Overseas national looking to acquire UK residential property


It is fair to say that London has been a magnet for ultrahigh net worth individuals with many seeking to acquire property in the capital. We regularly come across wealthy foreign nationals looking to purchase high-end London property for a variety of different reasons. One of the many reasons mentioned time and time again is the education of children at some of the world’s leading education facilities based in the UK. So, it was no surprise when we were approached by an ultrahigh net worth individual living in Malaysia but looking to acquire UK residential property as their children were moving to be educated in the UK.

In many ways this case study highlights the rigid approach taken by traditional mortgage lenders compared to the flexible criteria offered by private banks and niche lenders. Even though this was an ultrahigh net worth individual, who had once achieved billionaire status, there were still a number of issues to address.

Client scenario

This particular client was extremely wealthy from both a business and a personal point of view. They had a number of different companies right across the globe which created various income streams. These income streams involved an array of different currencies, accountancy standards and taxation considerations. There was also an array of personal assets and liabilities again spread right across the globe which contributed to what turned out to be a fairly complex financial background.

In summary, we have a Malaysian national with an ultrahigh net worth status looking to acquire a property in London which is valued at circa £3.9 million. The client is self-employed, has business assets spread across the globe and an array of different income streams. The fact that he is a Malaysian resident would also be an issue because he has no UK footprint. Turning now to the financials, the client has requested a part variable and part fixed rate mortgage with an LTV of 70%. This would be towards the high-end on any traditional mortgage transaction but taking into account the additional challenges, the LTV itself would be challenging.

So, the basic scenario was as follows:-

Client: Resident of Malaysia
Property location: UK
Property value: £3.9 million
Reason for purchase: Base for children to be educated in the UK
Income: Numerous income streams of different currencies
Employment status: Self-employed
Mortgage requirement: £2.73 million
LTV ratio: Circa 70%

When you begin to dig a little deeper the potential challenges are fairly obvious. Traditional mortgage lenders in the UK tend to have very strict criteria when it comes to foreign nationals. If they have no link and no connection with the UK, they are unlikely to have a UK footprint in terms of financial history and identification. You might think that with an ultrahigh net worth individual, with a very public profile, some traditional mortgage lenders may be a little more flexible. This is not always the case with many mortgage lenders sticking to their tried and trusted methods with extreme rigidity.

Therefore, it was fairly obvious that we would need to use the services of a private bank/niche lender with an understanding of Malaysia and the client’s financial strength. There was also the issue of the very specific breakdown between variable and fixed rates for different tranches of the mortgage. So, we had our challenges, we had our goals and it was now time to find a competitive funding package.

Issues to address

Those who have read some of our historic case studies will be well aware that mortgage lenders are not the most amenable when it comes to self-employed individuals. Again, without repeating ourselves, even though this particular client was an ultrahigh net worth individual many mortgage lenders would find the self-employed status difficult. The fact that the client was also a Malaysian national looking to acquire UK property for the first time presented yet another hurdle.

It is obviously a fairly long term commitment to acquire a property in a foreign land for the benefit of your children’s education – this was a positive factor. You might consider that because Malaysia is part of the Commonwealth this would be a positive factor when in reality it was probably not even a consideration. No previous footprint, no financial history and no real connection with the UK, there were certainly challenges ahead. It was obvious from a relatively early stage that we would not be able to utilise the services of traditional mortgage lenders. However, as an independent mortgage broker we have access to an array of private banks/niche lenders who are more flexible than their traditional counterparts.

In summary the issues to address were as follows:-

Client status: Malaysian national
Income: Various worldwide income streams in different currencies
Assets: Spread across the globe both business and personal
UK footprint: Non-existent
Required LTV ratio: Circa 70%

In many ways this type of case study highlights the fact that despite being an ultrahigh net worth individual there are some traditional mortgage providers unwilling to deviate from their set criteria. This client was an ultrahigh net worth individual with a relatively high public profile and public information readily available on his business dealings. Very often ultrahigh net worth individuals are asset rich but not always as liquid as you might assume. So, how did we shape the financial solution to this quandary?

The solution

As an independent mortgage broker we have access to more than 300 lenders across the globe. In this instance, the potential pool of lenders was significantly reduced because of the client’s residential status, employment status and sources of income. Very quickly it was obvious that we would need to utilise the services of private banks/niche lenders to create a degree of competition to secure the most competitive terms available. We were successful!

The exact details of the funding solution were as follows:-

Property value: £3.9 million
Mortgage funding: £2.73 million
LTV ratio: Circa 70%
Variable element of mortgage: £945,000
Variable mortgage rate: 1.8% over BOEBR
Variable mortgage duration: Five years
Variable mortgage payment terms: Uncapped overpayments
Fixed element of mortgage: £1.785 million
Fixed mortgage rate: 2.55%
Fixed mortgage duration: Five years

We managed to negotiate an extremely competitive rate, split between variable and fixed tranches, utilising the services of a specialist lender. The international lender already had an understanding of the Malaysian business market and took the time to review the client’s wealth profile. The fact that they were happy to split the mortgage into two different tranches, variable rate and fixed-rate was a help to the client and the lender. It meant that the client would look to utilise the overpayments option which would pay down the variable rate mortgage element more quickly. The fixed element gave the client a degree of certainty with regards to mortgage payments going forward.

This case study perfectly illustrates how some mortgage providers are willing to “go the extra mile” when it comes to lending criteria and accommodate a degree of flexibility. The fact that we already have strong relationships with such flexible lenders means that we can utilise these often exclusive services for our clients. It was not difficult to see the variety of issues with this client’s funding request and it is safe to say he was extremely happy with the outcome.

What can Enness do for you?

The London property market has been a magnet for ultrahigh net worth individuals for many years now. Even though the market has been impacted to a certain extent by Brexit concerns, currency movements have encouraged overseas investors to look back towards the UK. Many will be surprised at the perceived hurdles when looking to secure finance for an ultrahigh net worth individual with a relatively high public profile. This is a consequence of the fact that many traditional lenders are unwilling/unable to deviate from their fixed and often rigid lending criteria. In many ways this has opened up the market to private banks/niche lenders who are now becoming more prominent.

If you find yourself in a similar situation to this particular client, we would welcome the opportunity to chat in more detail about your challenges and your financial requirements. We are often forced to pick-up the pieces from our competitors who can show an unwillingness to be flexible and “think outside of the box”. As specialists in bespoke mortgage solutions we are able to put together an array of options for you to consider. These options are based upon real-time market rates which allow you to compare and contrast cash flow as well short, medium and long-term financial liabilities. We are very conscious of the need to maximise income/assets while at the same time ensuring that the client’s financial means are not overstretched.

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