News Column

Buy to Let

July 20, 2014



In a new Buy-to-Let mortgage scheme for British expatriates and their spouses, Skipton International's Director of Lending, Nigel Pascoe spoke to me about the eligibility criteria on properties offered throughout England and Wales that may prove a ready option when pension planning

I asked Nigel about whom this scheme will benefit and how well it would provide opportunities for those living abroad as an investment. He explained, "The new Skipton International expat Buy-to-Let mortgage is for British expats and their spouses who want to purchase a residential property in England or Wales for Buy-to-Let. It cannot be used by the mortgage applicants, or their family, to live in. This is designed as an investment, possibly for pension planning, and it isn't available to those who are currently living in the UK or expatriates who intend to live in the property on return to the UK. In the UAE as in other parts of the world it seems, the scheme is open to British expats either applying on their own, or jointly with a spouse."

I enquired as to the eligibility and criteria for acquiring the mortgage and asked him to describe an example of the workings and rental yields of the scheme, based on the purchase of a property worth GBP 300,000. Nigel outlined the scheme:

As mentioned, you have to be a naturally born British citizen or the spouse.

We require a salary base of at least GBP 40 thousand per annum, (or GBP 50 thousand if paid in local currency). The applicant should also be employed by an internationally recognised company or subsidiary.

The Loan-to-Value we offer is a maximum of 75 per cent and the property must generate sufficient rental income to exceed 12 per cent of a simple interest calculation at 6.49 per cent. This is to ensure affordability. Skipton International has an excellent record in ensuring our mortgage customers are able to afford the properties they purchase without over-stretching their finances.

We offer a variety of repayment terms: Capital and Interest, or Interest only, with a three or five year fixed option, and a five year discount.

For example, if you are a British expat looking to purchase a GBP 300,000 property, the maximum loan to value we would offer you is GBP 225,000. At this level of lending the property would have to generate a rent of GBP 1,461 per month. This would reflect a rental yield for the property of 5.85 per cent. If the property brought in a lower rent, the amount that would be advanced would be correspondingly reduced, thereby decreasing the Loan to Value. The monthly interest payment on a GBP 225,000 mortgage, with the Skipton International discounted rate of 4.49 per cent, would be GBP 842.

I questioned him on the best areas currently in the UK to invest. "Skipton will only lend in England and Wales, but even this market is large and very diverse in terms of property price and performance. London has seen the largest capital appreciation recently and this has reduced rental yields in many boroughs. Elsewhere, properties may not have appreciated in value quite so significantly, but this means that there are often better rental yields as a result."

His cautionary note on identifying a location for purchase, "Many potential purchasers will have local knowledge of a particular area which will attract them to buying an investment property there. In every case we would recommend that careful research of the local market is undertaken. Online property websites are a useful resource when gauging a market from afar, as too is discussing the market with a variety of agents. Viewing the property is recommended before committing to an investment. We would also suggest that you have a clear idea of your ideal potential tenants in mind as different property types and areas will suit families/students/young professionals etc."

I raised the issue of which regulator the scheme was managed under, how expatriates may be protected and tax implications for expats living in a tax haven such as the UAE? Nigel stated, "Skipton International is licensed to take deposits by the Guernsey Financial Services Commission. Buy-to-Let lending is an unregulated activity for any lender. We are not able to provide tax advice and recommend that individuals obtain independent advice from an adviser, before making a large investment decision.

I was curious to know how and where the scheme may be gaining in popularity. Nigel concluded, "We have only just launched this new expat mortgage, and so don't have an extensive customer base to assess a 'typical' customer. However, we are already seeing interest from British expats across the globe. We have built up an excellent reputation in the Channel Islands, through providing a personal service which allows us to guide mortgage applicants through the purchase process. This personal service is one of the reasons why our customers come to us."


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Source: CPI Financial


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