While Brexit continues to grab the headlines, countries such as France will always hold attractions for UK citizens looking to retire overseas. There may be some challenges in the short to medium term with regards to freedom of movement, citizenship and migrant rights but these will all be sorted in due course. As a consequence, it is important to plan ahead for your retirement and ensure that your finances and your assets are in order.
We were recently approached by a retired British/European couple, living in France with a portfolio of UK rental properties. The client’s income was modest, there was an issue with the lease and they had just turned 70. It was fairly obvious there would be some challenges in this very interesting case study.
When looking to remortgage your property, time is often of the essence and it is vital to plan ahead before the current mortgage term expires. We were introduced to a retired British/European couple who moved to France back in 1995 and retained a rental portfolio in the UK – consisting of four properties in one block. The term on one of the property mortgages had expired and the client was looking to remortgage. There were also other factors to take into consideration.
The basics of the case study were as follows:-
Nationality: British/European couple
Funding required: Remortgage for UK rental property
Leasehold term: Lower than the average duration
Income: Less than £25,000 pa
At first glance, the remortgaging of one property from four in their portfolio did not seem to offer too much risk. It is safe to assume that cumulatively they had significant equity in the four properties having left the UK back in 1995 to enjoy their retirement in France. However, the client’s tax returns showed income of less than £25,000 per annum which even for a moderate mortgage would significantly limit scope for raising funds. So, it was fairly obvious there were a number of challenges which we would need to address.
Issues to address
Initially this seemed like a fairly straightforward remortgage but when you consider the age of the client and the fact they were living in France, not to mention the lease issue, it would not be straightforward. In essence the main challenges would be:-
Residency: Living in France, looking to remortgage UK assets
Age: Just turned 70
Limited income: Tax returns suggest income of less than £25,000 per annum
Financial footprint: Limited UK footprint due to French residency
Property lease: Leasehold with a below-average term remaining
Initially the main problem would revolve around the client’s age and the fact they would have limited time in which to pay back any mortgage. There was also the issue of a relatively modest income although there were an additional three properties which could be used as collateral/security if required. On the whole we were fairly confident of putting together a funding package which would cover the client’s initial requirements as well as taking into account their plans to sell up when they turned 85.
The UK mortgage market has developed at lightning fast pace over the last 20 or 30 years. At various points in the not too distant past the idea of remortgaging a property at the age of 70 would have appeared challenging if not impossible. The situation has changed dramatically today and there are now specialist mortgage providers who cater for those in later years. As a consequence, we were able to arrange funding fairly quickly with attractive terms and perhaps more importantly an exit route for all parties.
Remortgage: UK-based mortgage lender
Mortgage term: 14 years
Exit route: Sale of property at age 85
While it is important to point out that the client had additional assets, in the shape of three other properties in the same block, this solution does reflect an appetite for more mature lenders. The fact that the client had a pre-planned exit route at age 85, when the property would be sold, was well received by the mortgage provider. It not only ensured a less than average mortgage term, with reduced risks, but also the knowledge that the property would be sold and outstanding mortgage repaid.
What can Enness do for you?
We regularly receive enquiries from expats living all around the world looking to acquire or remortgage assets in the UK. Very often they will have a limited UK footprint, due to their years overseas, but income, assets and a long-term strategy can go a long way to securing the required funding. As an independent mortgage broker we have access to more than 300 different lenders across a range of niche markets including those targeting mature investors. In this particular scenario the rental income from the property was very important as the client had an annual income of less than £25,000 on tax returns. There was also the issue of the below-average lease expiry which would need to be addressed at some point. However, the lease was not a major challenge for remortgaging at this juncture.
This type of scenario is becoming more and more common as a growing number of British citizens spread their wings. If you find yourself in a similar situation please feel free to call us to discuss your requirements in more detail. We can create bespoke mortgage arrangements around your specific scenario, taking into account your income, assets and plans for the future. As we have access to real-time market rates we can also put together a selection of funding packages for your consideration. This allows you to compare and contrast real cash flow and financial liabilities to see which best suit your current situation and plans for the future.