This email is a summary of the virtues of the Rothschild according to Stephen Dewsnip. The email, for obvious reasons, left out the “downsides” of this unconventional mortgage, a mortgage that according to him allowed the borrower to not be exposed to unnecessary risks..
From: Dewsnip, Stephen
Sent: 08 November 2006 09:16
Subject: RE: Mtgs.
Thank you for your enquiry regarding Rothschildâ€™s Spanish mortgage service, CreditSelect Series 4, and I am now pleased to provide further information for you.
CreditSelect Series 4 is neither complicated nor expensive, and has been designed to enable you to make the funds invested in your Spanish property work harder for you.Â It is not a conventional mortgage facility but rather a financial planning tool that creates liquidity for you by providing a loan for investment purposes.Â It provides an initial â€˜cash-backâ€™ facility, the prospect of an annual income stream, the opportunity to diversify between asset classes, the prospect of long term capital growth through a diversified investment portfolio and, depending on your personal circumstances, tax planning opportunities.Â Most importantly, as far as we are concerned, the investments acceptable to us each have a 100% capital guarantee from highly rated, large European banks at the end of 10 years.
CreditSelect Series 4 is available to both residents, whose who live in Spain for longer than 183 days per annum, and non-residents and in keeping with Rothschildâ€™s cautious and conservative approach has been designed to ensure that you are not exposed to unnecessary risks which, when considering that the product involves registering a mortgage over your Spanish home, we regard to be crucially important.Â There are no upper age limit restrictions or documentary proof of income required, although we do consider income and asset levels as part of our underwriting process.Â It is available where a property is owned by a company, as well as by individuals, and all paperwork and documentation is streamlined and standardised to make the application and completion process as smooth as possible.
In simple terms, it works by arranging a loan secured by a mortgage over your Spanish home with the loan proceeds being invested in a 100% capital guaranteed investment fund that matures after 10 years.Â Since the investment fund does not actually pay income throughout its 10 year period, we are happy for interest on the loan to roll-up and at the end of this period, the principal loan amount (ie. excluding any initial cash-back, rolled-up interest, capitalised fees and annual loan drawdowns that we permit to provide an â€˜incomeâ€™ stream) is repaid from the maturing investment.Â Of course, the investment funds are designed to return greater sums that the minimum guarantees and the aim is that the maturing investment fund will exceed the total loan balance, including all of the items listed above.Â As Rothschild is neither an investment nor tax adviser in this regard, we distribute the product via a network of financial advisers based predominantly in Spain and, should you wish, I would be pleased to provide you with a list of such advisers, with whom we are comfortable in dealing, in order that you can make direct contact.
Like your Spanish property, CreditSelect Series 4 loans are denominated in Euros, as is the investment, thus ensuring that you are not exposed to any unnecessary exchange rate risks.Â We lend up to 75% of the propertyâ€™s current market value which, from the point of view of Spanish inheritance tax planning (something that, regrettably, is often overlooked by not only purchasers but also estate agents, property developers, and even Spanish lawyers and notaries), is considered to be adequate given the tax rate tapering effect, valuation methods acceptable to the Spanish authorities, and the interest roll-up feature of our facility.Â Our loans start from â‚¬200,000 with effectively no upper maximum, meaning that the product is available to owners of residential property valued at â‚¬270,000 or more.
With a CreditSelect Series 4 mortgage, you can take up to 5% of the propertyâ€™s market value as initial capital or equity release and each year we compare how the investment fund has performed over the previous 12 months to the interest rate charged on the loan and permit an additional loan drawdown representing the surplus investment return, capped at 3% of the investment fund value.Â Since this is structured as a loan drawdown rather than as a withdrawal from the investment fund, it is not classified as income and hence is not liable to income tax assessment.Â Depending on your personal circumstances, this may also be beneficial to you.
In summary, CreditSelect Series 4 is not designed to be the most aggressive and risky product in the marketplace, in fact quite the opposite – we aim to help our clients in a conservative, cautious and well-structured manner without exposing them to undue risk.
I am enclosing a copy of our term sheet, which sets out the facilityâ€™s terms for non-residents in more detail, together with a copy of an article I wrote earlier this year on some of the tax rules in Spain, which you may also find of interest.
I look forward to hearing from you.