- Client: UK National & Resident
- Cash Holdings: Approximately £4 million
- Borrowing: Circa 1 million in a non-GBP currency
- Requirement: Flexible funding for a US holiday home
Enness was approached by a UK-based client looking to purchase a holiday home in the USA. Rather than taking a conventional US mortgage, the client wanted to explore borrowing in a foreign currency and had substantial liquid wealth, including significant cash holdings.
The client’s financial position meant there were several possible ways to structure the borrowing. The challenge was finding a lender comfortable with the international nature of the transaction, the multi-currency requirement and the fact that the funds would ultimately be used to purchase an overseas property.
After reviewing the client’s wider asset position, Enness identified an alternative to financing the US property directly. Instead, the lender could provide a bespoke facility secured against the client’s cash holdings. This avoided the need to arrange a traditional mortgage against the US property while providing the flexibility the client was looking for.
The lender was also able to accommodate the client’s preferred borrowing currency while applying a savings rate to the cash held on deposit. This created a favourable difference between the cost of borrowing and the interest earned on the deposited cash, effectively reducing the net cost of the facility.
The structure was particularly flexible because it operated as an indefinite revolving facility rather than a conventional term loan. There was no fixed maturity date, allowing the client to draw funds when required and repay them as and when appropriate. This gave the client greater control over their liquidity and avoided committing to a fixed repayment schedule.
The resulting structure was significantly more competitive than the traditional foreign currency mortgage the client had initially anticipated. Rather than paying a rate of more than 5% per annum, the client was able to secure the facility at approximately 0.5% per annum.
This case demonstrates the value of looking beyond the property itself when arranging finance for high-net-worth clients. Where substantial liquid assets are available, borrowing can sometimes be structured against those assets rather than the property being acquired, potentially creating greater flexibility around currency, repayment and the overall cost of borrowing.
Enness takes a holistic approach to financing, considering a client’s wider asset base and objectives when identifying potential lending structures. If you are looking to finance an overseas property and hold significant cash or investment assets, speak to a mortgage specialist to explore your options.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal or tax advice. Finance is subject to status, underwriting, asset suitability and lender criteria. Terms and availability will vary depending on individual circumstances and the proposed facility. Borrowing against cash or other assets carries risks, and clients should consider the potential impact of currency movements and changes in interest rates.
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.
