The UK property market continues to attract huge interest from overseas investors looking to start or expand their buy to let portfolios. Even after Brexit the UK population is expected to keep growing and the fact that the supply of new build properties continuously lags demand has created a very strong backbone. We have experience in acquiring property right across the globe for clients very often resident in different countries. Raising funds for foreign nationals living overseas is not easy especially when they are looking at buy to let investments and have little or no UK footprint.
This case study involved a high net worth individual who was both a Pakistan national and resident in the country. Even though we have seen a significant increase in the number of high net worth individuals in Pakistan this is an area of the world where some mortgage lenders are cautious and reluctant to commit. Even though we have seen a tightening of money-laundering regulations in recent years and an attack on fraudulent activity, there is still a degree of reluctance among some lenders. Unfortunately, while the tightening of regulations has certainly been successful we often see perfectly legitimate transactions, such as this case study, caught up in excessive red tape.
This particular case study involved a Pakistan national who was resident in the country and self-employed. Deemed a high net worth individual fee was involved in providing services to the Pakistan government. Unfortunately, the individual in question had no UK footprint which would place a greater emphasis on overseas paperwork and income confirmation. There was also the fact that the property would be a buy to let investment bring together a number of additional issues which would immediately see many mortgage providers withdraw their services. On the surface this seemed a fairly straightforward buy to let transaction but when we began to dig a little deeper it was obvious there would be a number of issues to overcome.
Especially in the current environment we tend to find many traditional mortgage lenders taking a step back from lending to foreign nationals, self-employed and first-time buy to let investors. The fact that this case study had all three of these issues, and others, made it fairly unique. We immediately realise that we would be dealing with private banks/niche lenders as opposed to traditional mortgage lenders. Thankfully, we have numerous contacts in this area more than happy to consider such scenarios – allowing us to inject an important degree of competition.
The basic scenario was as follows: –
Client: Pakistan national
Country of residence: Pakistan
Client income: High net worth individual
Property location: London
Property value: £1.3 million
Investment strategy: Buy to let
Funding required: Maximum
As we often deal for foreign nationals living overseas, looking to acquire UK property, we have numerous contacts we can call upon. The fact that very few case studies tick the boxes of foreign nationals, self-employed and first-time buy to let investors made this a very interesting fundraising. We would need to be flexible, provide the relevant in depth details and also look to secure the most competitive terms available. Yes, this might be a challenge!
It is very important that we are fully appreciative of a client’s overall financial status, income streams and the assets they have to hand. As a consequence, we have a very detailed process of meetings/communications with all clients in the early days. This allows us to ask the right questions so they can give the right answers, we can appreciate their background and any issues which may impact our ability to raise funds. One obvious issue with this particular case study was the fact that the client was an overseas national, living in their homeland and self-employed. It also turned out that they provided services to the Pakistan government which many would deem as “sensitive”.
After discussions with the client it was obvious that there were no income issues with regards to the affordability calculations. We would obviously need to obtain proof of income via a reliable source such as the client’s accountant/bank. Then there was the obligatory identification documentation required to fulfil any lenders legal obligations. The fact that we have undertaken various fundraising of a similar nature means that we know the information required, how this can be obtained and the best way to present it lenders. At this point it is also worth noting the strong historical links between Pakistan and the UK which has allowed the emergence of specialists for this particular type of fundraising.
So, the issues to address with this fundraising were as follows: –
Client nationality: Pakistan
Client residency: Pakistan
Employment status: Self-employed
UK footprint: Non-existent
Financial status: High net worth individual
Funding requirement: Maximum
As it happens, the fact that the client had connections of a “delicate nature” with the Pakistan government was not really an issue with the lenders we approached. Thankfully, they had long-standing experience of dealing with investors in the region, especially those looking towards the UK property market. They were appreciative of the challenges; they were as accommodating as we could expect and thankfully we were able to deliver.
Once we began to discuss the wider scenario with the client it became obvious from an early stage that we would be dealing with a private bank/niche lender. While some traditional mortgage lenders bar uncomfortable dealing with foreign nationals living in Pakistan, there are historic links between the UK and Pakistan which were of some assistance. We needed to confirm the client’s income, provide the relevant identification documentation and then it was simply a case of negotiating the best deal.
The broad details of the funding solution were as follows: –
Property value: £1.3 million
Funds secured: £910,000
LTV ratio: 70%
Mortgage type: Initial fixed rate
Mortgage interest rate: 3.99% fixed for 5 years
Mortgage term: 15 years
It is safe to say that the client was extremely appreciative of the competitive terms especially bearing in mind the array of challenges we faced. This is a perfect example of how we are able to use our long-term relationships with mortgage lenders to discuss what can be challenging issues. We know the information they require, we know the format they require and we know how far we can push with regards to LTV ratios, especially for those without a UK footprint. It is this type of competitive arrangement which tends to see clients returning to us in the future to fund additional ventures.
While our business is headquartered in London we have access to all real estate markets across the globe. In recent times we have dealt for nearly 100 different nationalities living in countries spread right across the world. Those who follow us will be well aware we have increased our worldwide physical exposure with new offices opening on a regular basis. This allows us to not only arrange physical meetings with clients in different countries but also more closely monitor events in local markets. It is also worth noting that as an independent mortgage broker we have access to more than 300 lenders spread right across the globe and involving many different currencies. This ensures that we can always inject a high degree of competition into mortgage fundraisings to ensure the best terms possible for our clients.
We have seen some significant changes in recent years with regard to worldwide property/lending markets. New trends are emerging on a regular basis and a central part of our role is to appreciate and work with these new trends. Our relationships spread right across the market from traditional lenders through to private banks/niche lenders. The fact that we also have access to real-time market rates means that we can present a number of funding solutions for consideration. This allows clients to compare and contrast cash flow together with short, medium and long-term financial liabilities. It is also worth noting that while clients are often very keen to maximise their investment funds, this must be done in a controlled manner which does not overstretch their finances. As a consequence, we are very open and honest with our advice and suggestions