Interest only mortgage with flexible overpayment for UK expat in Bahamas

Some lenders won’t touch expatriate mortgages. Others change their criteria, leaving even their established borrowers high and dry on a standard variable rate when their fixed term ends. A well-connected expat broker will find the lender who will consider your circumstances in the most favourable light.

The Scenario

Our client is the CEO of a financial services company in the Bahamas that owns a £3.5M Grade II-listed rural property outside Bath where his wife and children live while the children are at school.

His fixed-rate mortgage had ended four months previously. It reverted to his lender’s SVR: their lending criteria for expatriate borrowers had changed, and they weren’t willing to offer him a new fixed-term rate.

As a result, he was paying a hefty interest rate while he tried to find an expatriate lender who would give him the level of borrowing he needed.

Some lenders treat tax-free expatriate earnings as though they will be taxed, then take off an additional 25% to allow for currency fluctuations. So once you’ve lost half your income to a notional highest-rate tax band, and another 25% off the top, even the most generous expat remuneration package won’t support a mortgage of this size.

And then he came to us.

The Solution

There were a few major issues that needed to be worked around.

• The estate to be mortgaged included, as well as the main house, outbuildings and a former church which were rented out. Some lenders aren’t happy with high-value properties with residential and commercial properties included in the same title. 
• Our client has quite a “lumpy” salary package that varies considerably from month to month. He wanted an interest-only remortgage that offered the flexibility to overpay substantial amounts yearly.
• The set-up fees on a mortgage of this size can be substantial: a typical expat lender might charge 1.5-2%, which would add up to a hefty £20,000.

We sent our client’s CV along with the property details to a specialist building society and then felt sufficiently confident in his background. The relatively low level of exposure, to be able to offer a very competitive three-year discounted expatriate mortgage at less than half the SVR he had been paying.

The mortgage product is interest-only but allows over-payment of up to a substantial 20% per year, which suits our client’s remuneration pattern.

Moreover, the lender contributed £700 towards the valuation costs and charged a flat-rate product fee of just £850.

It was quite a complex arrangement, but we had an agreement in principle that was being actively progressed by the lender within three days.

In a similar situation? Please call our mortgage finance team on 0117 959 5094 or book a callback into our diary at a time that suits you.