Expat Mortgages
As a British expat living abroad, you may want to purchase a property for when you return or perhaps to rent out as a buy to let.
Sometimes this can turn out to be more difficult than expected. It can be challenging to find lenders that are happy with your income being paid in a foreign currency and no UK address.
Fortunately, there are still plenty of expat mortgage options for you and we take a look at the choices you have and how to improve your chances of success.
There are many reasons why British expats choose to own property in the UK. Often it will be purely driven by the potential returns that the UK property market can provide. Or more simply it is a property that will one day be home again upon their return.
When looking for a UK mortgage while living abroad there are a number of factors that will influence your eligibility for an expat mortgage or remortgage.
We have put this guide together so that you can learn how expat mortgages work, how much deposit you’ll need and how to apply for one.
What is an expat?
Expat, short for expatriate, is a person who no longer lives in their native country.
So this would be a UK citizen who is now living (and maybe working) overseas. It maybe that the intention is to work abroad for just a few years and then return, or perhaps to fully settle and remain overseas.
Expats can be employed or self-employed.
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The term expatriate comes from two Latin words, “ex” meaning “out of”, and “patria”, meaning “country”. An expatriate is exactly that, someone who is living in a different country from the one they were born and brought up in.
Expat mortgages explained
An expat mortgage is needed when you would like to buy a property in the UK but are currently living and working abroad as an expat, or where you have recently moved back after spending an extended amount of time in a different country
For example you are a UK national who is currently living in Dubai, with no immediate plans to return, and wish to purchase an investment property in London.
This poses a few problems with respect to applying for a mortgage. Firstly, there may be a time difference that makes it harder to deal with UK businesses. Secondly, providing proof of your earnings, deposit and current status can be troublesome.
Mortgage choices
The basic mortgage choices are the same as for any other mortgage:
- Repayment mortgage
- Interest only mortgage
- fixed rates
- tracker rates
- discount rates
Types of mortgage
There are a good choice of mortgages available for expatriates, either to purchase property or to remortgage one that is currently owned.
Residential mortgage
This would be for a UK property for your family live in while you are working overseas. It would enable you to have a property available for when you return to live in the UK.
Buy to let mortgage
An expat buy to let mortgage would be needed to remortgage your UK home on to a buy to let basis because you are moving abroad and intend to let the property. Additionally, many expats recognise the returns that are possible from the British property market and wish to purchase property and build up a portfolio.
Holiday let mortgage
Purchasing a holiday let property in the UK is very popular amongst the British expat community. The returns are excellent and often higher than an equivalent buy to let. This would require a holiday let mortgage.
Remortgages
The need to keep on top of your mortgage interest rate still applies even though you may live some distance away. As for a UK mortgage, once your product term expires you will be switched to the SVR unless you lock in a new rate. Remortgaging is also an opportunity to capital raise by releasing equity.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
How do expat mortgages differ from other mortgages?
Many of the high street lenders will not accept mortgage applications from expats so it can be harder to get a mortgage in the first place.
This tends to be because these mainstream lenders have set processes for mortgage applicants, most of which an expat will not conform to!
The first thing all lenders will do is to run a credit check on the applicants. Where your address is overseas this doesn’t allow them to get back the expected information to determine your creditworthiness.
Also it is usual for expats to be paid in their local currency rather than Sterling. Your mortgage repayments will be in GBP but with currency fluctuations the amount you need to send back to the UK can change monthly and this affects the affordability of a mortgage.
You will find that the interest rates charged are slightly higher than if based in the UK. Again, reflecting the lender’s view on risk.
Eligibility criteria
For the average expat it is more difficult to secure a UK mortgage and the process will inevitably be longer. But many expats do successfully obtain mortgages and the factors below are some of the more important criteria that a lender will look at.
Employed earnings
Lenders will prefer applicants that work for an internationally recognised company but other smaller employers will also be acceptable.
You will need to provide proof of your income, with the equivalent of payslips and P60/annual summary. You may need to get these documents translated into English for the lender.
If your salary is paid into a UK bank account it will be far easier for the lender to verify your income.
Self-employed earnings
As with all mortgages, providing proof of earnings is a bit more complicated for the self-employed.
You will need to provide several years of self-employed accounts detailing your earnings.
These need to be approved by an internationally recognised accountant. Suitably qualified (local equivalent of ACA, FCA, ACCA, FCCA, IPFA or ICAS).
Credit history
Having a strong UK credit profile will help you secure the best deals.
Understandably, the longer that you have lived overseas, the less information will be contained in your credit report. There are no international equivalents to our own Credit Reference Agencies.
Mortgage deposit
As with most mortgage situations that have a raised level of risk, the deposit requirements are generally higher.
Expect to have a mortgage deposit of 25% of the property value requested by most lenders. Some may go a bit higher and some a bit lower, depending on the proposition.
The more deposit you can afford to put down, the more likely you are to get the best terms.
Keep a UK presence
Where possible maintain a correspondence address in the UK, perhaps at family member’s home.
Your credit file will be greatly improved by keeping a UK bank account open and if possible a UK credit card as well.
Paperwork!
Without the benefit of a credit profile, bank account and the normal HMRC tax documents, lenders can be left in the dark about certain parts of your finances.
Keeping a good paper trail will be very helpful. From income that you declare to property purchases and sales, keep everything that you can.
Be mindful that the source of your mortgage deposit needs to be crystal clear, so statements, letters or correspondence is vitally important.
Country of residence
Your ability to secure an expat mortgage will depend on the country you are living in.
The list of acceptable countries will change regularly, largely due to socio-political and money-laundering reasons.
Banned countries could include those that have UK Government sanctions imposed, or where the country is in a war zone or is economically unstable.
Are you a seafarer?
If you are part of a ships crew you will be undertaking your employment duties overseas, in international waters.
Mostly this will be for upto six months each year and therefore does not qualify as an ‘expat’.
Don’t worry, you have not been forgotten!
A Seafarer Mortgage recognises your occupation, including your tax free earnings status.
Speak with an expat mortgage expert
With most high street lenders unable to offer mortgages to expats you will need an expat mortgage broker for these kinds of specialist mortgage.
Experienced brokers will have access to a range of expat lenders which will include private banks who can help with large mortgage loans of £1 million or more.
Bespoke arrangements can be sourced that take into account foreign income, family trusts, offshore income and wealth.
How we can help you
Respect Mortgages has connections to one of the oldest and most respected independent mortgage brokers in the UK. They have been trading for over 45 years and are one of the best specialist mortgage brokers you can find.
Their experienced expat team has access to a number of lenders, all of whom are willing and able to help British expatriates with their mortgage needs.
They can work at a pace suited to your international lifestyle and can accommodate different time zones and methods of contact.
