There is no doubt that the weak sterling exchange rate has attracted more overseas investors to the UK property market. When you also consider that the London property market is “taking a breather” it will be no surprise to learn that investment in regional markets has increased. The fact that new build numbers are consistently below the demand for new build properties has created a very competitive marketplace. This has encouraged many investors to consider buy to let off-plan properties where there is even the potential for a paper gain ahead of completion. However, as ever it is essential to pick the right area, right type of property and the right target market.
Our next case study involves an Australian national, living in Australia and looking to acquire an off-plan property in Manchester for investment purposes only.
As we touched on above, this case study revolves round an Australian national who has retired and still lives in Australia. Over the years the client has built up a significant portfolio of stocks and properties and upon retirement this became his main source of income. The fact that the client had never lived in the UK, had no plans to live in the UK and had no UK credit footprint created a challenging environment.
The full scenario for this particular client was as follows:-
Employment status: Retired
Off-plan property value: £243,000
LTV required: 50%
Mortgage funding required: £121,500
Income: Predominately investment income
The client had already committed to the unfinished development at a total cost of £243,000. While the LTV ratio looks fairly low at face value, it is the situation regarding the client’s residency, employment status and nationality which would prove challenging. While the majority of the client’s income came from their investment portfolio, it is worth noting that there were no other properties in the UK. So the client had no historic links with the UK whatsoever.
Issues to address
It is not difficult to see where the potential issues arise with this particular case study. We knew it would be challenging regarding the affordability test, credit checks and the source of the client’s income in retirement. In essence the challenges were:-
Nationality: Australian, hence requirement for foreign national mortgage
Income: In retirement, income from property/stock investments
Source of income: Australia, no UK based income
Credit history: No UK credit history
While issues regarding nationality/residency, income sources and credit history often occur in isolation, when they come together it does create a very challenging scenario. It was fairly obvious from the beginning that we would need to approach a private bank which specialised in foreign national mortgages where income was limited. Many private banks do not take into account rental income from the property in question but this is not always the case. When you also take into account the challenging buy to let market we could see some relatively in depth negotiations approaching. However, these are situations we have addressed for numerous clients in the past and still been able to secure extremely competitive terms.
Over the last 18 months we have represented more than 80 different nationalities from across the globe. Our expertise in foreign national mortgages has put us at the forefront of this particular sector. As a consequence, many of our new clients come to us having been turned down by their current mortgage brokers. Our ability to create bespoke mortgage funding arrangements, ensure finance is maximised but not stretched, and interest rates and terms are extremely competitive often goes before us.
Our independent status allows us to discuss potential funding requirements with more than 300 lenders. These take in traditional banks, private banks and niche lenders although in this instance it was fairly obvious that the private bank route would be most productive. We were aware of some private banks that were open to negotiation regarding income, credit footprint and nationality/residency. As a consequence of our experience and commercial relationships, we know what each specific bank requires, when they require it and the degree of flexibility with regards to income, assets, etc.
Therefore we were able to secure the following mortgage finance:-
Property value: £243,000
LTV ratio: 50%
Mortgage funding required: £121,500
Mortgage type: Variable interest
Mortgage interest rate: Variable rate of 4.25% plus base rate
Mortgage term: 5 years
We managed to find an international mortgage fund that specialised in assisting clients based overseas. There was no need for a UK credit footprint and the traditional affordability tests were not relevant in this case. The client simply had to provide evidence of sufficient funds to support their day-to-day expenditure and any surplus. The bank was also able to take into account income from the client’s stocks/properties in Australia and future income from the proposed UK acquisition.
Traditionally, many off-plan property developers also provide access to mortgage funding. However, this situation was somewhat different to the norm and we knew we could negotiate much better terms for the client.
What can Enness do for you?
It is safe to say this was a somewhat challenging scenario, a foreign national with no UK footprint, no regular employment income, looking to increase their buy to let portfolio. Lately this is a more common scenario amongst our clients as the attractions of the UK property market are enhanced by currency movements. Traditional banks were fairly quickly removed from the equation and it was obvious that the services of a private bank would best serve the client. As you will see above, we managed to circumvent the affordability test by clarifying the client had sufficient income to cover their living expenses.
If you find yourself in a similar scenario, we would welcome the opportunity to discuss your situation in more detail. The more details we have the more specific the advice we can offer and structure mortgage funding arrangements around your particular scenario. We have access to real-time market rates allowing you to compare and contrast all of the options open to you.