It is fair to say that we are experts in arranging mortgage finance for expats looking to acquire property in the UK. This is an area in which we have great experience, a vast array of contacts and the ability to structure mortgage finance around an individual’s specific financial situation. So, when we were approached by a UK national who was resident in Dubai but looking to acquire a London property, we began to look at the options. The property in question was a high-end home with a value of £7.8 million.
Even though the basics of the client’s requirements were fairly straightforward in principle, in practice there were many issues to overcome. The scenario was as follows:-
Property to purchase: Luxury freehold property in London
Property value: £7.8 million
Mortgage funding: £5.46 million
Required LTV: 70%
While an LTV ratio of 70% is certainly achievable it was the source of income and the client’s business structure which posed the greatest of challenges. It is commonplace for expats looking to acquire property in the UK to have various forms of income and assets spread across the globe. However, while commonplace it certainly does not make it easy to secure finance at a competitive rate.
As soon as we began to discuss the finer details with the client it became apparent that it would be the private banking sector that would be the best fit. The client’s income and business structure were not compatible with traditional high street banks and the restrictive affordability calculation introduced by the regulator. The main issues to consider included:-
Wealth: The client’s business was held in an offshore structure
Income: The majority of income came from offshore sources
Mortgage funding: £5.46 million
Mortgage interest rate: Fixed/Flexible
Historic discussions with an array of mortgage lenders have highlighted the challenges surrounding offshore companies/assets and income streams from outside of the UK. When it comes to business assets it can be difficult, if not impossible, to compare like-for-like accounts as accounting standards tend to vary significantly (in Dubai there is no requirement for accounts). There is also the uncertainty surrounding offshore income and potential foreign exchange exposure. All in all, we knew from the outset this would require a bespoke mortgage arrangement with an element of fixed and variable interest rates.
After discussing the client’s funding requirements with an array of our private banking contacts we managed to secure a very impressive deal. As ever, the main challenges related to overseas income and an offshore business structure which added a further layer of uncertainty. In order to secure the mortgage funding we were able to focus on the client’s background wealth and create a clear and concise credit report for the private bank in question. Rather than looking at the short to medium term income situation they were more than willing to look at the overall wealth of the client and their long-term prospects. As a consequence, we were able to secure the following funding:-
Mortgage: £5.46 million
Mortgage type: Part fixed interest and part variable-rate
Fixed interest rate: 50% of the funding was fixed at 2.24% for five years
Variable interest rate: 50% of the funding was secured at 1.10% over the Bank of England base rate
LTV rate: 70%
Mortgage term: 25 years
We were extremely pleased to secure this flexible arrangement which offered a degree of certainty while also ensuring the client would still benefit from a prolonged period of low UK base rates. The splitting of the interest rate applicable to elements of the mortgage funding is not necessarily common but it is certainly an option. In many ways, the customer now has the benefit of a fixed element and a relatively low variable element. After all, in light of the 2008 US mortgage crisis who would have guessed that UK base rates would still be near historic lows more than a decade later?
There were many challenges with this particular mortgage arrangement which focused around the source of income and the offshore business structure. We have very strong relationships with many private banks and this bespoke mortgage agreement has further strengthened our funding supply network. The key to this particular arrangement is the flexibility and the relatively high 70% LTV when taking into account the customer’s financial scenario.
If you are in a similar situation and looking to secure funding for a high-value property then please feel free to call us for a no-obligation chat. We can discuss your circumstances in more detail, your hopes for the future and the ways in which we can present your finances to secure the required mortgage funding. We are also able to obtain real-time market rates so that we can together compare and contrast various deal structures.
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