I recently arranged a remortgage for a non-dom Italian in his mid-30s. He was looking to arrange a new £520,000 loan against his beautiful 2 bedroom flat in Holland Park which was worth around £1.3m. My client had a preference for a capital and interest loan and specifically wanted a fixed rate to avoid future fluctuations in interest rates.
The first challenge I faced with this case was that my client was UK resident, but non-UK domiciled which means he only pays UK tax on income earned in the UK. Most lenders will only consider UK taxable income to support borrowing so in this case where the majority of income was earned outside the UK I needed a lender who would understand his income structure and consider an application accordingly.
Further complexities in his non-UK income presented themselves as typically lenders require translated payslips or employment contracts to prove international income. My client’s income was derived from contracts which were, in effect, commission only without any fixed monthly income. Further, contracts were of varying length, some without a long track record, albeit all within the same industry.
The final hurdle was sourcing a product to meet my client’s requirement for fixed rate product on a capital and interest basis. In the international and private banking arena, lenders often opt for ‘floating’ products which are priced at a premium against a benchmark, 3 month LIBOR, for example. Further, whilst less of a challenge, this type of lender typically issues loans on an interest only basis.
After thorough discussions with an underwriter and the lender’s credit committee, my relationship with the bank meant I could convince them to take 100% of UK income to support the loan and then to cover the shortfall by taking a small proportion of international earnings, irrespective of their wholly variable nature.