A popular way in which to consider investing in overseas property is by buying as a group
100% Finance
On selected developments we offer 100% finance, which means you only need to pay £1,000 reservation fee. The deposit bridge loan is secured against equity that you have in other property either in the UK or Overseas (if applicable).
The charge from the lender will be dependant on your credit score and subject to status but will be between 6-10% per annum.
The interest payments on this loan will be paid for you by the developer and the total cost of these added to the purchase price of the property on completion.
This facility can only be provided for investors that have equity in other property. If you don’t, then you will need to provide a 30% deposit on exchange of contracts unless there is the ability to borrow money on a unsecured basis.
How does the 100% finance scheme work?
- £1,000.00 non-refundable reservation fee required for reservation of a specific property.
- 30% deposit required (less £1,000.00) within 45 days of reservation. If you choose to lend this deposit the developer will pay the loan repayments, including interest, for this the 30% deposit until completion of the specific unit you have reserved. The payments will then be added to the purchase price upon completion.
Example:
Property price £300,000.00. £1,000.00 reservation fee paid. The deposit - £300,000.00 x 30% - £90,000.00 - £1000.00 (reservation fee) = £89,000.00. Interest on £89,000.00 @ 6% p.a. - £445.00 per month, paid for 24 months by the developer - £10,680.00 added to the purchase price upon completion.
Due to the significantly discounted off-plan contract price and the capital appreciation during the construction phase, it could be anticipated that the £300,000.00 purchase price will have grown to a property value at completion of circa £447,000.00.
At this point a 70% loan to value guaranteed mortgage is available and therefore you will be able to borrow up to £313,000.00 i.e. 70% of the value of the property at completion. This is clearly ample to pay for the £299,000.00 (purchase price less £1000.00 reservation fee) that you owe as well as the accrued interest of £10,000.00 – from the above example.
Assuming you borrowed the maximum loan to value mortgage, available from the example above, you would borrow £313,000.00 on which the annual interest payment would be £21,910 based on a rate of 7%. The rental guarantee of 10% of your purchase price of £300,000.00 will generate an income of £30,000.00 each year, should cover your mortgage payments. If you wish you could retain the £89,000.00 loan you took out for the deposit, pay the interest yourself each month, from completion onwards, and use the money to invest in further investment property purchases.
Should the developer be unable to raise your finance for your initial 30%, your £1,000 shall be refunded to you in full by the developers.
This finance scheme is an innovative way in which investors can utilise finance in order to invest and begin to establish an international property portfolio. The scheme is bespoke in that each client/investor will have different circumstances & credit rating and indeed objectives in regard to their investment.
What are the risks?
- The rate at which you borrow your initial deposit will effect the repayment and will in turn decide the amount that is added to the purchase price at completion.
- The amount added to the price at completion is also subject to the completion of the development as this effects the number of payments the developer makes over the construction period.
- The above example is based on the mortgage interest rate at completion being 7% per annum. This rate will decide the mortgage payment at completion.
- The final valuation at completion will decide the actual mortgage amount you could secure on the property once complete.
What are the rewards?
- Allows the purchase of a Caribbean property in effect with just £1,000 outlay.
- Although an investor makes the 30% payment, an
investor’s monetary outgoings and expenditure over
the construction of the property will remain unchanged,
allowing cash to be freed up for further investment or
other expenses.Allows investors with little or no cash to invest (subject
to status) - Could allow cash investors to invest in a larger unit, utilising borrowing to bring them to a much higher investment amount without any effect on their monthly expenditure.
- Any one looking at releasing equity to invest in an overseas property can do so without having to maintain loan payments until the property is complete.
- The equity released at completion from the property could be brought back into the UK free of tax (subject to status)
This scheme is available on the following developments:
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