As an expatriate it can sometimes be difficult and time consuming buying a property overseas. Using a range of International Mortgage Service providers we can help take some of the hassle out of the process as they offer the following:
Residential mortgages in over 10 jurisdictions - Great Britain, Spain, France, Portugal, Dubai, Hong Kong, Singapore, New Zealand, and selected locations in Australia, Canada and the USA.
Multi-currency loan facilities – offer mortgages in all major currencies – Euro, Sterling, US Dollars, Canadian Dollars, Australian Dollars, New Zealand Dollars, Hong Kong Dollars, Singapore Dollars, Yen and Swiss Franc. .
Depending on your status, high level of financing is available however generally the LTV is 75%. No early repayment penalties and no penalty for Buy To Let investors are just some of the benefits of their package.
Anybody who owns or is thinking of buying a property will have no doubt recoiled at the impact increasing interest rates are having on monthly mortgage repayments. Many onshore banks, due to demand from property owners, have introduced Foreign Currency Mortgages which gives clients the facility to switch the loan currency into one where interest rates are considerably lower. Lloyds/TSB offshore can offer this facility and whilst it is not without risk, it may offer an attractive solution to keeping payments at a minimum.
The purchase of a property is, for the vast majority of people, likely to be one of the largest personal investment decisions with which the individual is faced during his or her lifetime. The associated financing arrangement is likely to be one of the largest single exposures to debt that the individual will ever face. As such it requires careful consideration.
So, Which Currency to Choose?
A great question! Some people in Asia express uncertainty as to where they and their families will be located in a few years time, where their principal source of income will be generated and hence the currency in which it will be denominated. Most are trying to avoid the ‘financial handcuffs’ that accompany a typical retail loan arrangement and seek more imaginative packages affording greater currency flexibility.
To be locked into one particular currency during the whole repayment period may well be inappropriate given the situation faced by many people in the region. It could well be more appropriate for a borrower to seek a currency switching option whereby he or she has the facility to finance in one currency today and retain an option to convert into another currency at a later date. For example, a borrower may choose to finance in Sterling pounds today and later switch to US dollars should movements in cross-rates present an opportunity to minimise cost or should his or her principal source of income change.
Generally speaking, it is wise to match the currency of assets (either fixed or liquid) with that of liabilities e.g. a UK property asset with a Pound Sterling loan would match a fixed asset with the loan liability. Many people, however, opt to match more liquid assets such as savings, salary, future provident fund proceeds or even existing assets, with the loan.
In this case, the English property may be matched with a US dollar loan serviced by a US dollar salary for example. The choice depends largely upon personal circumstances and future plans, though the ability to switch currencies during the life of the loan could prove valuable at a later date.
Should a borrower anticipate income streams in more than one currency eg Sterling pound and US dollars, then theoretically he should initially draw the loan in the currency which he believes will weaken relative to the other. If currency switching is available, then once the chosen currency has so weakened the loan may be switched to the other currency and a saving in capital effected.
The Drawbacks
Anyone considering a mis-match between the currency of the loan and their assets should tread very carefully. Borrowers are sometimes tempted to do this in order to secure a loan in a currency with low interest rates. Unfortunately, significant movements in currency cross-rates can occur very quickly, wiping out any savings through lower interest rates and leaving the borrower stranded. Playing the forex markets with mortgage monies is definitely not for the faint of heart or financially weak and careful consideration must be given before opting for a mortgage of this nature.
There are various other types of mortgages available and to help you get your head around all the jargon, please find a brief description of mortgage types below.
Variable Rate Mortgages - as the name suggests, the mortgage rate can vary. The interest can go up or down depending on the basic rate of interest being charged by the Bank of England - this is known as the Base Rate. If the Bank of England lowers the basic rate of interest then it is likely that most financial institutions will follow suit including mortgage providers. Likewise, if they increase the basic rate of interest then the variable rate is likely to increase also.
Fixed Rate Mortgages - the interest rate is fixed for a set number of years meaning that no mater what happens to the variable rate, the fixed interest rate will stay the same for the set period. If for example you opted for a three year fixed rate mortgage, during the full set period, the interest rate will not fluctuate. With a fixed rate mortgage you will always know what your mortgage payments or repayments will be every month for the full three years.
Capped Mortgages - for mortgage applicants who are unsure which way interest rates will go and do not want to be tied to a fixed rate mortgage. A capped mortgage which is also known as a collared mortgage is where the Lender will promise that the rate of interest will not fall below another rate of interest - e.g. 6% (this being the collared part) ... no matter what happens to the interest rates in general.
A capped mortgage is simply one where the interest rate will not rise above the cap, there is no lower limit.
Reduced / Discounted Mortgages - whereby the Lender will offer you a discount or reduction in their variable rate for a set period of time. For example, 0.5% over 3 years ... so if the base rate of interest was 7% then you would pay 6.5% - if the base rate changed to 30% then you would pay 29.5%.
Flexible Mortgages - a flexible mortgage is where you can make overpayments to your standard payment. For example, if your standard payment is £250 you could pay £500 per month. If you select to overpay, you have the option to have these payments back at a later date if required.
A flexible mortgage also offers you the option of having up to a 6 months payment break from making payments off your mortgage account - this does not mean that you don't have to make these payments at all but rather the payments will be added at the end to the term of the mortgage loan.
