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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 |
| Type | 2x bed terraced house | 2x bed terraced house | |
| LTV | 80% | 65% | -15% |
| Interest rate | 4.29% | 4.09% | -0.20% |
| Condition | Complete renovation | Complete renovation | |
| Purchase cost | £50,766 | £62,416 | £11,650 |
| Rent | £704 | £600 | -£104 |
| Gross yield | 6% | 6% | 0% |
| After tax profit | £478 | £1,269 | £791 |
| Cash ROI | 0.94% | 2.03% | 1.09% |
| M40 capital gain per year | £15,557 | £13,557 | -£2,000 |
| Cap gain ROI | 30.65% | 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.
