How To Get A UK Mortgage For British Expats Living In Dubai

23-April-2018 18:36
in General
by Admin

When you consider you’ll get more sterling for your dirham, there’s a national shortage of housing in the UK and the market itself is resilient enough to the extent that house prices continue to rise, it all seems a bit of a ‘no brainer’ for ex-pats living and working in Dubai to invest in property back in Britain.

3 Common Reasons Why People Buy UK Property While Living In Dubai

  1. Buy to let property in particular is an excellent means of providing financial security in your later years and, with salaries higher in Dubai than in the UK (not to mention tax-free) a property to rent out is an accessible option for many ex-pats. 
  2. But then again, if you happen to work off-shore in the Middle East then perhaps you’re looking for a UK property for yourself – somewhere you can spend a few months before another oil and gas contract comes calling.
  3. Another ex-pat group looking to buy property we deal with here at Clifton Finance are individuals and couples who have worked and lived abroad in Dubai or other parts of the Middle East and are looking to retire back in the UK. 

High street banks unwilling to lend mortgage finance to ex-pats

All three of the above groups have extremely valid reasons for buying property in the UK. Not only that, but they often have the cash and means too. The difficulty many ex-pats find though, is a lack of willingness from high street finance lenders to give them a mortgage – regardless of whether they are looking for a repayment or interest-only payment product. This can prove incredibly frustrating and especially if you’ve gone through the whole process of filling out an application only to be refused at the final stage.

Some banks that are willing to provide mortgages will only do so on borrowing over £250,000. Other banks simply won’t consider contract workers from the off (since they are seen as ‘freelance’ workers and therefore of variable - and not guaranteed - income). There is also the fact that there are fewer banks and building societies willing to provide mortgages for UK nationals living in Dubai and wishing to buy back home in Blighty. That means, of course, that interest rates aren’t as competitive so the mortgage itself, if secured, could prove much pricier than if you had been living back in the UK.

And this is why many would-be property investors or those looking for a home for themselves end up using a broker.

A quick study of the property market and it is clear London isn’t performing as strongly in the past – particularly Inner London and the luxury sector – but there are other nearby hotspots such as Birmingham and Woolwich where would-be investors are guaranteed good yields or where residential buyers would find good value for money, improved infrastructure (HS2 will be rolled out within the next few years) and major regeneration. This includes Manchester, Liverpool and Leeds.

And even Brexit isn’t having too big a negative effect – thanks to the national shortage of housing in the UK, which is a problem that doesn’t look to be resolved any time soon, despite the government promising to build 300,000 new homes annually for the next three years (a figure, incidentally, which many housing analysts say is only the minimum amount of homes needed and anyway it wouldn’t affect affordability – house prices in the UK are still out of the reach of many first time  buyers). 


Why it’s so difficult obtaining a UK mortgage abroad

A lack of credit details. So what are the problems when it comes to securing a mortgage for your UK property? Well, one of the main difficulties boils down to that old chestnut – your Credit Score. If you’ve lived abroad for a number of years, or even decade, you’ll find your credit score in the UK could be pretty much non-existent. This means that your typical high street lender doesn’t have a clue about how trustworthy you will prove to be with their money. The upshot is they won’t lend.

Hassle over documenting evidence. All lenders require a copy of a borrower’s income status and proof of where they currently live (in the form of a utility bill etc). Payslips will usually suffice when it comes to income verification and if it’s an international company you’re working for then there shouldn’t be a problem in this respect. The difficulty lies in a salary which is paid in Euros or US dollars and which would result in currency complications. Another problem could be the fact that your rent and utility bills are part of your salary package (and in which case you will have to get your employer to write a letter verifying that this is indeed the case). 

Regulatory changes to buy to let mortgage financing – both here and abroad

British expats looking to buy property in the UK have been having an ever tougher time in recent years thanks to changes that have affected financial lending for buy to let properties – both by the British government and the European Commission.

UK changes.  Back in 2017 the Prudential Regulatory Authority (PRA) reviewed the way buy to let mortgage applications were made; their overall intention being to cut back on the number of landlords in the UK property market in order to free up housing for residential use.

Applicants are now required to prove they can afford interest rate payments were they to increase by as much as 5.5 percent. Rents must also cover 145 per cent of the buy to let mortgage (170 per cent in the case of an HMO) in order to cover for void periods – and evidence must be based on a surveyor valuation.

This is all done via detailed documentary evidence. In the case of expats this can prove time-consuming and complicated and for many high street lenders, too difficult to the extent they would rather not even start the procedure.

If you have a portfolio of properties then all must provide a good return. In other words, landlords are no longer able to spread equity across their portfolio in order to show an overall profit.

EU regulations. New regulations, instigated by the European Commission in February 2014 with the Mortgage Credit Directive (MCD), became law in 2016. This meant high lenders were more reluctant than ever to go ahead with foreign currency mortgages. The regulations are under Section 2A. 3.1 of the MCD state: 

Where an MCD regulated mortgage contract relates to a foreign currency loan ... the MCD mortgage lender must ensure:

(1) the consumer has a right to convert the MCD regulated mortgage contract into an alternative currency under specified conditions; or

(2) there are other arrangements in place to limit the exchange rate risk to which the consumer is exposed under the MCD regulated mortgage contract

The reason traditional mortgage lenders are reluctant to lend to an ex-pat in Dubai - or any other country for that matter - is because it gives overseas borrowers an opportunity to take advantage of an increased exchange rate where they could increase what their salary is worth – and this can be done at any time during the mortgage agreement. In other words, it could allow the borrower to change the currency of the loan mid-mortgage.

At the same time lenders are obliged to create an arrangement with the borrower to protect themselves were the currency of the applicant to increase or decrease dramatically. They could, for instance, insist on a cap on the extent to which the exchange rate would affect the mortgage. This means that if the exchange rate drops beneath that capped percentage then the lender would be out of pocket themselves. 

Getting a UK mortgage when you’re in Dubai without difficulty

The good news is that there are specialist lenders who want to lend to UK expats in Dubai. 

When calculating a loan they will take into affect all income streams – not just basic salary, but including stocks and shares as well as business profits. In other words, each application is based on individual merit rather than a general affordability template.

Neither will they insist on a substantial deposit (some will go as low as 20% loan to value).

All of these specialist lenders offer customised mortgages which are specifically aimed at ex-pats. Residential and buy to let mortgages are available for UK properties valued at a minimum of £150,000 and for a period of three months to 30 years. Pre-approval terms are often within 24 hours

To find out more about what we can offer you here at Clifton Finance if you’re an ex-pat and looking to buy a residential or buy to let property here in the UK then call our Finance Team tel: +44 203 900 4322.

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