How To Get A UK Mortgage When Living And Working Abroad
If you’re a British expat considering buying a property in the UK or remortgaging an existing home there are a few challenges you will need to overcome to secure a mortgage.
Aspects such as your credit score, providing documentation to prove who you are and where you live, and securing a competitive mortgage interest rate are all common challenges UK expats face.
Although challenging, securing a UK mortgage when living and working abroad is not impossible. In this post, we will give you the information you need to secure a competitive mortgage.
The Obstacles to Securing a Mortgage from a High Street Lender as a UK expat living & working abroad
Most high street lenders need you to have a credit rating in good standing. This is particularly difficult for most expats as all of their credit expenditure is in a different country. As such, your British credit rating is probably nonexistent.
Income and proof of address
For many high street lenders your expat status classes you as a ‘contractor’ or freelance worker. As such, in their eyes, you do not have a regular income. This will rule you out of any kind of mortgage deal.
Those that will lend want to see proof of income and address. Your payslips can verify your proof of income. Proving your address can be more difficult as many high street lenders want to see a utility bill. The chances are utility bills and other documents you could normally provide on request are handled by your employer and difficult to obtain. In this instance, expats have to provide a letter from their employer to prove they live where they say they do.
Furthermore, most high street lenders will only take your basic income into account. Other regular payments such as shareholder dividends, for example, are discounted. This can limit how much you are allowed to borrow significantly.
Even if you have managed to jump through the hoops high street lenders may simply take too long to agree the finance. Lending has become a lot harder since the financial crash of 2007. Other institutions have made it even more complicated. The EU’s Mortgage Credit Directive (MCD) implemented in 2016 has made lenders more sceptical about providing a UK mortgage to those living and working outside of the UK.
The bottom line is that if you need finance quickly, the high street could well let you down and you can lose the property to your competition. This effectively puts you back to square one.
Buying to Let Expat Issues?
If you are buying to let as an expat the obstacles increase further. In 2017 the Prudential Regulatory Authority (PRA) implemented changes designed to make it harder to obtain mortgages for rental purposes. The aim was to try and free up properties for residential use.
If you are seeking a buy-to-let mortgage or remortgage, you will find that you will have to show you can afford mortgage repayments even if rates rise to 5.5%.
Furthermore, rental income must cover 145% of the mortgage to cover void periods. If the property is classed as HMO this increases to 170%.
To prove this you have to provide evidence based on a surveyor valuation. The paperwork is complicated and detailed and very time consuming to fill out. The distance between you and where the lender is based also makes the whole endeavour more stressful.
The above is applied to all properties in your portfolio individually. This requires that every portfolio property has to show a performance that matches the above criteria. Portfolio total profits no matter how good are not taken into account.
Mortgage Credit Directive (MCD)
As mentioned before, the EU’s MCD has made it harder still for expats to obtain a mortgage from high street lenders, although its intentions were arguably honourable. The directive states:
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
This directive allows you to change the currency of the mortgage loan agreement at any point during the mortgage. Lenders are obliged to put in arrangements to protect themselves from currency fluctuations. Nonetheless, a scenario where they are left out of pocket is never off the table entirely. This makes most high street lenders reluctant to lend if you live and work overseas.
Reasons for buying UK Property when living and Working Abroad
If all of this is off-putting try not to let it overwhelm you. Yes, there are difficulties but perseverance brings advantages.
At this time there are some great reasons for buying a UK property. The market continues to be strong and mostly unaffected by events such as Brexit. There are up and coming areas which offer good investment opportunities if you are looking to leverage the rental market.
Alternatively, you may wish to switch your mortgage to a buy-to-let mortgage and make your property work for you.
Regardless of the obstacles, the effort is worth the reward. More importantly, there are creative solutions that can help you secure the finance you need. (See our case study: Interest only mortgage on a UK property for a British expat)
Given the issues you face trying to obtain a high street loan, what is the answer to secure your UK mortgage?
Most, take the specialist broker route. Specialist brokers have a better understanding of the expat world and can deal with private banks to secure a mortgage on your behalf.
Another issue you may face with brokers is that you may not be able to secure the sum you need. This can put the more affluent areas of the UK out of your reach unless you have the capital to put forward up front. It all depends on how well connected they are.
The better brokers, however, can overcome these obstacles as they are well connected to specialised lenders and have good relationships with individuals. This results in securing a deal based on your needs rather than a criterion that on the surface looks impossible to fulfil.
Clifton Private Finance Solutions
As experienced well connected brokers we can offer you:
- A bespoke solution based on your needs. We place your requirement with specialist lenders that will look at aspects the high street ignores such as your shareholder dividend payouts. This can considerably increase the amount you can borrow putting that home within reach
- The specialists we deal with are experts in their field and can offer you a mortgage factoring in aspects such as currency fluctuations
- We have specialists waiting to help you with every type of property scenario you can imagine. If you want a buy-to-let mortgage, remortgage your existing home for buy to let, a property to move into as you are shortly returning to the UK, we have a specialist that can help secure the best deal for you
- We can secure the finance quickly and can secure loans that are more in line with market prices
- As we have great relationships with specialists in private banks we can fight for your case to secure you the best deal possible
- We can help secure you an interest only mortgage or repayment mortgage
- Our good well cultivated relationships with lenders allow us to make special deals providing you fit a certain criteria which are highly competitive
- We can agree in principle your finance quickly often within a few days. (See our case study UK mortgage for British Expat in the USA agreed in principle in 48 hours for Edinburgh property)
- We are well versed with unusual property related scenarios. If you have struggled with the high street talk to us. We can probably find a lender allowing you to secure your new home
- We can help you with the administrative aspect of applying for a UK mortgage, greatly increasing the chances of securing a loan