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Expat Mortgages – What are your options?
Buying a home can be an exciting adventure. However, when you are an expatriate, several things might make it slightly more difficult for you. Many people look for UK mortgages for expats ahead of moving back to the UK or as an investment. It is often the case that the lender will see an expat as a higher risk and may offer less favourable rates.
Yet, it is possible to get a suitable deal on an expat mortgage, if you are prepared.
What is an expat mortgage?
An expatriate mortgage is a specialist mortgage product that is aimed at borrowers who are currently living overseas or as non uk residents. They will want to buy a property in either the country of origin or the one they are currently residing in. It is often more challenging to obtain a typical mortgage for residence, as many lenders see this as a high risk.
Expat mortgages work the same as a regular mortgage. The difference is that you will notice is that many lenders will change eligibility requirements, and they will do more checks. These checks will tend to be more stringent due to the perceived added risk when it comes to expat lending.
What are the criteria for an expat mortgage?
The lending criteria for expats when it comes to an expat mortgage is different from a normal remortgaging or purchase. Most often remortgaging for expats is a little bit easier.
Here are some of the issues that often impact expats looking for mortgages in the UK.
If you have been away from the UK for a serious length of time, then your credit history might be harder to be traced by UK lenders. This is where an experienced broker will be to your benefit.
Proof of income is essential, and many lenders will deem those who earn income outside of the UK to be a much higher risk. So you must have proof of earnings from an internationally recognised accountant if you are self-employed, or evidence of a job, preferably a contract.
Many lenders will prefer to see applicants who work for an internationally recognised company, and you will need payslips and other proofs of earnings too. Moreover, if they are not in English, you will need to have these translated. Some lenders may also require you to be paid into a UK bank account. The more of a paper trail you can show them, the smoother the process will go.
Why do you need an expat mortgage?
There are more reasons to have a mortgage and then just the simple one of buying a home. However, many expatriates do plan on returning to the UK and would like to have a house ready for them. In this case, it is not uncommon for lenders to want you to have friends or family nearby so they can keep an eye on an empty property – before you move in. Furthermore, your insurer will stipulate how often the home will need to be inspected and lived in.
Remortgaging your UK home as an expat
Many British professionals living and working overseas will need some practical help when it comes to this one. It would be best if you ideally let your mortgage lender know when you leave the UK. If you have not intended to let your home out then most lenders would not have been concerned about where the mortgage gets paid from.
However, they will be concerned that the property is fully insured.
So you will need to have insurance policies that cover:
- how long the property can be empty,
- how often it will need to be checked,
- how often you personally need to return to it.
Unless you are regularly returning to stay in the property, you will now be applying for a mortgage as an expatriate.
If you decided to let your home out when you left the UK you will need to have informed your mortgage lender. They will usually give you a “consent to let” until your current mortgage deal comes to an end. As soon as that current fixed mortgage deal does come to an end, you will need to apply for a buy to let mortgage.
Furthermore, you will be doing this as an expat. Lending rates for expatriates are typically higher. Lenders will now be looking for an independent valuation to confirm that the projected rental income for the property will cover the increased cost of your buy to let mortgage at your new expatriate rate.
Buy an investment property.
If you have been living in a country that has a particularly generous expat salary package, then you might be looking at buying a property as a form of investment. It is more common for people not to purchase in the country that they are working from, and instead invest back in the UK.
This is because it is a market that many are familiar with and it is efficient and transparent. Not only that but the UK rental market makes investment properties outside of London particularly intriguing.
Factors that affect expat mortgages.
Several factors can heavily impact your mortgage when it comes to buying from overseas.
You will have to consider these risks.
- Exchange rates In terms of foreign currency even a tiny change in the exchange rate can have a significant impact on the value of your purchase.
- Language Mortgages are complex processes that often come with complex language. It is not uncommon to have language issues unless a qualified translator is hired.
- Taxation Make sure that you are accounting for all of the tax that you will be liable to pay. This will be both in the UK and in a country where you reside.
- Paperwork You will need to ensure that you have all of the necessary licenses, planning consents, and permissions before you sign any form of contract or agreement. Work with a solicitor who knows the local market and speaks the language.
Can an expat get a mortgage with bad credit?
Bad credit makes it challenging to get a mortgage in more typical circumstances, but like all bad credit, it depends on how long ago the incident was, how severe it was and what the final outcome was. You may require to put down more of a deposit than usual.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage repayments.
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