When purchasing property in the UK it is vital to ensure that you are financing it correctly. There are a number of options available on the market to property bridging loans purchasers in the UK, but these options shrink considerably for offshore purchasers. This article will outline the options available to offshore purchasers looking to invest in the UK.
Why Invest in the UK?
There are a number of reasons to invest in UK property as an offshore resident, making it an increasingly popular option for property investors from around the world.
Stable Yield & Rental Demand
Property in the UK has historically demonstrated a stable yield to investors and a steady, consistent demand from tenants. The result of this is that property in the UK is considered a “safe haven” investment, especially in London.
Relatively Liquid
Given the consistent demand for property in the UK from both residents and offshore investors, property is considered to have a greater degree of liquidity when compared to foreign property.
No Restrictions on Foreign Ownership
Unlike many other markets there is no restriction on foreign ownership in the UK. This means that it is relatively straightforward for offshore residents to purchase and own UK properties.
Legal Certainty and Title Security
The UK has one of the most well-established, transparent legal systems in the world, contributing to a clearly defined and enforceable ownership structure for offshore residents.
How to Finance your UK Purchase?
When financing a UK property purchase, there are a number of different options available to offshore purchasers, including:
BTL Mortgage
Buy-to-let mortgages are available to borrowers, local and international, with hundreds of lenders each offering their own specialized products. While some lenders offer BTL mortgages exclusively to UK residents, other lenders specialize in providing offshore BTL mortgages. It is important to ensure that you are approaching the correct lenders to enable you to access the best rates on your BTL mortgage.
Private Banking Mortgages
Private banking mortgages are another popular option for offshore investors looking to purchase property in the UK. Because private banks are relationship-led, they are more flexible on mortgage underwriting criteria.
Bridging Loans
Where traditional finance cannot be arranged, bridging loans offer a popular, short-term alternative. Offshore borrowers can access mortgage bridging loans from a number of UK lenders, enabling them to move quickly and take advantage of limited time opportunities.
While each of the above options can be used by offshore borrowers, they will all be subject to similar underwriting procedures. During the underwriting process, the lender will analyse the details of the case, including: the borrower’s profile, the property and the repayment strategy. While these details vary from case to case, there are a number of key considerations that will be addressed by the lender before drawdown:
Key Lender Considerations for Offshore Borrowers:
Offshore Income
When applying for an offshore mortgage on a UK property, lenders will need to gather a full picture of your overall income profile, including any offshore income. This income will need to be verified and earned in a stable currency.
Property Details
Perhaps the most important consideration for lenders will be the subject property. Lenders will scrutinize the location, condition and marketability of the property before making a lending decision. It is vital that the property is suitable security for the lender, and that it can be sold quickly in the event of default.
UK Footprint
Lenders will also scrutinize the borrower’s footprint in the UK. Borrowers with a larger footprint in the UK are seen as more favourable than those without any UK assets. While lenders prefer borrowers with other properties in the UK, they are also comfortable lending to borrowers with other assets such as equities, cash or businesses in the UK. On the other hand, borrowers with no other assets in the UK are still able to access finance, but it may come at a higher cost.
Ownership Structure
Complex offshore ownership structures are also acceptable for UK lenders, although they may require enhanced due diligence or an external legal opinion from a solicitor. This means that, while those using complex structures can access finance, it will likely come at a higher cost than those borrowing through traditional structures.
In conclusion, offshore property purchasers have a number of different options available to them when purchasing a property in the UK, each of which comes at different costs. While some offshore purchasers might have relationships with UK banks, who can offer them offshore mortgages, most borrowers will need to approach a skilled mortgage broker to secure them the cheapest form of offshore finance.
