Chartwell Associates Pte Ltd | Mortgage Advice
 

Mortgage Advice

Mortgage Advice

If you are on this page, then the chances are that you are an expatriate looking for an International mortgage.

 

The good new is that we can probably help you.

 

Over the years we have built up an expertise in international finance and an extensive network of overseas lenders, although since the GFC the number of overseas lenders has diminished greatly and lenders have become much more choosey.

 

The range and types of mortgages available in the offshore market has also shrunk and the choice is really between capital & interest and interest only. These are explained below, but to make a truly informed decision, contact us and ask for an appointment with one of our advisers.

 

Capital/Principal & Interest

(Also known as Principal & Interest or Repayment Mortgages)

This is the simplest type of mortgage. The payments you make to the lender every month pay off both the capital and the interest from the loan. Provided you keep up the payments, you are guaranteed to pay off the loan by the end of the term agreed (usually up to 25 years).

The lender calculates your monthly repayments depending on the amount borrowed, how long for, the prevailing interest rate.

If you would like to learn more about Capital and Interest Mortgages contact us here.

Interest Only

An interest only mortgage is where the lender only charges you interest on the money you have borrowed. You don’t pay the capital back until the end of the mortgage. The lender may ask you at the outset how you will eventually repay the outstanding capital and may even ask you to provide an investment plan of one type or another to repay the loan at the end of the term, but usually they will leave the repayment plan entirely up to you.

Every month, you pay interest to the lender for the duration of the loan. The lender calculates your monthly repayments depending upon the loan size and the prevailing interest rate. At the end of the loan period, the lender will expect the initial capital they lent you to be repaid in full by whatever means you have arranged.

If you would like to learn more about Interest Only Mortgages contact us here.

Interest Only Vs Capital and Interest
Investment Property, "The Real Capital Gain"

Most expats considering buying an investment property are hoping for a “capital gain”, especially since most may have seen their own property increase in value considerably.

However, when buying an investment property the “capital gain” is arrived at in a very different way and it is important that this is understood in order to really appreciate the benefits of “investment property”.

Let us consider a property bought for U$100,000 with a mortgage of 70%, U$70,000.

Most people will be hoping that the property market will rise and make a capital gain on the price paid for the property ie. U$100,000. Let us assume that the property market does rise, but at a slower pace, and after 10 years the value has risen to U$150,000.

This represents a 50% increase in the purchase price, a gain of U$50,000. However, since this is an investment property this gain, if realized, could be subject to Capital Gains Tax.

However, in the mean time the tenant has paid off the mortgage of U$70,000. It is this U$70,000 represents the real capital gain, and this is not subject to capital gains tax. This is a guaranteed capital gain and tax free. Any gain in house prices is totally speculative, potentially taxable and really only the icing on the cake.

So for an initial investment of only U$30,000 you receive a guaranteed tax free capital gain of U$70,000 and a speculative (taxable) gain of U$50,000.

If, unfortunately, you buy at the top of a “property bubble”, and (as many commentators in the press have been predicting) the property market crashes by 25%, you would still have a gain of U$45,000 tax free, plus a potentially useful U$25,000 tax loss.