International Mortgage – Finance your London Property Loan with a SGD home loan

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Singapore banks have been expanding their overseas properties portfolio since 2012. This is good news for investors who have invested in London properties. Investors now have an option to take a London property loan with a Singapore bank right upon purchase. They can choose to take up the financing in either Singapore Dollars (SGD) or British Pound Sterling (GBP), depending on your financial and cash flow requirements. UK Citizens, PRs and residents can also apply for the home loan as long as the property is not for owner occupation.

Buyers need to note that the option to finance in SGD may not be a permanent service offered by the banks.

Depending on market conditions and other factors, banks may temporary stop this service. For example, Lloyds TSB International pulled out of the international mortgage service in 2012. If buyers are keen, they should secure the loan as soon as they purchased the property.

London Property Loan in Singapore Dollars

Currently in Singapore, investors buying residential properties for investment purposes can chose to finance in SGD dollars, depending on their financial and cash flow requirements.

Example of a loan package:

Minimum Loan: SGD $300,000

Loan to Value: Up to 80%

Interest Commencement: From date of first release/ drawdown/ settlement/ disbursement

Interest: Spread + Benchmark (eg 2.5% + 3 Month SIBOR)

This is a short illustration of how the Currency Movement will affect your loan at disbursement:

Application

At point of loan application, assume FX rate = 2.01

Purchase Price: GBP $327,000

70% Loan: GBP $228,900

Loan converted into SGD: $460,089 (FX rate = 2.01)

This loan amt will be offered in the loan contract.

On drawdown/ settlement/ disbursement

Prior to settlement, the lawyer will advise the client on the applicable payments (ie balance of purchase price, strata levies, stamp duty etc). He will also liaise with the bank to release the loan.

a) At disbursement, assume FX rate = 2.08 (FX moves in favour of GBP)

70% Loan: $228,900 GBP

SGD needed to give developer: $476,112 (FX rate = 2.0800)

Bank will disburse loan based on previously approved loan of SGD $460,089.

Borrower will have to top up the difference of SGD $476,112 – $460,089 = SGD $16,023

Monthly installment will commence based on SGD $460,089.

Purchase PriceGBP $327,000
Loan amount (70% of Purchase Price) Exchange rate: 2.01GBP $228,900 or SGD $460,089
Loan offered in Letter of OfferSGD $460,089
On Settlement/ First release
Amount payable to Developer, Exchange rate 2.08:GBP $228,900 or SGD $476,112
DifferenceSGD $16,023 ShortfallBorrower will need to cover the shortfall in cash.Bank will disburse SGD $460,089.Monthly installment will be based on SGD $460,089.

b) At disbursement, assume FX rate = 1.9680 (FX moves in favour of SGD)

70% Loan: GBP $228,900

SGD needed to give developer: $450,475.20 (FX rate = 1.9680)

Bank will disburse loan based on new loan amt of SGD $450,475.20.

Monthly installment will commence based on SGD $450,475.20.

Purchase PriceGBP $327,000
Loan amount (70% of Purchase Price) Exchange rate: 2.0100GBP $228,900 or SGD $460,089
Loan offered in Letter of OfferSGD $460,089
On Settlement/ First release
Amount payable to Developer, Exchange rate: 1.9680GBP $228,900 or SGD $450,475.20
DifferenceNo ShortfallBank will disburse SGD $450,475.20.Monthly installment will be based on SGD $450,475.20.

Advantages of financing in SGD

For investors and Singapore citizens working in Singapore and drawing a SGD salary, one of the main advantages is the ease of financing your investment in the same currency as your salary.

– Transparent loan rates with SGD loans pegged to inter-bank rates like the 3 month SIBOR.

– Lower interest rate compare to a London bank

– Receive services from a local Singapore bank

– Secure your loan at point of purchase and minimise uncertainty.

– Faster approval

Because the loan is offered by a local Singapore bank, this means you can contact the bank anytime here in Singapore and receive timely services. In additional, you can secure your loan as soon as you put down the deposit to purchase the property.

Risks of not securing a loan early

Most of the projects launched here in Singapore do not required buyers to secure a loan. Buyers will only need to get a loan closer to settlement. The risk of not securing a loan early includes

– Interest rate risk

– Change in Govt regulation

– Change to Loan to valuation quantum resulting in lower LTV

– Change in regulation relating to financing location and size of unit

London Taxes and other charges

Speak to your London Tax advisor or lawyer to find out more. The following is provided as a quick reference only. The list of charges below may not be exhaustive.

Stamp DutyStamp duty rates vary from state to state, do take this into account when you purchase your property.
Income TaxIncome tax is levied on the rental income. Letting agent’s fees, mortgage loan interest, service charges and ground rent can be used to reduce the taxable income.
Capital Gains TaxPart of Income tax. This is the tax pay on a capital gain.
Land TaxLand tax vary from state to state and may be payable.

Post settlement

Investors should consider protecting the investment by purchasing the following products post settlement.

– Building/ Fire Insurance

– Home Contents Insurance

– Mortgage Reducing Term Assurance (MRTA)

Find Out More About International Home Loan

Do you need a home loan for your overseas property? Whether you are buying an overseas property in Malaysia, Thailand, Australia, Tokyo or London, we can put you in touch with the bank that provides the best package for your needs.

You can choose to take up the financing in either Singapore Dollars (SGD) or the local currency, depending on your financial and cash flow requirements.

Fill in the form below to talk to a International loan specialist and find out more.

Package is subject to change at the Bank’s absolute discretion without prior notice. Credit facilities are granted at sole discretion of the bank. Terms and conditions apply.

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