Over the years we have seen many scenarios which have complicated mortgage funding applications for a variety of reasons. On numerous occasions we have taken on mortgage funding applications which many of our competitors had refused to even consider. Breaking what are often relatively complicated scenarios down into relatively small parts allows us to address each issue in isolation, building a bespoke solution.
The case below was fairly complicated as it involved foreign currencies, foreign nationals, second residential properties, relatively high LTV ratio and a specific approach to title deeds.
The client in question was based in the Bahamas and looking to acquire a weekend home in the UK. This would be his second residential property in the UK a detached home in the countryside. The idea was to use the second home at weekends as a getaway from the hustle and bustle of business life. The detailed scenario was as follows:-
Property to purchase: Detached house in the UK countryside
Property value: £1.29 million
Mortgage funding: £1 million
Required LTV: 78%
Even before considering the complicated residency and income streams of the customer, an LTV of 78% was certainly pushing the boundaries. Thankfully, plans to use the second residential property at weekends offered a degree of comfort to lenders. If there was somebody at the property on a regular basis then this would reduce the potential for damage and security issues.
Issues to address
While the above information may look fairly straightforward, if perhaps not stretching the LTV ratio a little, this was literally the tip of the iceberg. When we began to look at the client’s residency and income streams it became obvious that rather than traditional banks we would need to approach our private banking contacts. The main issues to consider included:-
Residency: Client was based in the Bahamas
Income: US dollar denominated
Mortgage type: Interest only
Mortgage requirements: Joint borrower/sole proprietor
Property title deeds: In name of client’s wife
If you were to take each of the above elements individually they would be challenging, together they would need a degree of innovation and “outside of the box” thinking. We can safely assume that the client had a significant income due to his role in the financial sector. The fact that he was based in the Bahamas would also suggest a degree of tax/income planning had already been undertaken. So, having written off the traditional banking route, due to the complex nature of the client’s finances, we approached a number of private banks.
We were able to approach our finest private banking contacts and provide them with details of the client’s background. Surprisingly, this type of financial background is no longer unique and is more commonplace as the financial sector in particular continues to expand across the globe. We were also well aware that private banks would be very appreciative of such a high earning influential client. However, we still had to negotiate the best deal and create a bespoke arrangement.
As a consequence of our discussions and “thinking outside the box” we managed to put together the following funding arrangement:-
Mortgage: £1 million
Mortgage type: Interest only
Mortgage interest rate: 2.39% fixed for five years
Fixed term: 5 years
Full term: 10 years
LTV ratio: Initially 78% (reduced to 75% after 12 months)
The key to creating a successful solution for this client was our ability to negotiate not only a relatively high LTV rate but ensure recognition of overseas income denominated in US dollars. The client’s obvious wealth attracted a number of private banks very keen to expand the relationship going forward. It was also interesting that we were able to secure a joint borrower/sole proprietor mortgage where the client’s wife’s name appeared on the title deeds. To all intents and purposes this is an administrative process but one which had to be negotiated all the same.
The client was extremely appreciative of the competitive rate of interest, acknowledgement of US dollar-based income not to mention the fact that it was also a weekend home which can be difficult with some lenders. The mix of interest only and a relatively high LTV reduced payments to a minimum which was exactly what the client was looking for. This is a perfect case study when looking to compare and contrast the clients we have acted for in the past. There were certainly a number of relatively tricky issues to address although thankfully we managed to do just that.
What can Enness do for you?
It is fair to say we have been successful in finding bespoke solutions to mortgage funding requests often turned down by our competitors. With this client living in the UK, based in the Bahamas, earning US dollar-denominated income and a non-traditional approach to the property’s title deeds, this was certainly challenging. The fact the private bank requested a reduction in the LTV from 78% to 75% after 12 months shows how far we were pushing the boundaries.
We know there are many potential clients looking at similar situations which at first appear near impossible to resolve. Taking a step-by-step approach during our no obligation chat allows us to gather all data required and pursue the best possible arrangement. Here at Enness we can obtain real-time market rates to demonstrate various mortgage funding structures and monthly costs.