What is an Offshore Bridging Loan
An offshore bridging loan is a bridging loan secured on UK property, where the borrower is an offshore resident, national or foreign registered company. Offshore borrowers can be resident in any country, however, there are some home countries that are increasingly difficult to source a bridging loan for, including those with ongoing sanctions from the UK government. On the other hand, there are some countries that are very common source countries and are easy to arrange finance for, including: USA, South Africa, EU and many Middle Eastern countries. Offshore bridging loans enable borrowers access to property development finance in order to take advantage of limited time opportunities without having to submit a traditional mortgage application, which can be notoriously complex for offshore borrowers. Generally speaking, offshore bridging loans will take a few weeks to arrange, depending on the borrower and their property. One important concept to understand is that bridging loans are not intended for long term use. They are a short-term product designed to bridge the gap between a short-term expense and a future income. They come at a premium to traditional mortgage finance, and this should be understood before engaging with any bridging lenders or brokers.
Why Do Offshore Investors Purchase in the UK?
The UK is one of the most popular real estate markets in the world, drawing buyers from across the globe. There are a number of reasons why foreign buyers invest in UK:
Sterling as a Currency Hedge: The Pound is one of the most stable currencies in the world, providing investors a stable currency in which to hold their investments. This is especially popular amongst investors from countries with more volatile currencies, such as South Africa or Turkey. Purchasing property in the UK enables investors to safeguard their money from currency depreciation.
Capital Appreciation: One of the primary reasons people choose to invest in property is due to its ability to appreciate over the years. Prime Central London is consistently ranked as one of the most stable areas in which to buy property, on a global level. Investors see PCL property as a stable and reliable source of wealth over a long term investment horizon, particularly in times of global geopolitical uncertainty.
Rental Yields: The UK rental market, especially in London and key cities, is one of the most developed in the world, with demand regularly outstripping supply. For offshore investors these rental returns provide a stable and secure return on their investments.
Established Ownership Rights: The UK operates one of the most developed, transparent and well-regulated property ownership systems in the world. Boasting clear title, strong contract law and established conveyancing process, the UK draws investors from across the globe.
While there are a number of factors driving investment in the UK, it is important to understand how lenders evaluate an offshore bridging loan application:
UK Footprint: Lenders prefer to lend to borrowers with an established UK footprint. This could be other properties, financial equities or bonds or family ties to the UK.
Source of Wealth: Borrowers with an established and verifiable proof of income will find it easier to source finance than those with unusual or unclear source of wealth. Lenders may require that the income/wealth is verified by a UK solicitor or accountant prior to completing the facility.
Property: The subject property is one of the most important considerations for any lender in the bridging market. Lenders will scrutinise the property, its ownership structure and its location in order to ensure that it is a suitable security. In order to do this, they will likely instruct a valuation report to be conducted prior to drawdown, which will need to be paid for by the borrower.
UK property has historically proven a safe-haven investment, allowing foreign investors a safe, and reliable hedge against currency depreciation or economic shocks. With this in mind offshore borrower have always been motivated to purchase UK property. Offshore bridging loans enable international purchasers the access to finance that they need in order to take advantage of the UK property market quickly and decisively
