OVERSEAS MORTGAGE FINANCE

Purchase

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A mortgage is a legally binding agreement whereby a bank, building society or lending institution allows you to borrow money to purchase a property; typically a residential, holiday home or investment property.

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When you have decided to purchase a property and require mortgage funding our team of specialists will provide advice to you and source the most appropriate mortgage in the marketplace.  Your adviser will present your case to a chosen lender who will evaluate your financial background, creditworthiness, and the value/condition of the chosen property, to determine the terms and conditions of the mortgage. 

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Once approved, you will receive a commitment stating a  specific amount of money, usually a percentage of the property's value will be provided by the lender. This amount is referred to as the principal. The borrower's legal representative ( solicitor ) uses the principal funds and your personal contribution to pay the seller and complete the purchase of the property. In return, the borrower agrees to repay the lender over a specified period of time, typically through monthly instalments, that include both principal and interest.

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The mortgage is secured by the property itself, meaning that if the borrower fails to make the required payments, the lender has the right to foreclose/repossess the property and sell it to recover the outstanding debt. This security for the lender allows them to offer lower interest rates compared to unsecured loans.

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The terms and conditions of a mortgage can vary depending on factors such as the borrower's credit history, the loan amount, the interest rate, the loan term, and the type of mortgage chosen. Common types of mortgages include fixed-rate mortgages, where the interest rate remains the same throughout part or, all of the loan term, and adjustable-rate mortgages, where the interest rate can change periodically.

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Remortgage

 

A remortgage refers to the process of switching your existing mortgage to a new one, typically with a different lender or an alternative product offered by your current lender. It involves paying off your existing mortgage loan by obtaining a new one on the same property. The primary reasons for remortgaging include securing a better interest rate, releasing equity, or changing the terms of your mortgage that are coming to an end, our advisers are able to asses your existing terms 6 months before the expiry of your existing mortgage, which provides you with an option to secure a rate in advance and ensure you receive the most competitive option at the time.

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1. Residential Remortgage: This type of remortgage applies to individuals who own a residential property, which is their primary residence. People often consider a residential remortgage to take advantage of market interest rates, reduce monthly repayments, or switch to a more suitable mortgage product.

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2. Buy-to-Let Remortgage: If you own a property that you rent out to tenants, you might opt for a buy-to-let remortgage. This type of remortgage is specifically designed for landlords and property investors. It enables you to replace your existing mortgage on the rental property to obtain a competitive rate, increase rental income, or release equity for other investments.

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3. Equity Release Remortgage: An equity release remortgage allows homeowners, typically older individuals, or retirees, to unlock some of the value tied up in their property. This can be achieved by remortgaging the property and borrowing against the equity. The released funds can be used for various purposes, such as home improvements, debt consolidation, or supplementing retirement income.

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4. Debt Consolidation Remortgage: This type of remortgage involves consolidating multiple debts, such as personal loans or credit card balances, into a single mortgage loan. By remortgaging and increasing the mortgage amount, homeowners can pay off their existing debts and streamline their finances. This can simplify repayments and potentially reduce monthly outgoings by benefiting from lower mortgage interest rates.

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When considering a remortgage, it's essential to weigh the associated costs, including arrangement fees, legal fees, and potential early repayment charges from your current mortgage. Consulting with a mortgage advisor or a financial professional can help you assess whether remortgaging is the right option for your specific circumstances and financial goals.

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Buy To Let

 

A buy-to-let mortgage is a type of mortgage specifically designed for individuals who want to purchase a property with the intention of renting it out to tenants. The primary purpose of a buy-to-let mortgage is to support individuals who are looking to invest in real estate and generate rental income.

 

1. Property Purchase: With a buy-to-let mortgage, you use the borrowed funds to purchase a property that you plan to rent out rather than to live in yourself. The property can be an apartment, house, or any other type of residential property suitable for renting.

 

2. Rental Income: The main difference between a buy-to-let mortgage and a regular residential mortgage is that the lender considers the potential rental income as a significant factor when assessing your eligibility for the loan. The lender will want to ensure that the rental income is sufficient to cover the mortgage repayments.

 

3. Deposit: Like other mortgages, you will need to provide a deposit for a buy-to-let mortgage. Typically, the deposit required is higher than that for a residential mortgage, often ranging from 20% to 40% of the property's value. The exact amount will depend on the lender's criteria and your financial circumstances.

 

4. Interest Rates: Buy-to-let mortgages may have slightly higher interest rates compared to residential mortgages. Lenders consider rental properties as higher-risk investments, which leads to slightly increased borrowing costs.

 

5. Affordability Assessment: When applying for a buy-to-let mortgage, the lender will assess your affordability based on various factors, such as your personal income, potential rental income, existing debts, and credit history. They will evaluate whether you can comfortably cover the mortgage repayments, even if the property remains unoccupied for a period or the rental income fluctuates.

 

6. Responsibilities: As the property owner and landlord, you will be responsible for managing the property, finding tenants, collecting rent, maintaining the property's condition, and complying with legal obligations and regulations related to rental properties.

 

7. Potential Returns: The aim of a buy-to-let mortgage is to generate rental income and, potentially, benefit from property price appreciation over time. By receiving rent from tenants, you can use the income to cover your mortgage repayments and other property-related expenses (Subject to UK tax regulations). If the property value increases, you may also profit when you decide to sell it.

 

It's important to note that buy-to-let mortgages can have different terms and conditions depending on the lender. It's advisable to thoroughly research and seek professional advice before considering a buy-to-let investment, as it involves financial commitment, property management, and understanding the legal and tax implications of being a landlord. The team at UK OMF will be happy to assist and answer any questions you may have. We can also provide access to our network of specialists to assist with any of the professional advice mentioned above (including Tax Advisors and Lawyers).

 

 

Cash Extraction/Further Advance

 

A cash extraction mortgage and a further advance are both related to borrowing against the equity in your property, but they work in slightly different ways.

 

1. Cash Extraction Mortgage: A cash extraction mortgage, also known as a cash-out refinance, is a type of mortgage refinancing where you borrow additional funds against the equity you have built up in your property. Equity is the difference between the current market value of your property and the outstanding balance on your mortgage. When you opt for a cash extraction mortgage, you refinance your existing mortgage for an amount that is higher than your current outstanding balance. The difference between the new loan amount and the old mortgage balance is given to you in cash, which you can use for various purposes such as home improvements, debt consolidation, investments, or other personal needs. By tapping into the equity of your property, you essentially convert it into cash, but it's important to note that the borrowed amount increases the total mortgage debt you owe. This means that your monthly mortgage payments may increase, and you'll need to carefully consider the financial implications of taking on additional debt.

 

2. Further Advance: A further advance is a way to borrow additional funds from your existing mortgage lender without refinancing the entire mortgage. This option allows you to access additional money by extending your current mortgage rather than obtaining a completely new mortgage. With a further advance, you approach your lender and request to borrow more money on top of your existing mortgage. The lender assesses your eligibility based on factors such as the equity in your property, your financial situation, and your ability to repay the additional debt. If approved, the lender will grant you an additional loan, which is added to your existing mortgage balance. The further advance option is suitable when you want to borrow a relatively smaller amount compared to your current mortgage and when you don't want to go through the process of refinancing your entire mortgage. It can be used for various purposes such as home renovations, purchasing another property, or funding a major expense. It's important to note that both a cash extraction mortgage and a further advance involve borrowing against the equity in your property and increasing your overall mortgage debt. It's advisable to carefully consider the costs, interest rates, and long-term financial implications before proceeding with either option. Consulting with a mortgage advisor or financial professional can help you make an informed decision based on your specific circumstances.

 

 

Equity Release

 

An equity release mortgage, also known as a lifetime mortgage, is a financial product designed for homeowners who are typically aged 55 or older and wish to access the equity tied up in their property without having to sell it or move out. It allows homeowners to unlock a portion of the value of their home and convert it into tax-free cash or a regular income stream.

 

Here's how it works: When you take out an equity release mortgage, the lender provides you with a loan that is secured against your property. The loan amount is determined based on factors such as your age, the value of your home, and sometimes your health. Unlike a traditional mortgage, you don't have to make monthly repayments towards the loan. Instead, the interest on the loan accumulates over time and is typically repaid when you pass away or move into long-term care. At that point, the property is usually sold, and the proceeds go towards repaying the loan. If there is any remaining value, it will be passed on to your beneficiaries.

 

Equity release mortgages come in various forms, including lump sum schemes and drawdown schemes. With a lump sum scheme, you receive a one-time payment, whereas with a drawdown scheme, you have a reserve of funds that you can access as needed. Interest is charged on the amount you borrow, and it can be fixed or variable.

It's worth noting that taking out an equity release mortgage can have long-term financial implications, such as reducing the inheritance you leave behind for your loved ones and potentially affecting your eligibility for means-tested benefits. Therefore, it is crucial to seek independent financial advice and carefully consider the pros and cons before proceeding with an equity release mortgage.

 

Regulations and safeguards are in place to protect consumers in equity release transactions, including the requirement for mandatory financial advice and membership with the Equity Release Council, a trade body that sets industry standards and consumer protections.

 

Overall, an equity release mortgage can provide homeowners with a way to access the value of their property in retirement, but it is essential to fully understand the terms, costs, and potential consequences before making a decision.

 

 

Debt Consolidation

 

A debt consolidation mortgage is a financial product that allows homeowners to consolidate multiple debts into a single mortgage loan. It is a way for individuals to manage their debts more effectively by combining them into one monthly payment.

 

Here's how it works:

 

1. Consolidation: The homeowner applies for a mortgage loan that is sufficient to pay off their existing debts, such as credit card balances, personal loans, or car loans. The mortgage lender evaluates the homeowner's financial situation and creditworthiness to determine whether to approve the loan.

2. Paying off existing debts: If the mortgage loan is approved, the funds are used to pay off the existing debts. This means that the homeowner will no longer have separate payments for each debt but will instead have a single mortgage payment.

3. Lower interest rate: One of the primary advantages of a debt consolidation mortgage is the potential to secure a lower interest rate compared to the interest rates on individual debts. Mortgages generally have lower interest rates than credit cards or personal loans, so consolidating debts into a mortgage can lead to savings on interest payments over time.

4. Extended repayment period: By consolidating debts into a mortgage, the repayment period is typically extended. This can result in a lower monthly payment compared to the combined payments of multiple debts. However, it's important to consider that extending the repayment period may increase the total amount of interest paid over the life of the mortgage.

5. Secured debt: It's important to note that a debt consolidation mortgage turns unsecured debts (like credit card debt) into secured debt. This means that if the homeowner fails to make mortgage payments, their home may be at risk of repossession by the lender.

6. Financial discipline: While a debt consolidation mortgage can simplify debt management, it's crucial for homeowners to exercise financial discipline and avoid accumulating new debts. If the underlying spending habits and financial behaviours that led to the initial debts are not addressed, the consolidation may only provide temporary relief.

 

Before considering a debt consolidation mortgage, it's advisable to consult with one of the  financial experts at UK OMF to assess the feasibility and potential benefits based on your specific circumstances. They can help you evaluate the costs, risks, and alternatives to determine if it's the right option for you.