For many years there has been a strong connection between the UK and the US which is often mirrored in the property investment market. When you also consider the fact that London is one of the major financial markets of the world it is no surprise that many US residents acquire homes in the capital. We are often approached by ultrahigh net worth individuals looking to acquire UK property. The fact that many are resident in the US brings about its own challenges as can the preferred structure of their mortgage funding.
This particular case study involved a US resident with a huge personal wealth looking to acquire a home in the UK. It soon became obvious that the client was looking to move relatively quickly on a property they had found. The mortgage would be circa £5 million which would equate to an LTV ratio in the region of 60%.
The fact that the client in question was a dollar billionaire and founder of a very successful business meant they had more than enough asset backing to cover the funds required. The property in question was worth circa £9 million although we would still need to go through the traditional paperwork to secure funding. As an independent mortgage broker we have access to more than 300 lenders across the globe allowing us to pick and choose specific lenders for specific scenarios. In this instance, due to the size of the mortgage, structure required and timescale, it was fairly obvious from an early stage that we would be going down the private banking route.
We tend to find that private banks (and niche lenders) are more flexible, and very often more competitive, than their traditional mortgage bank counterparts when it comes to ultrahigh net worth individuals. The thinking behind this is simple; if they are able to build a relationship with high net worth individuals then they can expand this to take in an array of different services. So, while on one side we have private banks looking to secure an AUM arrangement (assets under management) this particular client was looking for a “dry loan”. This effectively meant a swift mortgage arrangement at competitive rates without the need for an AUM arrangement.
The basic scenario was as follows:-
Client: US resident
Employment: Founder of a successful company
Wealth: Ultrahigh net worth individual
Property value: £9.35 million
Mortgage requirement: £5 million
Structure: No AUM
Additional conditions: Swift completion
Unfortunately, for many mortgage funding applications, the wheels of commerce can turn relatively slowly which can cause a problem if swift completion is required. This is one of the many scenarios in which we are able to use our very close relationships with mortgage lenders to speed up the process. We know which mortgage brokers to approach, how to present the client’s finances in the best light and the documentation/information required. So, it was now time to get to work!
We know from our vast experience that not all UK mortgage brokers are willing to offer competitive terms for US residents (indeed any foreign nationals). There is also the issue of a non-existent footprint in the UK both financially and as an individual. However, even though the potential pool of lenders would be reduced, there was still enough competition and flexibility in the private banking sector.
At first glance, the LTV ratio of 60% was not a major issue but it was the fact it was a US resident looking to act quickly which may cause problems. Then there was the issue of the “dry loan” which may initially see some private banks either offering uncompetitive mortgage rates or preferring not to get involved. Even though there is always the possibility of extending their private banking services to the client further down the line, the initial refusal to entertain an AUM arrangement would be somewhat restrictive.
In summary, the issues to address were fairly simple:-
Client: US resident
AUM: Not an option
LTV ratio: 60%
One of the major advantages of an ever expanding mortgage market is the emergence of specialist lenders in the shape of private banks/niche lenders. We are aware of the lenders specialising in mortgage funding for US residents who are also flexible with regards to timing and AUM arrangements.
There are obvious advantages when dealing with an ultrahigh net worth individual worth in excess of $1 billion. So, the challenges of dealing with a US resident, looking at a UK property, with no AUM arrangement and very quick settlement were somewhat overshadowed. The real challenge was to find the most competitive rate using our contacts in the private banking/niche lending sector. We approached a number of lenders detailing the specific structure and funding requirements for our client. Fortunately, we were able to arrange a “dry loan” in excess of £5 million with no requirement for the transfer of assets under management and quick settlement.
The exact details of the funding solution were as follows:-
Property value: £9.35 million
Total funding: In excess of £5 million
LTV ratio: 60%
Type of funding: Dry loan
Mortgage interest rate: 2.19%
Fixed period: Five years
It is fair to say that the client was pleased with the outcome, a very competitive fixed headline rate, relatively high LTV ratio for the scenario and no need to transfer investments to an asset management division. This is the kind of case study which highlights our growing presence and reputation in the mortgage market. We knew which companies to approach, how to approach them, the information required and the fact they would be willing to act relatively quickly. However, we also needed to inject as much competition into the process as possible to secure a competitive rate.
Over the years we have dealt with approaching 100 different nationalities looking to acquire property around the globe. As an independent mortgage broker, we are able to negotiate with in excess of 300 lenders across the market. This takes in traditional banks, private banks and niche lenders accommodating all funding scenarios. While not all traditional mortgage lenders will accommodate foreign nationals looking at UK property, there are more private banks and specialist lenders willing to negotiate terms than ever before. This particular case study was challenging because the client was an overseas resident, looking at a relatively high LTV for their scenario and a requirement to raise funds quickly.
If you find yourself in a similar situation we would welcome the opportunity to talk through your requirements and financial background in more detail. While there is no one size fits all solution, we have strong relationships with many mortgage providers covering all elements of the marketplace. On occasion, the more competitive rates will be provided by traditional mortgage lenders although we are also specialists in providing mortgage/refinancing for high value bespoke scenarios. Using real-time market rates we are able to put together an array of potential solutions to your situation. This allows you to compare and contrast both cash flow and short, medium and long-term financial liabilities. While we are able to shape any funding structure around your specific scenario, by maximising your income, we are always conscious not to overstretch your finances.
We are delighted to present the Global High Net Worth Mortgage Guide which takes an in-depth look at the world of international mortgage finance in luxury property markets around the world. The guide covers local regulations, access to funding, how to secure the most competitive terms and much more.
Our bespoke approach to mortgage funding is second to none, covering residential, commercial, development and international property acquisitions. Real-life case studies highlight how we approach complex funding requirements which often demand a bespoke funding structure.DOWNLOAD PDF