Financing Your UK Property

Carrick Property has many clients looking to invest in the UK property market. Here are some areas to consider when embarking on a journey to secure that apartment you’ve had your eye on 

There are lots of ways you can invest, but the two standard ways are property and  shares. “People understand the property market as its bricks and mortar so less complicated for many,’ says Scott Irving, Carrick Property, General Manager. While it’s a romantic prospect to purchase a retirement or investment property offshore, you do need to ensure you have carefully considered your finance options.  

South African purchasers can secure financing in the UK with Carrick facilitating seamless access to lenders, explains Irving. “Our developments are all pre-approved which helps the process and the wide range of lending options in the UK market means that clients can choose the structure which works best for them.” 

Set realistic goals 

The younger you start the better. Set a goal – how many properties would you ideally like to own in the long-run? How much are you able to spend? Are you able to secure a deposit? How long are you willing to let them sit so that they can make money for you? 

Think long-term  

The key, says Irving, is to buy a place in the right location, get a tenant in and have the tenant pay the mortgage. “If you stick it out – and property is a long-term investment – it’s expected that your property will double in value over the next 15 to 20 years.” 

Choose the right mortgage product 

You can choose between interest only or capital repayment. “With capital repayment you’re getting the growth over the next 15 years, but you're also getting equity because the tenant is paying the mortgage off,” explains Irving. But because you’re paying the capital back as opposed to interest only, it’s a bit riskier. “Most people these days do interest only because it halves the mortgage amount,” says Irving. “You get the capital growth, you don't get the equity, but you're safe because the rent covers the interest and other expenses like service charges and ground rent. Should you lose a tenant, it's easier to manage.” 

Have a contingency plan 

This applies especially if you’re trying to build up a portfolio of apartments. Location is key because it’s all about tenant sustainability. If your apartments are empty and you’ve got to chip in £500 or £1000 pounds on a few of them, you can soon find yourself on a slippery slope.   

4 things to know about mortgages 

  1. If you’re based outside of the UK, you need to have a UK bank account for the direct debit mandate in the application. Some lenders include account opening as part of the application process. South African banks with a presence in the UK are open to financing purchases, but there are requirements to be met. 
  2. The level of lending that’s available to overseas buyers is governed by the rental income on the proposed investment. The maximum that you can get by way of lending is 75% loan to value so you should be basing your lending decisions on the assumption that you’re putting down a minimum of at least 25% deposit. If the rental doesn’t meet the debt service ability of 75%, then that could potentially be limited. 
  3. Choose a lender that uses commercially minded valuers who understand the market, can accurately value the property, will do due diligence, and can therefore ensure the best valuation. 
  4. Processes are currently taking a lot longer because lenders are inundated with applications, so from application through to offer, expect six to eight weeks. Mortgages are typically valid for a period of six months so if you’re buying an off-plan property that is due to be completed in two years’ time, the lender will usually reach out five or so months before completion date. 

The armchair investor 

While some investors feel they need to be able to check in on their properties, Irving believes the UK market is extremely attractive for overseas investors. “The UK property market is more mature than any other property housing market in the world. You can qualify for lending and leverage which is a lot more difficult in many other jurisdictions and the legislation and legal structures are stable so it’s a very desirable place to park your money.” 

The key, however, is to employ experts who can bring the right products to the right purchasers, and that fully understand the client’s financial situation.  

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