london property at canary wharf

London Property Loan – UK Vs Singapore Banks

With Brexit deal near its finishing line, there may be renewed interest in investing in a prime London property for many global real estate investors.  Many may not be aware, especially for the benefit of Asian investors who can park their funds in the safe haven financial centre of Asia, Singapore banks have long been aggressive in lending to its Wealth or private banking clients for forays into London property market.  In recent years, some banks have gone further as to waive the need to join Wealth banking altogether in a bid to lend more outside the local property market

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We are one of the leading mortgage brokerage firm in Singapore that could help you secure that leverage to enter London property market wherever you are based.  And the best part is besides Sterling, you can choose between Sing dollar, or switch between the two whenever you have a strong conviction on currency movements.  For those looking to extend their loan capacity beyond just banks in their own domiciled country, speak to us today as we can help you with the ever-changing lending criterias and documentations needed from Singapore lenders.  To give you a low down, here’s a quick summary on the key differences between borrowing from UK banks (for those eligible) and from Singapore banks:

 

 

Information As At September 2018

Loan FeaturesUK Property Loan
From Singapore Banks
 
UK Property Loan
From UK Banks
Eligibility

 

Non-tax resident of UK;
Singapore Citizen/PR;
Onshore/offshore foreigners to Singapore
UK tax residents;
UK Citizen/PR
Purpose

 

Must be for investment only;
(both purchase or remortgage from UK/Singapore banks)
Both investment and own-use
(both purchase & remortgage)
Base Currency

 

Choice of GBP or SGDGBP only
Currency Switch

 

YesNo
Interest Rate

 

Variable rate only
(P+I, no interest-servicing loan option)
Fixed and variable
(interest-only more stringent with MMR)
Mortgage Peg

 

3-month SIBOR (Loan in SGD);
Bank’s GBP COF Or 3-month LIBOR For GBP (Loan in GBP)
Variable or tracker rate
(usually reference on BOE interest rate)
Loan-To-Value Ratio (LTV)Mostly 60% with max up to 70%
(75% for Singaporeans)
Can go up to even 100% but with higher interest rate
Minimum Loan

 

GBP200,000 to GBP300,000GBP25,000
Max Loan Tenure

 

30 years or up to age 7530 years or usually up to age 80-85
Location

 

London Zone 1-3 only;
Approved list of projects
All cities and projects
Type Of Property

 

Must be completed in 1 single disbursement, usually apartments/condoAll types completed or under construction

 

Our chart above provides a snapshot of all the key information you need to know for your London property loan be it borrowing from UK or Singapore banks.  Here’s three more considerations we like to highlight when choosing between the two:

 

Amount of expenses and debt information to be furnished

The Mortgage Market Review (MMR) put in place by FCA (Financial Conduct Authority) in UK since April 2014 has now made borrowing from UK banks a challenging experience.  Borrowers local or foreign must be prepared to answer a litany of questions on their spending habits (especially for regular items like subscriptions, childcare, etc coming out from bank accounts) in order for the banks to be sufficiently satisfied that one is borrowing within their means.  Previously lenders need only assess income to ascertain repayment ability but with MMR the onus is placed on lenders to also look at debt and spending in order to assess affordability.  This means that the entire application process may take 2-3 hours and approval can take weeks.

As Singapore banks are not governed by MMR, the level of checks conducted will not be as laborious.  For the majority of borrowers out there with employment income, most lenders would require just 6 months of payslips with 6 months of bank statements showing corresponding salary credit.  There is usually no stringent checks on spending habits and debt situation.

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Need for AUM (asset under management)

Most banks in Singapore still require “onboarding” of preferred banking especially for foreigners with income outside of Singapore.  This means parking around S$200,000 to S$250,000 in your account here.  Speak to us though as there are a few banks which could waive this requirement or you may just be asked instead to earmark a much smaller sum equivalent to 36 months of the mortgage instalment payable upfront.

Parking of funds in Sing dollar can actually become an advantage (see next point) if you know how to make full use of currency movements.  Speak to our dedicated team of mortgage consultants who can explain to you how this works and guide you step-by-step on how to secure your London property loan in Singapore.

 

Currency risk when financing in SGD – boon or bane?

Financing your London propery purchase from Singapore banks present a unique opportunity to profit from currency movements, notwithstanding the risks involved which can be mitigated.  Let us illustrate with a simple example.

Carter works in Canary Wharf for the past one year and hopes to buy his own apartment instead of renting.  He found a suitable apartment for his family near his work place that costs GBP800,000 with a 60% LTV mortgage from a Singapore bank at GBP480,000, which he took in S$ financing and converts at GBP/SGD $1.794 to S$861,120 and service the loan with an interest at 3.8% over 30-year tenure.

Imagine if the Pound recovers back to FX rate of GBP/SGD at $2.00 two years after Brexit deal by 2020, and  Carter decides to switch his loan base currency from SGD back to GBP, he would convert his loan outstanding of S$829,116 to GBP414,558.  Had he taken the loan in GBP two years ago, at the same interest rate of 3.8% over 30 years, his loan outstanding would be GBP462,160 instead.  This translates into a savings of GBP47,602 for Carter which is equivalent to a reduction of almost 10% on his original loan amount of GBP480,000!  This savings is purely from a currency bet as Pound recovers from its low and Sing dollar weakens thereby Carter’s loan became “smaller” in Pound terms.

For a more indepth understanding of how one can qualify for London property loan financing from Singapore banks, speak to our team of mortgage consultants today, obligation-free!

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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About Darren Goh

Darren Goh is the Executive Director of MortgageWise.sg, a thought leader in the Singapore mortgage industry, with frequent interviews and quotes by the press - Business Times, Straits Times, Zaobao and EdgeProperty for his views on the latest mortgage trends. He is an avid property investor with careers in banking & real estate before becoming an entrepreneur.
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