Australian nationals, in Australia looking to acquire London property

THE SCENARIO

Despite the doom and gloom surrounding Brexit, the London property market continues to attract the attention of foreign nationals. The recent reduction in the value of sterling against leading currencies has made UK property even more attractive. So, we were not surprised to be approached by Australian nationals, living in Australia looking to acquire a buy to let property in the UK. As ever, there were numerous challenges but our contacts in the private banking sector certainly paid dividends.

Client scenario

Aside from the fact the clients were Australian nationals (still living in Australia) looking to acquire property in London, the property was valued just under the £1 million level. We know from historic discussions that many private banks will only lend a minimum of £1 million. So, aside from the fact the clients were foreign nationals living overseas there was also the issue of minimum lending criteria. The scenario in full was as follows:-

Property to purchase: London property
Nature: Buy to let investment
Property value: £970,000
Mortgage funding: £585,000 – £727,500
Required LTV: 60% – 75%

We were given the remit of maximising mortgage funding in order to minimise the deposit needed on the property. There was also a requirement to purchase the property in joint names or in the family trust for inheritance tax planning purposes. These were very specific conditions which further exacerbated the fact that the funding required was below the £1 million minimum level for many private banks.

Issues to address

A knock-on effect from Australian nationals, living in Australia, looking to acquire UK property was the source of their income and wealth. While traditional banks are often reluctant to take into account foreign currency income streams, even some private banks will err on the side of caution with conservative affordability calculations. This backdrop was in direct comparison to the clients requirements, maximise funding and minimise deposit requirements. So, in summary, the main issues to consider:-

Wealth: Overseas wealth
Income: Foreign currency income stream
Mortgage funding: Up to £727,500
Mortgage type: interest only
LTV rate: 60% – 75%

We investigated a number of options, different structures and interest rates which allowed us to present three different solutions. These involved different interest rates, different mortgage terms and ultimately different funding figures.

The solution

While there is a strong historic connection between the UK and Australia, securing mortgage finance for foreign nationals living overseas can still be extremely challenging. After sitting down with the clients and discussing the various options we were able to put together a number of packages for their consideration. There were variations in interest rate, loan amount and even the mortgage term. So, after negotiating the best rates we were able to present the following funding solutions:-

Property value: £970,000
Type of mortgage: Interest only
Rental income: £35,000

Option 1

Borrower: Family Trust
Type of mortgage: Buy to let
Loan amount: £630,500
LTV: 65%
Mortgage term: 7 years
Mortgage interest: Lifetime tracker

Tracker interest rate: 2.25% plus 3-month LIBOR
Monthly payment: £1,623
Early repayment charge: 1% for two years, none thereafter

2 year fixed rate

Interest rate: 3.30%
Monthly payment: £1,733
Early repayment charge: For the term of the product, none thereafter

3 year fixed rate

Interest rate: 3.32%
Monthly payment: £1,744
Early repayment charge: For the term of the product, none thereafter

5 year fixed rate

Interest rate: 3.37%
Monthly payment: £1,770
Early repayment charge: For the term of the product, none thereafter

Option 2

Borrower: Family Trust
Type of mortgage: Buy to let
Loan amount: £582,000
LTV: 60%

Mortgage term: 25 years
Mortgage interest: 2 year fixed 2.90%
Monthly payment: £1,406
Early repayment charge: 2% for 2 year, none thereafter

Option 3

Borrower: Family Trust
Type of mortgage: Buy to let
Loan amount: £727,500
LTV: 75%%

Mortgage term: 25 years
Mortgage interest: 2 year fixed 3.34%
Monthly payment: £2,024
Early repayment charge: 2% for 2 year, none thereafter

We were delighted to present the clients with a number of different options incorporating varying levels of mortgage funding, interest rates and mortgage terms. When you consider the relatively high LTV, foreign national status and mortgage funding from £582,000 up to £727,500 this certainly gave food for thought. The bespoke nature of this particular scenario gave us the opportunity to negotiate the best terms with our private banking partners.

What can Enness do for you?

We were extremely pleased to be able to offer an array of different funding options to our Australian clients. In many ways this is the perfect scenario as it allows clients to compare and contrast bespoke arrangements and market rates. Recently we have seen growing interest in fixed rate arrangements with UK base rates at near all-time lows. Even though some experts are suggesting base rates could fall in the short to medium term there is no certainty of direction.

If you find yourself in a similar situation to our Australian clients and are looking for the most competitive options and deals available, please feel free to contact us for a no obligation chat. We would welcome the chance to discuss your situation in more detail, your plans going forward and funding requirements. This would allow us to obtain real-time market rates taking in a variety of fixed interest rate terms.

Arrange a call with an Enness Broker

CONTACT US

Want to Learn more?



DOWNLOAD HERE