Our clients are typically Foreign National Professionals living and working in the UK. Our expertise lies in advising our clients on their mortgage requirements both in the UK and in their home countries.

In addition many of our clients are living and working abroad and need our help to invest in new and emerging property markets.

Typical case studies of the clients we deal with would include the following:

Case Study 1

Patrick is an Australian and has owned a property in the UK for the last 3 years. When he first purchased his house it was difficult for him to obtain a mortgage since he didn’t have a history of earnings here. Eventually a lender accepted him and, although on a high interest rate, he was happy to finally be on the property ladder. Patrick is having second thoughts though. Why is he paying 1.5% over Bank base rate for his mortgage when he hears all these great rates being advertised? What mortgage should he get considering all the options?

What is the best way to mortgage your property?

Mike Abbott from Sable Property and Andrew Frank from Sable Wealth Management, reply … Understand your options and focus on the best interest rate.

• Mike “The UK mortgage market is the most competitive and diverse in the world. It’s easy to get lost in the detail of thousands of products. The key issue is your effective headline rate over the term you hold the mortgage. This effective rate is the rate you get for the 2 or 3 year initial period (fixed or discount) once the fees have been worked in. Fancy features tend to be marketing gimics and increase the cost of the mortgage considerably”.
  
• Andrew “Agreed. Too many people look for flexibility and in my experience very few of them actually need or eventually use that flexibility. Firstly, good financial planning removes the need for these options. Secondly, with flexibility comes expense. A fully flexible mortgage is often a whole percent higher on the rate. Lastly, as a Non-Domiciled Foreign National the interest on your offshore savings is not taxed so you should utilize an offshore bank account as your flexibility not your mortgage, it works out cheaper in the long run.”
  
• Mike “Focus on playing the banking game. Most mortgage products have a discounted initial rate over the first few years. Banks know how to attract people with a low initial rate. So they rely on initial fees and customer complacency to not change their mortgage after the initial discount term is up. Mortgages, like investments require ongoing management. Look to remortgage every few years chasing the best rates and utilizing the special discount offers. Remember not all lending products are available to the general public. A large portion of special deals are only available through the broker community”.
  
• Andrew “My pet hate is the offset mortgage. Although a fantastic concept for the UK
  Nationals it is by far the most expensive option for a non-domiciled client. These mortgages only really apply if you pay higher rate tax on your savings interest. Non-Domiciles don’t pay anything so it’s no use being charged an extra percent with the pretense of saving interest on the offset portion.”
  
• Mike “Lastly, use a mortgage broker. I cannot stress this enough. There are 148 providers out there with and each of them has different lending criteria. The cost of a mortgage is an intricate mix of rate, penalties, upfront fees, and features. At least take the advice from the broker, it’s free up till the point you actually get the mortgage. Most good brokers should always find a better rate than you could get yourself. In addition, us foreign nationals often get caught in the approval process at the last step and many of the advertised rates don’t apply to us. A broker knows which mortgages you will most likely qualify for.”
  

Case Study 2

James Davies is an Australian living and working in London for the past 3 years. The large consulting firm he works for have sponsored his UK work permit (for the next 2 years) and he plans to make the most of the UK work opportunity for at least the next four years. Like many young professionals James can see the value in owning rather than renting. He has earned well during his three years in London and has managed to save up approx. £20,000. He expects his salary to be around £70,000 this year. After reading the financial press he concluded that he should be maximizing the interest he receives and consequently deposited his cash savings in an Egg savings account. Having done some preliminary research James was keen to buy a two bedroom flat in the Southfields area and found one for £ 255,000. James then noticed a good looking 2 year fixed mortgage product in the window of a large well-known building society. On making an application he was very surprised to learn that his application was declined as not being suitable for their criteria.

When James was declined by the lender he was referred to Sable and has now completed on his first UK property purchase.

Andrew (From Sable Wealth Management) and Mike (from Sable Property) look back and discuss James’s case … Make sure you have saved up enough and fully understand all the costs beforehand.

• Mike "James made a good decision by choosing to buy a main residence property. The growth on this property will not be taxable as it’s his Principle Private Residence and by effectively gearing the purchase he will now create a good non-taxable return. James needed to get familiar with all the costs and the legal side of the transaction."
  
• Andrew "Agreed. There are many one off costs involved in a property purchase, which quickly stack up. For starters, for a property costing less then £250,000, the stamp duty charge is 1%. This jumps to 3% over £250,000. Even though James could afford the mortgage for a property over £250,000 he quickly decided not to pay the extra tax charge and rather buy the cheaper property. In the end he found a very similar property for £245,000. He was also not aware that although the solicitors fee was only £750 once the disbursements and other charges were added the bill came to over £1000."
  
• Mike "James’s first job was to work out, after all his other living costs, what he could actually afford in monthly mortgage payments. By knowing which lenders would actually do the mortgage with his visa situation, I was able to shortlist the appropriate products and work backwards and calculate how much he can borrow. In the beginning James was keen to put down a 15% deposit but when he realized that his borrowing rate on the mortgage was going to be lower that his tax free savings in the offshore account he agreed that 10% was the best gearing level. As a broker I was able to show him how the mortgage rates did not in his case improve with the additional 5% deposit. Above a 10% deposit he was going to have to pay a higher lending charge and a higher rate which was expensive and not adviseable."
  
• Andrew "Yes, James was not the first client we have seen to be surprised that by saving offshore as a non-domiciled Australian he would not have to pay tax on the interest or capital gains. By opening an offshore bank account for him we helped him earn a much better net rate than he was getting on his Egg onshore UK savings account. We also had to ensure that the offshore account was correctly structured so that he doesn’t unwittingly create a lax liability when he uses the savings for a deposit."
  
• Mike "In the end James’s visa status meant we could not choose from the whole market for his mortgage. When he first came to us James thought he might not be able to get mortgage or if he could get one, he was going to have to pay a much higher rate. It’s true that most of the UK lenders require clients to have permanent right to reside in the UK. However many of the mainstream lenders have developed more flexible rules to cater for the millions of foreign nationals earning good money while on visa’s. It’s just a case of knowing these lender rules and using them to get the best deal."

Next month Chris asks about setting up a new business.

Sable is a financial services firm focused specifically on South Africans based in the UK. Contact us with your question and we’ll publish it by sending a quick overview of yourselves and your question to SA Times.