Fee for service is standard for overseas mortgages

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It’s important for Australians to understand that international mortgage markets are very different to the Australian market.

Whilst the concept of a mortgage and its purpose is clearly the same, the way the mortgage and property markets work in different countries can vary greatly. Often clients can make the mistake of bringing along  assumptions about the availability of credit, willingness of overseas lenders to be competitive for their business, flexibility of loans and the level of fees and charges – based upon their Australian experience.

This may well result in disappointment when clients start dealing with international mortgages, especially if they expect the broker and lender to work in the same way as the Australian mortgage industry works – for no fees. In reality upfront fees are real and payable by the applicant, and are commonplace  for mortgages overseas.

Often lenders charge their own arrangement fees, or application fees that can be a percentage of the loan amount (rather than a small set fee or no fee, like in Australia). Brokers around the world charge client fees for sourcing, arranging and trouble-shooting new mortgage applications.

Considering the cross-border nature of transactions there are often different language and cultural nuances to take into account and negotiate. These factors are unique to international mortgages and add increased complexity to the loan arrangement process. in addition in many cases the overseas lender’s lending policies can vary more frequently, under the pressure of financial crises in their particular region.

In addition lenders do not provide any ongoing income or commission to introducing brokers. Lenders tend to pay one upfront fee, if any, to the broker for introduced business.

In this environment clients should expect that upfront fees will be payable when organising their international mortagge for a foreign purchase or refinance. These fees can range from 0.5 to 2% of the requested loan amount and/or include an upfront loan processing fee once preapproval is obtained – to ensure some cost recovery is achieved by the broker if the international enquiry is abandoned by the client.

Considering the nature and complexity of buying in a foreign country there is a higher rate of withdrawn applications or enquiries, amongst potential international property buyers.

OSmortgages.com

 

 

Prices Up but affordability better in NZ

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The average house asking price in Auckland NZ in October was NZD$568,778 and up 6% from 3 months prior.

Nation-wide it was $434,164 and that is the current record highest average house price in New Zealand. A lack of listings may have been a key driver, but it appears sellers are more confident of better sales outcomes.

This continues a 3 year trend of steady increases in asking price, each year. The seasonal trend is to see asking prices rise throughout winter until October, but then fall back after October.

Affordability is measured regularly by the Roost Home Loan affordability report, and in October this report suggested a deterioration in affordability from an average house payment requiring 50.8% of household income in September, to 52% of income in October. How does this indicate affordability is better? Well in March 2008 the index was at 83.4% of household income required to pay an average mortgage! being the highest measure recorded.

Affordability has gradually decreased from this peak, to 55% one year ago, and only recently back to 52% of household income.

Interest rates are lower than one year ago, and expectations of a further moderation in interest rates as a result of global economic woes, will potentially see more buyer interest in the property market.

OSmortgages.com

 

 

World’s most expensive house sale GBP390 million

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A mystery Russian billionaire hit the record books this month after purchasing the world’s most expensive house at £390 million on the French Mediterranean coast.
Villa Leopolda was built by King Leopold II of Belgium in 1902 and boasts 20 acres of land overlooking the Cap Ferrat near Villefranche.

It is believed that the price of the property shot up because the original owner was reluctant to sell.

Among the villa’s previous residents was the Agnelli family, founders of the car company Fiat, and during the 1960s it played host to a slew of jet-set parties attended by celebrities like Frank Sinatra and Ronald Reagan.

Chelsea Football Club owner Roman Abramovich was originally rumoured to be the new owner, although he has since denied this.

The mystery buyer of Villa Leopolda is the latest in an ever-expanding line of wealthy Russian business tycoons investing in the area.

from HomesWorldwide.co.uk

UK Investment property loans increased Q3 2011

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The number of new buy to let loans granted in the UK increased by 16% in the third quarter of 2011, according to data published today (Thursday 10 November) by the Council of Mortgage Lenders.

Over the same period, the value of mortgages advanced in the sector grew by 19%. The data shows that the pick up in buy to let lending that began in the second quarter has continued.

In the three months to September, a total of 34,500 buy to let loans were advanced, an increase from 29,700 in the preceding quarter. The value of lending totalled £3.8 billion, up from £3.2 billion. On both measures, buy to let lending was at its highest level since the final quarter of 2008.

The number and value of outstanding buy to let loans also continued to grow. At the end of September, there were 1,378,700 loans outstanding, worth £157 billion, up from 1,296,700 worth £150 billion 12 months earlier.

In the third quarter, there were 18,580 loans for the purchase of buy to let properties, accounting for almost 12% of all house purchase loans. But the proportion remains significantly lower than the former peak in the first quarter of 2008, when 32,650 mortgages for buy to let property purchase accounted for 19% of all loans for house purchase.

In the third quarter, the number of buy to let mortgages more than three months in arrears declined from 28,300, some 1.57% of the total, to 26,300, or 1.45%. There was, however, a small increase in the number of buy to let properties taken into possession from 1,500 in the second quarter to 1,600, although, as a proportion of all buy to let properties, the figure remained unchanged, at 0.08%.

‘With tenant demand remaining strong in the rental sector, some existing buy to let landlords have been expanding their portfolios and the growth that returned to the sector in the preceding quarter has continued,’ said CML director general Paul Smee.

‘The recovery of buy to let from its low point in 2009 has helped improve supply and choice in the rental market. Despite recent improvements, however, buy to let lending volumes are still only around one third of their former peaks,’ he added.

Overall the number of properties taken into possession by mortgage lenders in the third quarter of 2011 was 9,200, virtually unchanged from 9,100 in the second quarter, the data also shows.

The number of repossessions in the quarter equated to 0.08% of all mortgages. This has been the same for five of the last six quarters, with the exception of the fourth quarter of 2010, which experienced a typical seasonal dip, to 0.07%.

So far this year, a total of 27,500 properties have been taken into possession, some 4% fewer than in the equivalent period last year. It now appears likely that the total number of repossessions in 2011 will be lower than the CML’s forecast of 40,000.

There was a slight fall in the number of households in arrears with their mortgage across all categories. At the end of September, the total number of mortgages with arrears of 2.5% or more of the outstanding balance fell to 161,600, 1.44% of all loans, down 2% from 165,200 or 1.47% of all loans, and 8% lower than the 175,100 cases or 1.55% of all loans at the end of September 2010.

Despite these improvements there is still a stock of cases with significant arrears. Some 27,300 loans have arrears of more than 10% of the outstanding balance. In addition, the squeeze on household budgets as a result of falling real incomes, cost of living rises and increasing unemployment will negatively affect households, and could lead to increased arrears in the coming quarters.

Extended forbearance by lenders has clearly been successful to date in keeping the vast majority of households facing payment difficulty in their homes, but ongoing pressures remain and the economic backdrop represents a significant challenge to the recent improving trend in arrears.

‘The fall in the number of mortgages in arrears, and the stable picture on repossessions, are testament not only to the beneficial effects of low interest rates, but also to effective arrears management, and good communication between lenders, borrowers and debt counselling organisations,’ said Smee.

‘Against the backdrop of widespread financial uncertainty sweeping both the UK and the wider European economies, it is impossible to be sanguine about the future influences that households may face. But lenders will do their utmost to help borrowers keep their homes, whatever pressures emerge. Anyone worried about their mortgage should seek early advice and talk to their lender: these figures firmly show that repossession does not have to be an inevitable consequence of mortgage arrears,’ he explained.

Paul Hunt, managing director of Phoebus Software said that flat possessions over the last quarter are a triumph of clear and effective communication between borrowers and lenders.

‘In the three months to August, the total number of unemployed people in the UK grew by 4.7%, but that hasn’t translated into a rise in repossessions. Partly, this is a result of many borrowers taking advantage of the extremely low rates currently available on the market. But another important factor has been borrowers’ willingness and capacity for forbearance on arrears,’ he explained.

‘A growing emphasis on servicing functions which are able to quickly identify borrowers likely to have a problem before arrears get out of hand means lenders have had growing success in navigating mortgage borrowers through choppy economic waters,’ he added.

from PropertyWire

UK Government announces new Housing strategy

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The UK government announced on Monday 21 November a bold and ambitious new housing strategy aimed at helping first time buyers get loans and releasing more land for developers to build new homes.

Prime Minister David Cameron said “The action we take will drive up the level of house building, ensure we are helping new home owners and boost consumer confidence. The Strategy will break the current cycle in which lenders won’t lend, builders can’t build and buyers can’t buy. We’ll be making it easier for people to secure mortgages on new homes, help people get on the property ladder, address unfairness in social housing and ensure homes that have been left empty for years are lived in once again”.

Under the proposals, homebuyers will be able to secure loans on newly built homes with only a 5% deposit. The government and house builders will help provide insurance for the lender, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.

This may provide a helping hand for up to 100,000 prospective buyers who are currently frozen out of the housing market because of the need for large deposits.

Affordable housing providers are in line to share almost £1.8 billion cash to develop new affordable homes. The first £1 billion worth of contracts  under the Affordable Homes Programme  have  been confirmed, putting the government on track to deliver up to 170,000 new affordable homes across the country over the next four years.

The government will give more support for local areas that want to deliver new, larger scale developments that meet the needs of their growing communities. A new prospectus will be published shortly inviting councils and communities to identify opportunities for locally planned large scale development, providing streamlined planning processes, giving communities a stronger say and developers greater certainty.

Viable schemes that are sustainable and have strong local support will be given financial assistance to get the work going, and the new plots could vary from a small expansion of a few hundred homes through to a new town with up to 10,000 homes.

£400 million Get Britain Building: Where there are existing building sites that have stalled, a funding pot will enable house builders to restart construction, helping to deliver up to 16,000 new homes on sites that already have planning permission,

An independent review will also consider whether there are barriers to greater large scale investment in rented housing.

Cameron described the fact that for years so little has been done to bring the nation’s growing number of empty homes back into use is a ‘national scandal’, adding that tackling the 700,000 empty homes across the country is a top priority in the strategy, and a key feature in the drive to increase the provision of affordable housing.

Housing Associations and councils will be able to apply for part of £100 million of Government funding to bring empty homes that blight neighbourhoods back into use. Government is also announcing £50 million of further funding to tackle some of the worst concentrations of empty homes.

The schemes will be backed by cash rewards through the New Homes Bonus for councils and many schemes will also have wider benefits such as training opportunities for local people.

The Government is also consulting on plans to allow councils local discretion to introduce a council tax premium on homes in their area that have been empty for more than two years, to provide a stronger incentive for empty homes owners to bring them back into use.

The Strategy also focuses on the needs of older people and includes a deal to improve the quality and choice of housing available for older people, which aims to help them to stay independent for longer.

So a package of measures will help the elderly adapt their homes, or move into alternative housing, to meet their changing needs. As part of this package the Government will work to develop equity release products – new ones, to help older home owners safely release equity that they can then use to maintain or adapt their homes.

Other reforms set out in the strategy include transferring housing and planning powers from central government to councils and local people, with powerful cash incentives through the New Homes Bonus, so instead of simply feeling the strain that new building projects place on existing services, communities have a reason to support new development. Councils will receive support to work with local people and bring forward plans for larger custom built housing projects, similar to the successful project in Almere in the Netherlands.

It also includes supporting private sector growth by reducing regulation and other burdens on house builders, accelerating the release of public sector land with capacity to build up to 100,000 new homes by 2015, and support up to 200,000 construction and related jobs during development.

Measures in the strategy will support the radical programme of reform to the system for social housing that is already underway. The government will consult on ‘Pay to Stay’ proposals and ensuring those on household incomes of over £100,000 a year, will pay up to market rents if they want to continue living in taxpayer subsidised homes.

The overly bureaucratic and complex model of council housing finance will be scrapped.
Instead of the revenue generated from social housing being handed over to central government and redistributed, councils will be able to keep their own receipts, giving them freedom to maintain their housing stock with more efficiency and transparency, in a way that meets local needs.

The Strategy will also support greater investment in the private rented sector, a sector which accounts for around 16% of all households. Large scale investment will be driven through changes to the tax rules affecting bulk purchases of buy to let homes, as well as through measures to encourage the growth of Real Estate Investment Trusts, the globally recognised model for real estate investment that provides low cost access to capital.

An independent review will also consider whether there are barriers to greater large scale investment in rented housing.

Cameron described the fact that for years so little has been done to bring the nation’s growing number of empty homes back into use is a ‘national scandal’, adding that tackling the 700,000 empty homes across the country is a top priority in the strategy, and a key feature in the drive to increase the provision of affordable housing.

Housing Associations and councils will be able to apply for part of £100 million of Government funding to bring empty homes that blight neighbourhoods back into use. The money will be used for innovative housing schemes that will ensure empty properties that ruin neighbourhoods are lived in once again, communities are regenerated and at the same time more affordable housing is provided. Government is also announcing £50 million of further funding to tackle some of the worst concentrations of empty homes.

The schemes will be backed by cash rewards through the New Homes Bonus for councils bringing empty homes back into use, and many schemes will also have wider benefits such as providing excellent training opportunities for local people.

The Government is also consulting on plans to allow councils local discretion to introduce a council tax premium on homes in their area that have been empty for more than two years, to provide a stronger incentive for empty homes owners to bring them back into use.

The Strategy also focuses on the needs of older people and includes a deal to improve the quality and choice of housing available for older people, which aims to help them to stay independent for longer.
Nearly a third of all homes are occupied by the elderly, and nearly two thirds of the projected increase in the number of households over the next twenty years will be headed by someone aged 65 or over.

So a package of measures will help the elderly adapt their homes, or move into alternative housing, to meet their changing needs. As part of this package the Government will work to develop simple and attractive financial products that help older home owners safely release equity that they can then use to maintain or adapt their homes.

Other reforms set out in the strategy include transferring housing and planning powers from central government to councils and local people, so that they can shape development in their areas replacing top down targets with powerful cash incentives through the New Homes Bonus, so instead of simply feeling the strain that new building projects place on existing services, communities have a reason to support new development.

It also includes supporting private sector growth by reducing regulation and other burdens on house builders, accelerating the release of public sector land with capacity to build up to 100,000 new homes by 2015, and support up to 200,000 construction and related jobs during development.

Paragon Group chief executive Nigel Terrington said,

“It is clear that the UK has a serious housing problem, with not enough homes being built and a lack of mortgage finance. Current housing completions simply aren’t sufficient to meet forecast household formations, so a commitment to build thousands of new homes is a positive start, whilst plans to support homebuyers through the mortgage indemnity scheme will stimulate the first time buyer market.

“It is crucial to the success of the mortgage market and the economy that we have a housing market in balance and with growth options across both the rental and owner-occupied sectors.”

OSmortgages.com

 

Euro-zone interest rates cut – November 2011

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The European central bank reduced Euro-zone rates from 1.5% to 1.25% on the 3rd November. This change will flow through to variable mortgage rates in Europe.

By way of history, the Euro-zone central bank rate (ECB refinancing rate as its known) has hovered between 1 and 1.5% since May 2009. The last move in July was an increase by 0.25 per cent and this latest move reverses that rate increase. This move coincides with the appointment of a new ECB chief, Mario Draghi, an Italian.

The rate that determine mortgage interest rates in Europe is generally the 3 month “Euribor” rate, or 1 month Euribor rate (like the Reserve Bank’s Cash rate in Australia).

These Euribor rates will now adjust downwards and flow through to lower mortgage rates across European mortgages.

This change is seen as a reflection of concerns about the current Greek debt crisis impacting the Euro-zone from a liquidity and economic point of view, and a desire to anticipate or minimise impacts of further recessionary conditions in Europe.

OSmortgages.com

French tax changes – Why buying French property now, could be the best timing

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Well the French government has seen fit to amend a capital gains tax concession which previously allowed owners of property to pay NO capital gains tax if they held a property for more than 15 years. This changes in February 2012 when owners will need to pay capital gains tax unless they hold property for more than 30 years in France.

Where is the opportunity?

The changes mean more property owners will pay capital gains tax for longer (like we do anyway). This will motivate overseas owners and local owners who planned to sell in the short or medium term (and planning to sell soon after 15 years of ownership) to sell now, faster, and before February 2012!

In my mind this should mean a willingness to accept less for their property, in order to sell faster. All this when the aussie dollar is sky high against the euro and interest rates in Europe are very low by comparison, for your overseas mortgage. Of course any considerations you are making about an overseas mortgage need to take into account the risks inherent in an overseas mortgage denominated in a currency that is not your currency of income.

Here is the article about the change in tax for you :

http://bit.ly/vr0LNu

OSmortgages.com

French Ski properties impress

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A new report has been created by Knight Frank property looking at the relative property value changes and influences across ski properties worldwide.

Their first conclusions are about the healthy state of the French ski resorts, as a destination and for property investment purposes.

They said:

“The stabilisation, and in some cases recovery of prices in the French Alps can be attributed to a number of factors. Many French ski resorts are located at high altitude, which makes them (on average) more reliable in terms of snowfall. In the Austrian Alps by comparison, a chalet above 1,600m can be hard to come by. Furthermore, the French resorts are well-established, most offering an array of sports and activities beyond skiing, not to mention their gastronomic diversity. The French resorts have also benefitted from significant investment over the last five years which has meant the quality of skiing, accessibility and infrastructure has never been better. Courchevel is a case in point where year-on-year there are improvements being made to the resort’s ski lifts and snow cannons.”

Quite a good analysis it appears to me.

They also said, with regard to specific areas,

“The traditionally favoured resorts of Courchevel, Megève and Val d’Isere continue to lead the market in terms of sales activity. But it is worth highlighting the key sub-markets within the resorts which generate the strongest interest from buyers; Courchevel 1850; Mont d’Arbois in Megève, and the Belvedere and Routes des Chalets/Le Reynard in Méribel are all excellent examples.

Worth considering if you have a hankering to turn your ski holidays into a purchase opportunity.

OSmortgages.com

Australia top of preferred list for Brits..

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The Post Office UK regularly publish survey results about the preferred places that British residents would move to, in order of preference.

Australia is the most popular country for British people looking to live overseas with 21% saying it would be their number one choice, followed by the US, Canada and Spain, according to latest research in September.

This is quite a change apparently from their previous survey in March 2011, which cited France (a long time favourite for Brits) as the most preferred, followed by Spain, then the US, Australia and Thailand.

The major reasons given for moving abroad included Improved quality of life (number 1 reason), followed by a warmer climate and experiencing a new culture. Improved work/life balance and salary related motivations came in as 4 of the top 10 reasons as well.

The Post Office Uk report also concluded those who do move abroad are living their dream with 70% of expats ranking themselves as very happy with their new life.

OSmortgages.com

 

 

Getting a deal done in the US

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Well there is no doubt it is a good time to buy in the US, from a currency exchange point of view!

The Australian dollar just hit “parity” again with the US dollar, meaning buying power for the Australian not afraid to venture outside Australian shores, is virtually unprecedented.

Here is a brief summary of the basics related to currently available US mortgages, from OSmortgages.com.

Loan Size.

Minimum US$100,000.  US lenders and most intermediaries have become restrictive about the loan size requirement and the amount of work that is required for a small loan (reading between the lines: “too hard”). In addition property vacancy and valuation issues tend to be more prevalent in lower-priced properties hence US lenders, particularly lending to foreigners, do not want large exposure to this market. This does not mean that there is no US lender out there at all that will do loans for foreigners for less than 100k, just not lenders that OSmortgages currently deal with. This situation may change in future and I will keep you posted.

Loan Ratios – LVR or LTV.

Generally non-residents need “30% down” as they say in the USA. Loan ratios exceeding 70% will be sufficiently rare, so keep this in mind. Now this changes if you have a large loan requirement – above US$1million. For these loans generally 60% LVR is the maximum usually available. All large loans should be treated as case by case however and an individual enquiry about your case should be made.

Interest rates.

Interest rates available to non-residents start around 4.7% and are all fixed. Variable only kicks in after a short (3 or 5 year) initial fixed term expires. Otherwise you can arrange up to 15 years fixed rate for investment properties and up to 30 and 40 year fixed rates for a home (owner-occupy). An indicative 15 year fixed rate right now is 4.875%.

Refinancing and Cashout.

A common enough question. Refinances and those in order to extract equity are available up to 60% LVR, or 50% lvr if loan value is > US$1million…. and depending on your lennder, on a case by case basis.

Servicing requirements.

You will find the basics about what it takes to satisfy a US lender you can afford the loan are not too dissimilar to Australian lending requirements. However there are a few differences. One such is the request to know specifically the value of council rates and strata fees you incur on existing properties in Australia or elsewhere. In the US, lenders specifically deduct these amounts from income when calculating debt-to-income ratios. They also like to see “reference letters” from banks where you have been a customer in the past.

Process….

Let us know your specific situation by getting in touch. If your general scenario meets the above requirements, the first step will be filling in a preliminary questionnaire, so we can gauge your US borrowing ability. This website will be updated with more tools and calculators to make this stuff easier to work out, quickly, so stay posted.

Daniel, OSmortgages.com