If you live overseas and are beginning to investigate UK mortgages, you may find the process difficult and confusing as UK lenders continuously tighten their lending requirements. In return, this has meant that specialist advice is sometimes required to help you secure a mortgage to purchase a property in the UK.
When going through the process of seeking and applying for a UK mortgage while living overseas, multiple factors will affect your eligibility.
Before deciding upon which lender to use for your UK mortgage, it is highly advisable to speak to a professional expat mortgage advisor who can search the whole expat mortgage market and assist you with your application after discussing your requirements. When using a professional mortgage advisor, they tend to have access to a more comprehensive range of products. They can also advise you on options that you were not aware were available.
This article will provide you with a brief overview of eligibility criteria in the ever-changing mortgage market. It is important to remember that if you do meet the requirements for a mortgage, your personal circumstances will significantly affect the rates you are given.
If you have questions or would like to speak to a professional to discuss your options, please feel free to request an introductory call with one of our mortgage specialists, who can evaluate your circumstances and provide guidance and advice.
All mortgage lenders will assess individuals’ eligibility for a mortgage based on risk; this is the same process whether you are a resident or non-resident.
During the banking crisis of 2008, one of the main issues was that lenders were ‘over-borrowing’ to ‘risky’ people; this meant that they were lending too much money to people who didn’t have a high enough income to make their repayments.
Since this, lenders have tightened their restrictions. A much more detailed investigation into individuals and their financial and employment affairs is now carried out to ensure that the amount borrowed is affordable to ensure that the individual can make their repayments on time, not default.
When applying for a UK mortgage from overseas, the lender considers additional factors, such as currency fluctuations, economic uncertainties, and lack of international credit scoring. This means that the risk is much higher for the lender to grant a mortgage to an expat. The mortgage process for expats will typically take more time, and more information will have to be provided.
The above should not deter you from applying for a UK mortgage, but it should be considered to know what to expect from the process. Typically, expats will pay a higher rate of interest and fees and may also be more limited regarding the amount that can be borrowed.
This will primarily depend on two key factors:
– The deposit amount (loan-to-value)
– Your total provable income
Many UK lenders will offer mortgages between a maximum of 3.5-6 times your total annual income. However, when lenders decide on the amount, they will also consider other factors such as your employment history, other liabilities, how many times you have applied, and your financial dependents (if any).
If you are looking to apply for a buy to let mortgage, your expected income from the rent charged will also be considered when deciding on the maximum mortgage value.
LTV is the amount that you need to borrow vs the property value. One of the critical factors determining which mortgage products are available to you is the loan-to-value.
If you are looking to purchase a property as your primary residence, the LTV may be up to 95% (meaning you can borrow up to 95% of the property’s value), even if you are an overseas resident. These mortgages, however, are expensive and come with fees and interest charges attached at a higher-than-normal rate.
For this mortgage, lenders will do a very detailed check against you as the risk to them of the property entering negative equity is much greater (the borrowed amount ending up higher than the value of the property).
Below you will find a brief list of factors that could increase your chances of a successful UK mortgage application.
This is much simpler for individuals who are employed rather than self-employed as it is much simpler to provide pay slips to prove past income.
If you are self-employed, you will be required to provide your accounts backdated for several years, and an internationally recognized accountant should be used.
Some banks will require income to be paid into a UK bank account. However, this is not always necessary.
A UK credit history is not essential to apply for an expat mortgage; however, having a strong UK credit history can help with seeking the best deals and rates.
Suppose you have lived abroad for an extended period. In that case, likely, your UK credit rating will not be of any assistance in the application process as international credit rating agencies do not exist.
By keeping a credit card or a residential address (such as your parent’s address), you can maintain financial association with the UK, meaning that you are more likely to be able to apply for a broader range of mortgages. This is because UK lenders can still see your financial footprint, therefore increasing the information they can access.
However, it is essential to understand how the above may affect your tax affairs, and professional advice should be sought.
The usual approach of a British expat is to approach the well-known UK banks that offer mortgages. However, you may be able to lend from non-UK-based lenders, so it is a sensible idea to scour the market or use an expert ex-pat mortgage broker.
If you are a UK resident, applying for a mortgage is usually quite straightforward, most individuals will simply go to a comparison website or visit their current bank to discuss mortgage options.
It is essential to search the market and explore your options when applying for an ex-pat mortgage which can be time-consuming. This is where the use of an ex-pat mortgage broker is useful, this can be slightly more costly than going through the process alone, but it will provide you with peace of mind that you are making the correct choices and a much greater chance of securing a mortgage at a reasonable rate.
Many mortgage brokers will have access to products that are not shown on lender’s websites, and therefore using a broker will open doors to more options and better rates that you would not be aware of if you approach a lender directly.
Lenders make their decisions based on all the information that you provide. Applying for an expat mortgage requires a lot more information than a typical mortgage application, and often this information is necessary early in the process.
Providing information can often be time-consuming and frustrating; however, providing all the information needed at the start of the process can help stop delays further down the line. It is quite common for applications to be rejected later during the underwriting process when it is discovered the individual cannot provide all the documentation to satisfy the lender and their lending criteria.
Deposits are mandatory when purchasing any property in the UK, whether you are an ex-pat or not.
The UK has strict anti-money laundering regulations, which means that you will be required to go through multiple due diligence processes, including providing detailed evidence of the source of the deposit.
While this may be a frustrating part of the process, keeping a detailed record of any lump sum past payments will assist you in the application process.
When individuals move overseas and own a UK property, a popular choice is to rent the property out. Therefore, buy to let mortgages are commonly available to expats as they are a necessity.
Unlike with a residential mortgage, the deposit required is usually much higher, and the LTV can be limited to just 60% in some situations.
In almost all cases, a significant deposit will be required for a buy-to-let mortgage in combination with meeting all the eligibility criteria highlighted in this article.
Due to the complexities above and the likelihood that a specialist broker will have access to unique mortgage products not available to individuals, it is highly recommended to seek advice when applying for a UK mortgages as an expat.
Requesting an intro to one of our trusted UK mortgage brokers takes only a couple of minutes, and in doing so, you will be able to obtain a free consultation that will provide a general overview of your mortgage options.
