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Expat Investor : March 2008
March 2008 EXPAT INVESTOR 13 QUOTE, UNQUOTE Butterfield Bank (Guernsey) Limited (the "Bank") is licensed under the provisions of The Banking Supervision (Bailiwick of Guernsey) Law, 1994, as amended and under the Protection of Investors (Bailiwick of Guernsey) Law, 1987. The Bank's registered office is situated at Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3AP. Serving individual and institutional clients for over thirty years, Butterfield Bank in Guernsey has built a strong reputation for delivering a truly first class service, offering tailored solutions to our clients' global wealth management requirements. The special relationship enjoyed with our clients has no doubt helped this reputation grow. In turn this has enabled our individual clients to both plan and realise exactly where they want to be with their finances and for our institutional clients to work with a market leader in administered banks, administered trust companies and third party fund administration services. For more information, telephone: Jeff Swain on (44) 1481 705252, David Queripel (44) 1481 733254 or email: firstname.lastname@example.org Butterfield Bank A powerful partner www.butterfieldbank.gg Bahamas | Barbados | Bermuda | Canada | Cayman | Guernsey | Hong Kong | Malta | Switzerland | United Kingdom Private Banking Discretionary Investment Management Lending Custody Trustee Services Corporate Administration Third Party Fund Administration Administered Banking and Trust Company Services Fast Facts 33006 draws against the available credit limit. Remortgaging to chase the best deal or product every two or three years may be realistic onshore, where the competition for your business is such that free legal fees or valuations are often available. Offshore, however, this is seldom the case, so it is vital to get the loan choice right first time. Otherwise, you need to factor in the very real legal, bank administration and surveys costs. Budgeting can be very important for those who have just bought their first home. This group is most likely to want to have fixed housing costs, so a fixed rate loan might seem attractive. Remember, though, any fixed rate loan is highly likely to have significant penalties of at least 3% for making early repayment of capital. If you know you will receive a bonus and you want to pay off a chunk of your loan early, this is probably not the correct loan style for you. There are other ways of resolving the apparent dilemma between budgeting certainty and repayment flexibility. Base rate tracker loans effectively give protection that your interest rate will only rise if the Bank of England moves its interest rates. This means you are protected against banks introducing their own rate changes and you are also protected against banks passing on interest rate rises which are higher than any change in the base rate. Yet such loans usually allow for penalty-free repayment of capital after just 12 months. A good solution for many, therefore, is a lifetime base rate tracker product, as borrowers have a clear idea how their rate can and will move both up or down, there is the flexibility to reduce the loan over time and, providing the initial rate is competitive, borrowers know that their loan is going to stay that way until repaid, so there are no concerns about the cost of remortgaging two years down the line. For more infor mation visit www.offshoreonline.ORG How to plan your offshore mortgage One of the most common reasons cited by expatriates for moving abroad to live and work is the desire to upgrade their main home. However, if you have recently left the UK and followed the correct advice and told your lender you were moving abroad, or if you have recently tried to buy a new home in the UK from overseas, you may have been surprised by the generally poor range of choice available amongst lenders and the length and complexity of the process. The reason for this is simple -- most building societies have little or no experience of lending to expatriates, so they view them as higher risk. Because the property is usually rented out if you are living abroad, the first reaction of many lenders is to class it as a buy-to-let and so a commercial purchase, even if it is the only home you own. The net result? The lender levies a higher rate of interest than if you were buying in the UK. But it is not all gloom and doom -- there are good-quality lenders in the market who do understand the needs of expatriates and who will offer market leading rates to homebuyers abroad. But many expatriates simply do not have the time or know where to look to find them, which is why it usually pays to use a specialist broker to do as much of the legwork as possible. Note, though, that advisers based overseas are unlikely to be regulated and certainly will not be supervised to the same extent that UK-based Financial Services Authority (FSA) regulated companies are. With email and easy web access, it is now as quick to deal with a broker in the UK as it is to speak to somebody locally, but crucially, with a UK broker, you know you will be dealing with a regulated professional who has your interests at heart and who will be open and honest about all aspects of the process. A UK-based broker will also be in a better position to speak to lenders personally, so a good tip is to ask them to negotiate those extra benefits which can make the difference between a product which really does fit your needs and one which is just off the shelf. Understanding the needs of the overseas buyer, your personal circumstances, how these can and do change quickly and without warning is critical if the correct loan for you is to be negotiated. Expatriates can find contracts ending suddenly, they can be caught in political unrest, terrorist attacks and outbreaks of war, yet, at the other extreme, they can suddenly receive a sizable annual bonus which gives them the means to pay off a large part of any home loan. So choosing the correct loan type is an essential first step. This is where the overseas buyer will notice the first big difference from the UK market -- the range of products available is far narrower. Fixed, variable, tracker and discounted products are all available , but the more sophisticated types of mortgage, such as revolving credit and offset loans, are offered by a handful of lenders only. With some products, this will be a tax driven question -- onshore, offsets make sense for a specific client profile, whilst offshore, if the same client pays no tax, any benefits are less clear. In such circumstances a DIY offset can often be set up using a gross paying deposit account. A narrow group of clearing banks offer 'lifestyle' loans, which allow the borrower to draw against a pre- agreed credit limit at any time, so he might repay a loan over five years and then want to pay for refurbishments for tenants, for example. In such cases, he simply Tim Harvey, Managing Director, Offshoreonline.ORG, explains how to set about securing an offshore mortgage.
January February 2008