British mortgages are quite different: remortgage can reduce the monthly repayment, make the appreciation and achieve realization? It’s true!
27th 5月 2015
Case Study
27th 5月 2015
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How do people use financial leverage to purchase properties in UK?

Nowadays, as more and more Chinese people begin to go abroad and invest  properties in the uk, the real estate market, with its unique cultural charm and excellent performance after the financial crisis, has become increasingly popular in China and all over the world.

A batch of domestic investment clients arrive with money, site location, see the building, pay the deposit, and sign the contract. They are quite busy in investing, however, it seems that few people are concerned about how to meet their investment needs through financial leverage and mortgage loans.

For the most of people, if they can afford the property, they can’t even think about using the mortgage from British banks.

Can you get a loan without a UK permanent residency?

The answer is yes.

The financial system in Britain has experienced hundreds of years evolution and it has developed to a fairly advanced and perfect level. Under the strict market supervision system, various financial products developed in an orderly and vigorous way. For any financial needs, solutions and products will always be found in this system.

Mortgage product is also not exceptional. Although the majority of banks are reluctant to dabble in mortgage loans for investors, there are still some banks and financial firms willing to rely on certain selected channel, that is professional financial service intermediary, to obtain the customers who meet their requirements. 

With the help of professional financial service companies, a growing number of Chinese investors have managed to get British mortgages. Most of them are successful businessmen and senior white-collar workers in Chinese companies.

So what are the requirements for UK loans and how to apply for it?

Unlike the mortgage applications in China, lenders in UK mainly assess the cash flows of applicants rather than their net worth. Instead of using domestic assets as collateral, banks use the property to be purchased for the mortgage.

How to calculate the cash flow?

The cash flow is the funds movement of the applicant’s income minus the daily expenses which include the repayment of the existing debt. According to the monthly net income, lenders calculate whether the net mortgage repayment is reasonable. Of course, the rental income of investment properties will also be considered. However, personal incomes are the main reference. Generally, the loan amount is between 4 and 5 times of the personal annual pre-tax income and each loan is about 60-70% of the property income. Some banks will also consider the rental income of their clients’ domestic properties when doing the income assessments.

What kind of materials are needed?

Passport

The payslips for the last three months.

The bank transaction records for the last three months.

The deposit certificate for more than three months.

Annual income certificate (provided by the employer to the bank)

Annual tax certificate, etc.

For the enterprise owner or partner, the company’s audit reports for the last three years are also needed.

What are the specific procedures like?

  1. In the beginning stage of deciding to purchase a property in UK, clients should contact the bank or professional financial service company for initial consultation to determine the amount of the mortgage. Then generally, you will need to obtain the AIP from the bank which can determine the approximate amount that can be used to buy a property, at the same time, also lay the foundation for next stage’s choosing the property and bid. This is because when clients purchase a property in the UK, if the mortgage is needed, most housing developers or agents will ask for the AIP from the bank.
  2. After AIP is received, clients can prepare materials and see the property .
  3. After the property is decided, the loan application can be officially submitted. All application materials should be submitted to the bank, including the application form and the auxiliary materials mentioned above.
  4. At the same time these materials are evaluated and reviewed, banks will conduct quality inspection for the property. If all is satisfied, they will issue a loan approval letter. The loan is completed successfully.
  5. The lawyer completes the document review and signature.
  6. Exchange of contracts.
  7. Finish the contract and get the keys.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate some forms of Business Buy to Let Mortgages and Commercial Mortgages to Limited Companies. Not all services we offer are regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on your mortgage. 

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