The design of the loan/credit in England

credit

If you are not a British citizen, but still intend to take out a loan in this country, then you should contact a small private bank. Private banks in England are more favorable to foreigners who want to borrow money from them than state-owned banks.

Credit institutions should first make sure that you are able to pay off the debt, as they are interested in making money on you in addition to getting their money back. It is impossible to give general advice on getting a loan in this country. Each case of applying to the banks of England is considered individually, and there is no single approach to applicants. But there are certain principles that have been developed over the years, knowing which, you can have a certain advantage over other borrowers, applying for a loan in any of the banks of this country. It is also worth noting that many banks in this Kingdom now use very fashionable and common scoring systems.

What features of lending are present in England?

In general, we can say that the most popular and widespread type of lending today is the “Mobile Rate”. In this case, the rate is directly related to the rate of the British central bank. The applicant can also take out a loan with a fixed rate. Of course, loans are available to consumers, where the applicant will pay only the bank’s interest or only the amount itself, or at the same time interest with the principal amount of the debt.

Whether you can get money to use in an English bank depends on how much you can convince the bank of your solvency and what documents you will be able to provide. And how you will do it — decide for yourself. Alternatively, you can seek specialized help from a credit broker. But here is the most important advice English banking organizations value real estate clients the most.

Your home for them is a guarantee of repayment of the loan taken. The fact is that today the most valuable property that a person can possess is real estate. It can be a house, apartment, land, part of an office, etc. All this has a huge value and such values are actively accepted by banks as collateral, issuing large loans on favorable terms.

If you have real estate at your disposal, you prove your solvency to any bank. In combination with a good credit history, such a client can count on a profitable loan with a very low interest rate.

There is also such an opportunity as obtaining a loan under the Investor program. Thanks to this program, any foreigner can get a residence permit. And in a country like the United Kingdom, everyone would like to live not as a foreigner, but as a resident and citizen who has equal rights with all other people. But this program is only for those who are willing to invest in UK securities in the amount of one million pounds. Very often, rich and famous go to live in the UK under this program.

The investor is entitled to a loan secured by this amount. He invests in the securities of this country and gets back 80% of the amount. Thus, the investor opens his credit history in England, which gives him the right to apply for a new loan. Someone who has invested a million pounds in the British economy, together with his family, can now live in the UK, having received a residence permit. Oddly enough, the Investor program is the easiest way to get a loan in England for a foreigner, but not the most profitable, especially for the average person.

Description

It may take up to 5 to 15 business days for your loan application to be processed by the Bank of England. The maximum loan amount is determined from the assessment of the Borrower’s solvency. For housing and education loans, UK Banks take into account the income of Co-borrowers

By main place of work and any of the following types of income:

Income from another place of work, if the term of the employment contract exceeds 6 months.

Income from private practice.

Income of the Borrower’s spouse at the main place of work or pension.

From the commission amount, which is the interest on the mortgage loan, you can return the % through a tax deduction.

If you annually receive the amount from the deduction(the tax service transfers it at the same time at the beginning of the year) you will drive into debt reduction and will significantly reduce expenses.

If there is an opportunity to re-credit, at a lower percentage or for a shorter period of time – use it.

Mortgage in the UK (England)

A mortgage (loan for the purchase of real estate) in the UK is issued to both residents of this country and non-residents. Mortgages in England can be obtained for the purchase of residential and commercial real estate. 

Benefits of mortgage

A mortgage, of course, allows the borrower to purchase a property worth several times more than the available savings. In addition, the mortgage allows you to multiply the income on the invested capital. Let’s assume that the current income from renting a property is 5% and the property is growing in price by 10% per year. When buying a property without a loan, the investor will receive 15% of the return on the invested capital. In the case of a purchase involving a mortgage for 75% of the value of the property (assuming that the rental income will cover all the costs associated with the mortgage), the return on invested capital will be 40% (price increase / invested capital). 

Mortgages also provide effective protection in the event of inflation or a weakening of the mortgage currency, as in these cases the real value of borrowed funds decreases. 

The mortgage is usually issued for 25 years. However, the loan can be repaid or re-financed on more favorable terms in 1-2 years. In practice, investors refinance a mortgage every 2-3 years, returning the invested funds (equity release) due to the fact that due to the increase in the cost of collateral and improving conditions in the mortgage market, banks increase the loan amount secured by the same property. For example, if you purchased an apartment for 500,000 pounds with a 70% mortgage (350,000), then if prices increase by 20% in 2 years and credit conditions improve from 70% to 75% of the cost, in 2 years you will be able to get a mortgage for the same property in the amount of 450,000 (600,000 x 75%), repay the original loan of 350,000, and return 100,000 of the original invested 150,000. In case of refinancing, the returned invested funds are not taxed. 

How to get a mortgage in England

In the current mortgage market, the borrower’s annual income should be at least 30,000 pounds. It is also possible to attract a loan without proof of current income, if the borrower has free funds or assets in the amount of 2,000,000 pounds or more. In the latter case, it is possible to attract mortgages from banks that specialize in wealthy clients. 

Proof of income is a letter from the employer, a tax return, financial statements certified by an internationally accredited accountant, etc. Usually, bank statements for the last 6 months are required, confirming regularly received income (salary, dividends, rental income, bonuses, etc.). Creditor banks accept as income not only salary, dividends or profits, but also income from renting real estate or other property. 

When obtaining a mortgage on the basis of assets, you can provide a document on the ownership of real estate, funds in a brokerage account, proof of investment, an extract from the securities account, a statement on bank deposits, etc.

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