UK Mortgages For Non-Residents & Expats

If you live overseas and want a mortgage, it can be a little confusing. We cover everything you need to know about expat mortgages.

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 which lender to use for your UK mortgage, it is highly advisable to consult with a professional expat mortgage advisor. These experts have an in-depth understanding of the whole expat mortgage market and can guide you through the application process after discussing your requirements. Their experience and knowledge give them access to a more comprehensive range of products and the ability to advise you on options you may not have been aware of. This article will briefly overview eligibility criteria in the ever-changing mortgage market. It is important to remember that if you do meet the requirements for a mortgage, your circumstances will significantly affect the rates you are given.

The Difficulties – Ex Pats Applying for A UK Mortgage

All mortgage lenders assess individuals’ eligibility for a mortgage based on risk; this process applies whether you are a resident or a non-resident.

During the 2008 banking crisis, 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 then, 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 and that the individual can make their repayments on time and 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 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.

How much can an expat borrow for a UK mortgage?

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 (including the stability of your job and the industry you work in), other liabilities (such as existing loans or credit card debts), how many times you have applied for a mortgage in the past, and your financial dependents (if any). These factors can significantly impact the amount you can borrow and the interest rates you are offered.

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.

Loan-to-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 want 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. Negative equity means that the value of your property is less than the amount you owe on your mortgage. This can be a significant risk for lenders, as they may not be able to recover the full amount of the loan if you default on your payments

Factors to consider to improve your chances of getting a UK mortgage as an expat

Below is a brief list of factors that could increase your chances of a successful UK mortgage application.

1.Proof of earnings

This is much simpler for employed individuals than for self-employed individuals, as it is much simpler to provide pay slips to prove past income. If you are self-employed, you must 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 only sometimes necessary.

2.Credit History

A UK credit history is not essential to applying for an expat mortgage; however, having a strong UK credit history can help you find the best deals and rates.

Suppose you have lived abroad for an extended period. In that case, your UK credit rating will likely not assist in the application process, as international credit rating agencies do not exist.

3.Keeping financial association in the UK

By maintaining a credit card or a residential address in the UK, such as your parent’s address, you can retain a financial association with the country. This can increase your chances of being able to apply for a broader range of mortgages. UK lenders can still see your financial footprint, which provides them with more information and can potentially improve your borrowing options. However, it is essential to understand how the above may affect your tax affairs, and professional advice should be sought.

4.Lenders location

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 expat mortgage broker.

5.Expat mortgage brokers

If you are a UK resident, applying for a mortgage is usually straightforward; most individuals will visit a comparison website or their current bank to discuss mortgage options.

When applying for an expat mortgage, it is essential to search the market and explore your options, which can be time-consuming. This is where the use of an expat mortgage broker is useful. Although this can be slightly more costly than going through the process alone, 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 have access to products not shown on lenders’ websites, and therefore, using a broker will open doors to more options and better rates that you would not be aware of if you approached a lender directly.

6.Providing Information

Lenders base their decisions on the information you provide. Applying for an expat mortgage requires a more extensive range of information than a typical mortgage application, and this information is often needed early in the process. It’s crucial to provide accurate and comprehensive information to ensure a smooth application process and increase your chances of securing a mortgage.

Providing information can often be time-consuming and frustrating; however, providing all the required information at the start of the process can help prevent delays later on. It is common for applications to be rejected later during the underwriting process when the individual cannot provide all the documentation to satisfy the lender and their lending criteria

7.Deposits

Deposits are mandatory when purchasing any property in the UK, whether you are an expat or not.
The UK has strict Anti-money laundering regulations, which means that you will be required to undergo multiple due diligence processes, including providing detailed evidence of the deposit’s source.

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.

8.Expat buy to let mortgages

When individuals move overseas and own a UK property, a popular choice is to rent it out. Therefore, buy-to-let mortgages are commonly available to expats as they are necessary.

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.

Advice from an independent expat mortgage broker

Due to the complexities above and the likelihood that a specialist broker will have access to unique mortgage products not available to individuals, seeking advice when applying for a UK mortgage as an expat is highly recommended.

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