If you’re applying for a UK mortgage but live abroad, be prepared for a complicated process.
Expatriates looking for a mortgage on a property in the UK now have a wider choice of loans. Cambridge Building Society and Tipton & Coseley Building Society have both launched new ranges of buy-to-let mortgages aimed at British people living overseas. Both ranges include fixed and discount deals, available for both new purchases and remortgaging.
About five million UK nationals live overseas, and many are keen to hold on to a home in the UK, or to invest in one to rent out. But the available mortgage options are quite restricted – and in most cases, you’ll need to get a specialist landlord mortgage.
It is possible to secure a standard residential home loan as an expat, but it’s tricky to arrange, says Guy Stephenson, director of specialist expat mortgage broker Offshore Online. “Lenders will want to see evidence that close family are living in the house. Since most expats work abroad and cannot live in two places, for the majority, a buy-to-let is the more appropriate solution.”
You will typically need to seek out a specialist lender: options include Paragon, Saffron Building Society, Market Harborough Building Society, Al Rayan Bank, Skipton International, Natwest International and Kent Reliance. And be prepared to jump through a lot more hoops than for the standard home loan.
“It can be a difficult process to secure a mortgage when clients are overseas, especially with the time difference and tighter lending criteria,” says Aaron Strutt of Trinity Financial. “Many… lenders like borrowers to work for multinational firms, have a minimum income of at least £25,000.” Interest rates tend to be higher, and a deposit of 25% is usually required.
Another factor is the European Mortgage Credit Directive, introduced in 2016, which means individuals paid in a foreign currency now come under closer scrutiny when their loan applications are assessed. The underwriting process needs to take account of possible exchange-rate fluctuations, as well as looking at a borrower’s overall financial position.
Keep the tax office up to date
Unsurprisingly, salaried expats have the greatest choice of mortgages. Lenders often exclude the self-employed, on the basis that income cannot be verified to a high enough standard, unless it is audited by a reputable accountancy practice.
Expats face tougher identity checks. Getting a correctly certified passport can be tricky if the borrower lives in a remote area without access to international lawyers, accountants or diplomats. And don’t rely on your employer to help out. “Big multinational companies… will have standard formats for issuing employee references which seldom match the requirements laid down by a lender, who is trying to underwrite on the basis of very specific individual information needs,” notes Stephenson.
It is also easier to get approval for a UK mortgage from certain countries than others. Most lenders have a “restricted” list of countries where they won’t lend (for example, countries subject to sanctions or with a weak reputation for regulation). Many African nations and some in Eastern Europe meet this category.
Finally, if you do buy, remember to keep the tax office informed. If you live abroad for six months or more per year, and rent out a property, you’ll be classed as a “non-resident landlord” by HMRC – even if you’re a UK resident for tax purposes. Wherever your income is taxed, you’ll be required to pay tax on the rent you receive.