Securing mortgage terms against the value of an exclusive heritage vehicle

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THE SCENARIO

Recently a client came to me following a recommendation by one of my contacts in Monaco. The gentleman was a resident of Monaco with a high-flying international consultancy job that provided him with multiple incomes, mostly paid in USD.

He had no assets in the UK but was trying to acquire a retirement home for his elderly mother who had no income and no ability to service a mortgage commitment. The property is located within a retirement village in Somerset and valued at £750,000. My clients had some cash available but due to the variable nature of his income and commitments that required him to work all over the world, they had to raise some additional capital to meet the purchasing deadline that was in just two weeks.

While my clients did not possess a considerable level of liquid assets that they could utilise in the short-term, what they did have, that I found from researching into their asset base, was an incredibly exclusive classic car. This was a very unusual vehicle with a value of $1million which naturally my clients had no intention of selling. This asset therefore presented me with an opportunity.

There were several obstacles within this process. The clients’ lack of UK residency, income in foreign currencies and the looming deadline for completion put a lot of pressure on this case. In addition to this, lending against homes within retirement villages is an extremely challenging task. For example, certain criteria must be met to acquire these properties which means that clients must jump through several hoops to secure a retirement home. Very few banks will lend against this type of property, and those that might would likely take a great deal of time to complete, which we simply didn’t have.

OUR SOLUTION

Since speed was of the essence in this case, I considered my clients’ entire asset base and proposed structuring the mortgage against the classic car. This would be a much quicker process than attempting to acquire a mortgage from a bank.

I have an excellent relationship with a classic car specialist who I have worked with closely in the past. They would not typically work with clients who are based overseas and who are paid in a foreign currency, but due to my connections with them, they were able to offer my clients’ desired loan amount at a rate of 8.5% per annum.

This is not necessarily the cheapest rate we may have been able to achieve, but in the two weeks we had until completion it was my clients’ ideal solution. Also, the niche nature of the car is not something the lender would typically lend against due to a restricted market, and the loan amount was higher than the classic car specialist’s standard maximum loan.

My clients were in a bit of a cash-flow predicament but were expecting a significant investment pay-out in the next 12 months. We agreed with the lender to service a percentage of the debt over the 24-month period of the loan but with a balloon payment of £420,000 put in place at the end of the term which would pay off the debt once the investment matured.

I relish the challenges that come with these unusual cases and I was very pleased to be able to capitalise on my relationship with the lender to offer my clients this outcome to their complicated case.

 

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