Living in Singapore, buying in London? British expats: here’s how to get UK property finance
The hidden costs of expatriate life can jump up to bite you when you go looking for finance on a property back in the UK. Those competitive mortgage rates you see touted online by British high-street banks: not for you, as a non-resident.
There’s more paperwork to track down for expats, and more regulatory hoops to jump through – all, laudably, to clamp down on international money-laundering.
But the extra administrative work can make some mainstream lenders reluctant to get involved in this market at all.
- Some will slice a straight 25% off the top of your SGD earnings to allow for currency fluctuations.
- Some others will charge punitively high interest rates as soon as they see that +65 phone number.
This is one of the situations when paying a broker to find the best deal for you really does end up saving you a meaningful amount of money.
And a good broker will save you weeks on the mortgage application process.
Buying property in the UK makes sense
When you’re strolling down Lorong Mambong at the weekend, or taking a pool-view selfie at the Marina Sands, owning in Singapore will have looked tempting. But you’ll know that purchasing here is rated "seriously unaffordable" by Singapore Business Review.
In 2019 Singapore has again been rated the world’s most expensive city for foreign expats by the Economist Intelligence Unit - jointly with Paris and Hong Kong.
It’s hardly surprising, with 5.8M people packed into 113 square miles. And despite the government’s efforts to add significant new square mileage to the city-state.
In London, by comparison, where property prices have been legendarily inflated, there’s been serious Brexit discounting on some of the bluest of royal-blue-chip addresses on the Monopoly board.
Properties in Kensington & Chelsea registered the biggest drop in asking prices in 2018, according to property website Zoopla, with average discounts of over £127K. In Mitcham, in south west London, 45% of asking prices were reduced.
And outside the property bubble of London, the very liveable cities of Edinburgh and Bristol were in the top five of UK investment hotspots in 2018. And buy-to-let landlords have been hunting out the bargains offering excellent rental returns in north-east England: Yorkshire, Bradford and Hull.
Mortgage or refinance for a residential property
If you’re looking at remortgaging a UK property you already own (to secure a much more attractive lending rate after you come out of your fixed-term mortgage), your first call may be to the high-street bank or building society that made you your original loan.
You could be in for a rude shock. And likewise if you’re looking for a first mortgage, and start by approaching the big-brand names.
Many high-street banks aren’t set up for working with expats, and they just don’t have the expertise to deal with your requirements.
- A common complaint is that their processes aren’t flexible enough to deal with the complex set-up of British expats’ income.
- Many of them are hesitant to offer finance to expats who haven’t got an active credit history in the UK.
- When calculating your loan-size affordability they may take off an additional slice to allow for currency exchange fluctuations.
- And they can’t act quickly enough for buyers based overseas who are looking to make an offer on a property while they’re over on a visit.
The majority of expats come away from their approach to a high street lender feeling that they haven’t got the best deal for their particular circumstances.
Specialist lenders can offer expats better terms
You need to get access to specialist lenders who make a business of funding mortgages to borrowers like yourself, who are resident overseas.
Their requirements for expat residential mortgages are usually less stringent than traditional lenders’ criteria. This is because they understand the complexity of the market and generally consider expat applications on a case-by-case basis, rather than trying to make your circumstance fit a set of predetermined conditions.
You’re more likely to find the flexibility you may be looking for, for example a joint mortgage with a partner still living in the UK.
Mortgage or refinance for a buy-to-let property
If you’re looking for finance on a UK investment property which will give you rental income, you need to be aware of the major changes in regulations introduced by the Bank of England’s Prudential Regulatory Authority in 2017, which govern how lenders consider applications from borrowers based outside the UK.
New, tougher requirements:
- A stricter stress test: lenders now require British expats to be able to afford mortgage repayments in the event that interest rates increase to 5.5%.
- A portfolio review: lenders are now obliged to complete an in-depth review of an expat’s total property portfolio profitability, rather than the profitability of just the property that you’re applying for finance on.
- A higher rental coverage ratio: you now need a rental coverage ratio of at least 145% for a standard buy-to-let, and 170% for a house in multiple occupation. And lenders will be looking for rental coverage ratio estimates from professional surveyors.
Specialist lenders for expats’ buy-to-let properties
These regulations will apply, no matter who you approach for you property finance. But what you don’t want to be burdened with is additional proofs or unreasonably arduous terms.
- Specialist lenders for expatriates are often smaller-scale, and review expat mortgage applications individually.
- Salaries paid in foreign currencies, or complex income sources (including stocks and shares) aren’t a major drama for them.
- The terms and conditions of an expat buy to let mortgage can be negotiated by a specialist property finance broker, to ensure that the terms suit your needs.
We’ve got experience working with expats
We source mortgage offers and refinancing deals for Britons based overseas on a regular basis. To discuss your particular situation, just give us a call here at Clifton Private Finance: