Introduction
We recently helped an experienced landlord arrange a buy-to-let remortgage in Midhurst, West Sussex, to release capital towards another property investment.
Our customer had a substantial property portfolio and earned income through a combination of UK and US self-employment, overseas business interests and rental properties.
The main challenge was finding a lender willing to assess income across different countries, currencies and tax systems while providing the flexibility our customer wanted.
We arranged a two-year tracker mortgage with TSB on an interest-only basis, without early repayment charges.
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The Scenario
Our customer was an experienced property investor who owned several residential and buy-to-let properties, both in the UK and overseas.
They wanted to remortgage a leasehold flat in Midhurst to release capital towards purchasing another investment property.
The property had an estimated value of approximately £500,000, with a new mortgage requirement of £160,000. This represented a loan-to-value (LTV) of 32%, leaving substantial equity in the property.
Although the relatively low LTV was favourable, our customer’s wider financial circumstances were more complicated.
They were self-employed, with income generated through UK business activities, a US company and rental properties in different countries.
Our customer also had existing private banking arrangements, but the available mortgage products did not provide the combination of pricing and flexibility they wanted.
Their preference was for an interest-only mortgage over 13 years, with a tracker rate and no early repayment charges. This would help keep monthly payments lower while allowing them to repay or refinance without an early repayment penalty.
The Challenge
The main difficulty was not the amount of equity in the property. It was finding a lender able to understand and assess a complicated international income structure.
Self-Employed Income Across Two Countries
Our customer received income from several sources, including UK self-employment, US corporate earnings and overseas rental properties.
Some earnings were received in US dollars, creating additional considerations around foreign currency conversion and the amount of income a UK mortgage lender could recognise.
Different lenders approach foreign income differently. In this case, standard affordability calculations struggled to accommodate the combination of income sources and accounting arrangements.
US Tax Returns and Rental Depreciation
Another complication was the treatment of rental property income within US tax returns.
US tax rules allow certain depreciation deductions against rental income. These can reduce the taxable income shown on a tax return without necessarily representing an equivalent cash expense during that period.
This meant the figures appearing in the overseas tax records needed further explanation when assessing our customer’s financial position.
It was important to identify lenders prepared to examine the supporting financial information rather than relying solely on figures extracted from a standard affordability calculator.
Existing Property Portfolio
Our customer also held several properties, some without outstanding mortgages.
The wider portfolio needed to be considered alongside the proposed borrowing, including rental income, existing mortgage commitments and the overall financial position.
We also needed to ensure the mortgage structure was appropriate for the customer’s investment plans and preference for interest-only borrowing.
Finding a Flexible Mortgage Product
Our customer did not want to be tied into a mortgage with substantial early repayment penalties.
This was particularly important because they wanted flexibility to manage their property investments and potentially refinance or repay borrowing in the future.
Finding a suitable lender therefore involved considering both affordability and the available mortgage products.
What We Did
We began by reviewing our customer’s financial circumstances and the income evidence available from both the UK and the US.
This included UK tax calculations, US individual tax returns, corporate accounts and overseas rental income records.
We also examined the treatment of depreciation within the US rental accounts to understand how the accounting figures related to the income being generated.
Given the number of properties involved, we reviewed the wider portfolio, including property schedules, rental agreements, existing borrowing and available equity.
Researching Suitable Lenders
We carried out whole-of-market mortgage research, considering mainstream banks, building societies and specialist lenders.
The research focused on lenders able to consider the customer’s international income arrangements, existing property portfolio and interest-only borrowing requirements.
We also looked at how lenders approached foreign currency income and whether their assessment methods could accommodate the supporting US accounting information.
Rather than relying entirely on standard affordability calculators, we contacted lender representatives in advance to discuss the circumstances and establish how the application could be considered.
Presenting the Income Evidence
An important part of our work was organising the financial information so that the lender could understand the different income sources.
This involved presenting the UK and US tax evidence, explaining the overseas business income and highlighting the treatment of rental depreciation within the US accounts.
We also obtained supporting personal and business bank statements, property information and tenancy agreements.
This helped provide a clearer picture of the customer’s financial circumstances than a basic income calculation alone.
Reviewing Capital-Raising Options
We considered how capital could be raised against the customer’s existing property portfolio, including refinancing options involving more than one property.
The objective was to identify an appropriate way of accessing funds for the next investment while retaining flexibility over the existing properties.
Following our research and discussions, we identified a suitable buy-to-let mortgage with TSB.
The Solution
We arranged a buy-to-let remortgage with TSB, using a two-year tracker product.
The mortgage was structured as follows:
| Mortgage detail | Arrangement |
| Property location | Midhurst, West Sussex |
| Mortgage type | Buy-to-let remortgage |
| Property valuation | Approximately £500,000 |
| Mortgage amount | £160,000 |
| Loan-to-value | 32% |
| Repayment method | Interest-only |
| Mortgage term | 13 years |
| Initial product | Two-year tracker |
| Early repayment charges | None |
| Lender | TSB |
The tracker mortgage provided the flexibility our customer wanted, without early repayment charges.
The interest-only arrangement also helped limit their ongoing monthly mortgage payments, although the capital balance would remain outstanding and need to be repaid at the end of the term.
Why This Solution Worked
TSB was able to accept the customer’s overall financial circumstances and provide the borrowing required for the remortgage.
The application involved a substantial amount of supporting financial information because of the mixture of UK and US income, business accounts and rental properties.
Our review of the overseas accounting records, combined with early lender discussions, helped us identify an appropriate route for the application.
The recommended tracker mortgage also suited the customer’s plans by providing flexibility to repay or refinance without an early repayment charge.
This was an important consideration alongside the mortgage’s affordability and the customer’s preference for interest-only borrowing.
The Result
We successfully arranged the TSB buy-to-let remortgage, providing borrowing towards our customer’s next property investment.
The mortgage combined an interest-only structure with a two-year tracker product and no early repayment charges.
Despite the complexity of the customer’s international income and accounting arrangements, we were able to identify a lender and product that accommodated their circumstances and borrowing requirements.
What This Case Shows
Having several sources of self-employed income, particularly where earnings come from overseas, can make mortgage applications more complicated.
Foreign tax returns do not always present income in the same way as UK accounts, and lenders can differ in how they assess overseas earnings, rental income and business profits.
This case demonstrates the importance of reviewing the underlying financial information, understanding the relevant lender criteria and discussing complicated circumstances before submitting an application.
It also shows that having substantial property equity does not remove the need to satisfy a lender’s affordability and underwriting requirements.
Need Help with a Complex Buy-to-Let Remortgage?
If you are a landlord with overseas income, multiple properties or complicated self-employed accounts, Kerr & Watson can help you review your mortgage options.
We provide independent, whole-of-market buy-to-let mortgage advice, including remortgages, capital raising and portfolio landlord finance.
Contact Kerr & Watson to discuss your circumstances and find out which mortgage options may be available.
