for the loan that would allow them to access much-needed liquidity. This was important for the client as although they had a very significant net worth, much of this was tied up in illiquid assets such as high-value property.
They wanted a loan facility that would give them access to capital they could use to purchase property in St. Barts and the Alps. The client effectively wanted our help to arrange a facility in advance that they could use to draw down funds as and when needed for these additional property purchases.
To achieve this, we knew we needed to approach lenders that would be open to offering a relatively flexible loan facility that the client didn’t need to draw down straight away. We also needed to lay out the client’s plans with regards to additional property purchases to ensure that the lender would support the loan capital being used for this purpose. We also had to explain the client’s financial situation carefully, as they had a very stable financial background and wealth, but comparatively little day-to-day liquidity. Explaining repayment plans, how the funds would be managed and risk to the lender was therefore key.
We approached a Swiss private bank to arrange the mortgage. Using the client’s UK residence as collateral, we negotiated a 65% loan-to-value mortgage (£2.7million). The amount was initially vested as assets under management with the bank. When the client needs capital to fund their additional property purchases, they can use this amount as a drawdown facility in the form of a Lombard Loan. The bank was also happy to support the client finance a property purchase in the Alps.
As well as considering the client’s finance requirements, we also looked at their needs in terms of what added value a banking relationship would provide to the client, the flexibility of the facility, and how to structure the facility to ensure the deal was optimised before the client drew down funds.
We negotiated a facility with a private bank that placed special emphasis on client relationships. The bank offered the client a single point of contact for the client within the bank, and flexibility with regards to how the loan capital could be used and when it could be drawn down. The bank offered a 5-year SONIA tracker, interest-only mortgage, with the client paying interest on a quarterly basis.
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