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February 4, 2022
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February 24, 2022

Gatehouse bank foreign national 65% LTV £75,000 mortgages

Published by Nick on February 9, 2022
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  • Finance
  • Insight
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    Gatehouse bank foreign national 65% LTV £75,000 mortgages

    Gatehouse bank have announced an important change: they are reducing their minimum mortgage size for foreign national buyers from £100,000 to £75,000.

    Here’s my opinion…
    —

    https://gatehousebank.com/intermediaries/products/buy-to-let-product-page-intermediary
    Then click on ‘international residents’
    Then review deals under ‘Individual & Corporate Structure BTL Finance Rates’
    These deals are for standard buy to let mortgages.
    Minimum finance amount: £75,000
    Minimum loan to value 65%
    Minimum property purchase amount: £115,384
    Cash deposit: £40,384

    For other loan providers who offer minimum mortgage size of £100,000
    Gatehouse bank and HTB: 75% LTV: £133,333: – cash deposit:  £33,333
    Gatehouse bank: 80% LTV: £125,000 – cash deposit: £25,000

    I’ve run some numbers:
    Both properties in M40

    House ‘A’House ‘B’Diff ‘A’ and ‘B’
    Price£135,000£115,000-£20,000
    Type2x bed terraced house2x bed terraced house
    LTV80%65%-15%
    Interest rate4.29%4.09%-0.20%
    ConditionComplete renovationComplete renovation
    Purchase cost£50,766£62,416£11,650
    Rent£704£600-£104
    Gross yield6%6%0%
    After tax profit£478£1,269£791
    Cash ROI0.94%2.03%1.09%
    M40 capital gain per year£15,557£13,557-£2,000
    Cap gain ROI30.65%23.75%-6.90%

    The full calculations are here in PDF format
    80% LTV £100,000 mortgage
    65% LTV £75,000 mortgage

    What does all this mean?
    Previously, properties priced under £130,000 were generally inaccessible to foreign national buyers.
    The only viable model would be to buy properties with cash and refinance in a portfolio mortgage with Hampshire trust bank at 75% loan to value
    As a result, these lower-priced properties offered relatively more value because there is less international buyer competition.

    Looking at the numbers, it touches on that old question: to go for capital gain or not?
    – Do you bank on capital gain?
    – Or do you go for cash return on investment?
    – Or something in between

    The £75,000 65% LTV Gatehouse mortgage makes ‘cheaper’ properties accessible.  In theory you should be able to achieve gross yields of 7% or more, which in turn would maximise your cash ROI.
    But, because the loan to value is relatively low, it does mean you must deposit at least 15% more cash than if you had a higher loan to value mortgage on a more expensive property.

    My opinion:
    – I would go for higher priced property because these are generally in better areas and have fewer fundamental condition issues
    – I would not get an 80% loan to value mortgage.  Instead I would de-gear a little and go for 75% loan to value, which gives a little more cash return and a little less capital gain ROI
    – Time and time again, the real money in property comes from capital gain.  So I would prioritise capital gain 70% and cash return on investment 30%.
    – If I saw a £115,000 to £130,000 property which represented excellent value, then, yes of course I would use this 65% LTV Gatehouse mortgage.

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    Nick
    Nick

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