Case Studies & Articles
Location: United Kingdom
If you own high-value real estate, releasing capital from the property which you can then invest elsewhere for a higher rate of return, can make a lot of sense. As a result, there has always been a demand for equity release schemes involving high-value properties. These tend to be owned by high-net-worth individuals. Equity release schemes have become even more popular due to uncertainties in the market and challenges such as Brexit, which have reduced overall investment returns.
In many ways, the current environment is particularly attractive if you want to release equity from high-value real estate. Simultaneously, both in the UK and abroad, many regional property markets now offer the potential for double-digit rental yields. In this scenario, it makes sense to consider switching equity tied up in a low performing investment to one with more potential in the short, medium and long term.
After the UK changed its stamp duty regulations, many individuals saw a significant increase in property purchase costs. In addition to the relatively low-interest rates, it can make more sense to redevelop an existing property or family house rather than try and buy a new home. Given the significant competition for property and the time it can take to secure a mortgage, releasing equity to invest in redeveloping a property or home can make good sense.
For example, if you were to spend £100,000 on a renovation that resulted in a £200,000 uplift in the value of your property, this makes perfect investment sense. Rather than moving home, you can benefit from an instant return on capital invested. You will also have opportunities to remortgage in the future based on the new, higher value of the property.
Any equity you release from your property will need to be paid back in the form of a mortgage or short-term loan. As a result, you will still need to adhere to various lending criteria.
Historically, retail banks tend to have a more rigid approach to equity release transactions, while private banks and niche lenders are more flexible. That is not to suggest that retail banks are not competitive. For straightforward transactions, many high street banks are ideal. However, for more complicated situations and borrowers, the use of private banks is often more advantageous.
Enness acts for many high-net-worth individuals who can have assets spread across the world and various forms of income, often in foreign currencies. Very often, high street retail banks won't include these assets in affordability calculations. This can significantly impact how much sense it will make for you to borrow from these lenders and the finance packages that will be available to you.
Private banks and niche lenders tend to be very different in their approach and flexibility. They are more appreciative of overseas assets, multiple income streams, and they will also consider future events that would positively influence how much you would pay. For example, they can consider future investment returns, salary increases, upcoming bonuses, liquidity events, etc. While high street banks tend to have rigid formulas and algorithms deciding the outcome of an equity release application, private banks and niche lenders are more able to offer a personal approach and custom-made finance packages.
Enness has operated in the equity release market for several years, and the team understand current market trends and what these mean for you. In the current low-interest-rate environment, there is enormous liquidity in the lending market. Therefore, there is potential to enhance returns significantly.
As long as your figures add up and you have further collateral to give lenders comfort, equity release is often a very straightforward decision for lenders. If you own worldwide assets and you have various income streams, you will usually find that private banks are better able to cater to you and understand what you bring to the table. As such, they will most likely be Enness’ first port of call if you wish to release equity from a property you own.
Enness has close relationships with specialists in this area, and your broker will know how you need to present your case and what lenders will want to see to be able to make a lending decision. Enness’s recommendation and introduction will often go a long way towards securing funds, and the application process will be streamlined and quick.
It can be tempting to sit on your hands and take a passive approach to investments in low-interest-rate environments. In reality, however, you will find that there is lots of finance available at very attractive prices. Releasing equity even for a renovation or extension of your property may be worth considering, given the potential for an immediate uplift in capital value.
Maximising your asset when interest rates are low is perhaps easier said than done. However, Enness’ brokers have experience across the board and contacts in the high street and private banking sectors. Enness can structure funding requirements specifically around your situation. Get in touch for a no-obligation chat about your situation and your plans, and the team will present you with the options available.Let's Talk Now
The UK is home to one of the most liquid, competitive, and complicated mortgage markets in the world.
There are hundreds of mortgage providers who lend in the UK, from major international banks to niche building societies and alternative lenders. Each lender has their own specialisation and position in the market where they excel. They also have lending criteria, interest rates, processes and oddities which are specific to them.
The UK has a considerable number of lending channels. There are regulated mortgages, unregulated mortgages, buy-to-let finance, bridging finance, commercial mortgages and more. It’s easy to see why the lending market is so complicated. The UK’s finance options are plentiful.
There are huge pools of liquidity (some of it incredibly cheap) and you can enjoy flexible lending terms. If you are a foreign national, expat, a high-net-worth individual, are self-employed, have significant assets but relatively low taxable income or anything in between, the UK mortgage market will have an option for you.