Since the EU referendum back in 2016 there has been growing interest from overseas investors looking to acquire property in London. Aside from the historically low base rates in the UK we have also seen a fall in sterling against the major currencies of in excess of 20%. While the short to medium term outlook for the UK economy, and the UK as a whole, is uncertain, many investors with a long-term time horizon are turning their interest towards London.
When we were approached by a Saudi national looking to acquire buy to let properties in central London we undertook an extensive review of the lending market. The quest was simple, to secure a multi-million pound mortgage facility which would bring all of the six buy to let properties under one loan.
While traditional banks are still active in the multi-million pound mortgage industry, many take a backward step when it comes to buy to let and perhaps more so with foreign nationals. In this particular case we were approached by a Saudi national living in London with no footprint or indefinite leave to remain. The details of the scenario were as follows:-
Properties to purchase: 6 x Buy to let properties in central London
Total property value: £5,515,000 (Six properties)
Total loan amount: £3,309,000
In this scenario, an LTV ratio of 60% is towards the top end of the range and would normally require various elements of additional security. The fact that the client had no footprint in the UK with regards to income added to the challenge. However, we have very strong connections in the private banking sector and it soon became obvious this would be our best route to funding.
Issues to address
As we touched on above, there were a number of issues to address such as the size of the mortgage, spread across six different properties and the client’s personal circumstances. It was fairly obvious from an early stage that this was not a scenario which would attract the attention of traditional banks. The flexibility of the private banking sector; the approach to non-traditional income streams together with the array of different security options would prove crucial. Some of the main issues to address in this particular situation included:-
Wealth: The client had a very limited footprint in the UK
Income: Overseas income streams are not always appreciated by traditional banks
Mortgage funding: A buy to let mortgage of £3.3 million spread over six properties
Mortgage type: Interest only
We are extremely experienced when dealing on behalf of foreign nationals looking to invest in the UK – often with a limited financial footprint. Even in the event that company accounts and tax returns from overseas income streams are available, they are not always comparable on a like-for-like basis with their UK counterparts. While it makes perfect sense from the customer’s point of view to wrap all six buy to let properties under one loan, not all lenders are competitive in this area. We knew from an early stage that the private banking sector was the way forward, using our contacts to create a competitive environment which would allow us to secure the best funding terms.
After discussing the client’s requirements with various private banking contacts we were able to secure very competitive terms. While many of the elements in this particular case appear on a regular basis, it is somewhat unusual to have all of the challenging elements in one funding application. However, we were very quickly able to secure the following funding:-
Mortgage type: Variable rate
Variable interest rate: 2.5% plus 3-month LIBOR
Mortgage term: 5 years
Some of the additional elements to this funding arrangement included:-
Early repayment penalties: None
Interest cover: 1 year interest cover held for the term of the mortgage
We were extremely pleased to secure this funding without an additional requirement to transfer funds to the asset management division of the private bank. The majority of lenders would require a minimum £1 million (and possibly up to £2 million) of additional funds held under an AUM arrangement. Obviously this would have a significant impact on the client’s financial position over the term of the mortgage.
The private bank in question did indicate that in the event of a “widening of the relationship” with the client there may be potential to sweeten the deal on the headline mortgage interest rate. This is an approach taken by many private banks to build and expand on their relationship with new clients going forward. If the client does decide to go down this particular route we will offer further advice and guidance with regards to achievable mortgage interest rate reductions.
What can Enness do for you?
Due to our independent status we have strong relationships across the lending sector taking in traditional banks, niche lenders and private banks. Our experience and knowledge of the market ensures that we know who to approach, how to approach them and the type of information they require. In this particular case we had a number of challenging issues coming together under the same funding application. While the basic mortgage terms are extremely competitive the client was relieved that we were able to negate the need to transfer assets under an AUM arrangement.
If you are in a similar situation and looking to secure funding for buy to let properties please feel free to call us for a no-obligation chat. We can discuss your particular scenario in more detail, plans for the future and ways in which we can showcase your financial scenario in the best possible light. There is also the option to obtain real-time market rates so that we can give you an idea of payments going forward and the structures which best suit your scenario.