How to get a UK expat mortgage
You're a British citizen currently living and working outside the UK, and earning in a non-sterling currency. But you want to buy property here and take advantage of the exchange rate on the pound, record-low UK interest rates, and good-value property prices.
You have long-standing ties to the UK: perhaps you already own property in Britain.
You have a UK bank account, or dependents living here.
But when it comes to buying or remortgaging property in the UK, that foreign-currency salary means that you're an "expatriate" for most mainstream UK lenders.
And that has signficant implications for the availability of UK mortgage finance - and how much it's going to cost you.
In this blog we’ll start with:
- WHAT DO YOU WANT TO DO? (This determines the kind of mortgage finance you need.)
Then we'll look at:
- THE 4 KEY FACTORS that will affect you as an expatriate borrower.
And we'll check that you SHOULD be classed as an expatriate
- OR DO YOU QUALIFY for one of the golden get-out clauses that could shave thousands off your mortgage costs?
WHAT DO YOU WANT TO DO?
1. Buy a home
Many of our expat clients are future return-planning with no fixed idea of their return date.
Not having a UK workplace that they need to be near to, a common scenario is that avoid capital-city prices and buy a first (or second) home near the family they come over to visit regularly (to avoid overcrowded spare bedrooms, or impersonal hotels).
- Lenders like you to have family nearby who will keep an eye on an empty property
- Your insurer will stipulate how often the home needs to be inspected / lived in
London mortgage for returning self-employed Dubai expat
Our independent online trader needed £750K of a £1.6M London purchase price. His annual earnings were more than £500K but he had no tax records from Dubai and had just formed a new UK limited trading company for his business dealings.
We advised that he would need his Dubai accounts for the past two years verified by UK-based accountants. Read more »
2. Buy an investment property
After the first few months of expat highlife - the brunching, the boat trips, only ever using the fridge in your apartment kitchen - it becomes clear that a generous expat salary package (with or without living allowances and return-travel costs) can be put to good use.
If you don't intend to buy in the country where you're working (in Dubai or Singapore that's hardly an option, in Germany long-term renting is secure and cost-effective...) then investing back in the UK makes sense. A market you're familiar with, efficient and transparent legal and financial services, good property management agencies, and personal connections who will check on a property for you.
In the residential market, the chronic shortage of housing in the UK, and constraints on new house-building, ensures a strong demand for rental properties, and excellent return on investment particularly outside London.
In the commercial market, retail and light-industrial units also show good returns. If you're considering a shop-with-flat-above property, you'll need to be aware of the mortgage constraints on such properties - both for yourself and any future buyer.
From Singapore Strait to Roman Bath
Our British client in Singapore wanted £1.23M to purchase a property in Bath, putting down 23% deposit.
He wanted interest-only, with a flexible drawdown facility with no penalties.
But he had a complex income stream, paid in a foreign currency (SGD), did not pay tax in the UK, and there were other unique loan requirements. High-street lenders weren’t interested.
We took his application to a private bank who offered the full amount he was wanting, on the terms he needed, at a very competitive rate. And we negotiated an interest rate reducing by 0.5% after two years for a 20% reduction in the loan capital each year. Read more »
3. Remortgage my UK home as an expat
This is the most common scenario that we see, and the point at which most British professionals living and working overseas first run into the practical financial issues of being an expatriate UK property owner.
When you left the UK, if you’re prudent you would have informed your mortgage lender.
If you weren't intending to let out your home most lenders won't have been concerned about where the mortgage gets paid from.
What they will be concerned about is that the property’s fully insured. So you will need to have checked the terms of your insurance policy about:
- how long the property can be empty
- how often it needs to be checked
- how often you should return to it
But now your fixed-rate mortgage term has come to an end, and your borrowing is going to revert to your bank’s standard variable rate (SVR).
That’s not a rate of interest you want to be sitting on for any length of time, so you need to remortgage.
Unless you return regularly to stay in the property (see below: CAN YOU QUALIFY AS A NON-EXPAT UK BORROWER?) you’ll now be applying for a mortgage as an expat.
Market-leading rate to remortgage Singapore expats’ UK investment properties
Our clients needed to remortgage their house rented out in the UK: their fixed-rate term had come to an end and the mortgage had reverted to their lender’s (high) standard variable rate.
The wife earns in SGD. They’d been directed to a lender who found an offer of a fixed three-year expat rate of 3.83% APR.
We sourced finance for them at 2.99% APR, interest-only, fixed for two years (they didn’t want to be tied in for longer).
The fees were £500 lower, and we knew this offer could proceed. Plus the solicitors we recommended were inexpensive, and very efficient. Read more »
Release additional funds
Many of our clients take advantage of their high expatriate salary and increased property equity to remortgage at a higher value and use the additional funds to consolidate debt and pay off some of the costs of relocation not covered by an employer.
4. Remortgage my UK home as a rental property
If you decided to let out your home when you left the UK you will need to have informed your mortgage lender.
They’re usually willing to grant a "consent to let" until your current mortgage deal comes to an end. (Subject to the property being fully covered by landlord insurance.)
But now that your current fixed mortgage deal has come to an end you’ll need to apply for a buy-to-let mortgage, as an expat. And that’s a different ballpark. Lending rates for expatriates are higher (see below).
Lenders will be looking for an independent valuation to confirm that the projected rental income for the property will cover the increased cost of a buy-to-let mortgage, at the expatriate rate.
This isn’t usually a problem for the type of properties our clients own, usually in major cities.
Expat Buy To Let mortgage at a domestic rate
Our Amsterdam-based clients needed to remortgage their London home as a rental property, and release equity to buy a home in Holland.
The expat rate we found for them was comparable with a domestic BTL mortgage and found them the £100K they needed. Read more »
Lenders will also want to stress-test affordability on salary:
- For 65% LTV you’ll need to be earning £40K+ equivalent
- 75% LTV you’ll need to be earning £50K+ equivalent
We can find you a lender who has no income requirement at all – but their rates are high.
"Top-slicing" to top up a shortfall on rental income
A few lenders will allow owners to make up any shortfall on rental income from their earned income, but it’s not usually a necessity for our clients. We can usually find more affordable borrowing for you by extending the length of your fixed-rate term.
5. Remortgage my rented-out home as our residence
If you’re planning to move back into the home you’ve been earning rental income on, you’ll want to get off your BTL expat mortgage and onto a domestic residential mortgage rate as soon as possible.
This is easiest if you’re being transferred by your current employers, and you’ll be on a local salary. Returning to job-hunt will be a little more complicated, and you may need to delay remortgaging until your new employment is set up.
We will need to check there are no early repayment charges (ERCs) on your BTL mortgage.
You can arrange to remortgage while you’re still out of the UK if:
- You know your return date
- You will be paid in sterling
- You can provide confirmation of your future salary
THE 4 WAYS BEING AN "EXPAT" CAN AFFECT YOUR UK MORTGAGE APPLICATION
1. Your UK bank may not give you a mortgage
This comes as a big surprise to many Britons who have lived and worked in the UK for years, and have a long-established relationship with a bank or building society.
But when many high-street lenders look at a foreign currency income they’ll just say No. They don’t do expat lending so you need to look elsewhere.
- Often it’s only specialist lenders, who can be more flexible, who will consider your situation and offer the most competitive rates.
- It’s difficult for you as a borrower now living overseas (or preparing for the big move) to track down enough of these private banks and get hold of their rates, in order to make useful cost comparisons.
- And because many of them are small, and not set up with customer relations departments to deal directly with lenders, they’re only accessible via a mortgage broker.
2. You lose a chunk off your assessed income to allow for "currency fluctuations"
Borrowers who earn in a foreign currency are a major concern for lenders. The amount they’re able to remit back to the UK to cover their monthly payments can be hugely impacted by currency fluctuations.
Banks don’t actually want to end up taking their customers to court and repossessing homes – it’s not good business.
To cover themselves, most expat lenders will slice a flat-rate 25% off your income affordability assessment, to allow for worst-case currency fluctuations.
So when we’re looking at the borrowing-power of, say, a Briton working in private banking in the US:
Salary: US$400K = £327K minus 25% = £243K income for affordability
48-hour Edinburgh mortgage offer for expats in US
Our clients had been expats living and working in the US for nine years and were planning their move back to the UK.
They’d expected to rent before buying, but then were shown their dream home. They didn’t know what their mortgage options were.
They would be applying from the States, and still paid in US$ when they returned, so they counted as expats.
But we found them a deal at a very competitive rate for five years, running to age 70, and with a lender who would pay the valuation fees. More details »
3. You’ll be paying an expatriate rate
This can come as a bit of a shock to an overseas Brit who's been doing a quick bit of web research on UK mortgage rates. Or if you've been asking friends back home what they’re paying.
Whether you’re buying for the first time, or remortgaging a property you already own, there are additional administrative costs in dealing with borrowers overseas. Different time zones, different types of ID, accounting systems and payroll verifications.
Plus, lenders feel less certain about borrowers in another country.
If things go pear-shaped for any reason – you lose your job and you can’t keep up with your UK mortgage payments – it’s harder for them to keep track of you if you’re overseas.
This risk differential is reflected in the rates.
Depending on how much you’re wanting to borrow, the loan-to-value ratio (LTV) and how long it’s fixed for:
4. Your mortgage lender may want to meet you in person
This is less about relationships, and more to do with due diligence: a lender needs to be assured that you are the person shown on your ID documents.
In many cases we can do this verfication for them, but we have known lenders who want to meet clients who are taking out mortgages for £500K or less. So in some circumstances you may need to time a trip back to the UK accordingly.
SHOULD YOU BE CLASSED AS AN EXPATRIATE?
We’re experts on arranging expatriate mortgages – but that doesn’t mean we’ll set you up with one if it’s possible to get you cheaper, local mortgage terms.
If you approach most UK high street lenders showing a foreign currency income they'll tell you you’re an expatriate borrower.
But we’ve had significant successes getting non-expat mortgages for clients who live and work outside the UK, and have non-sterling salaries.
We need to be able to show:
- Substantial ties to the UK (such as close family based here)
- Frequent trips back to Britain (evidenced by travel records or credit card spending)
- Regular activity on a UK bank account
- Preferably no property owned in the country where you're living overseas
- Good credit history
UK national working in Virginia not counted as expat for Northamptonshire mortgage
Our client had been working for a US power corporation for 14 years, dividing his time between the US HQ and rural England where his children live.
His bank of 32 years turned him down for a mortgage: with foreign currency earnings they said he was an expat.
We believed his regular trips back to the UK, and the fact that he rented property in both places, would qualify him as UK resident.
The selected lender wanted to see a year’s boarding passes, but we persuaded them to accept records of credit card spending. More details »
Contact us to get the right UK mortgage if you're a British expat
There’s no doubt that mortgages in Britain can be more expensive for expats than for local residents.
Which is why you need to have an experienced expat mortgage broker advising you, and getting access to the lenders who can offer you the best terms based on their lending criteria for your circumstances.
And expats often need to move quickly: you may have seen a property you want to buy while you're over in the UK on a visit, and you want to get the deal done before you leave. You need an experienced specialist broker who can anticipate all the likely scenarios that the structure of your mortgage finance needs to accommodate.
(You don’t want to be caught out by ERCs if there’s a chance you’ll return within the next couple of years.)
A first phone call to one of our specialist expat mortgage specialists us will establish how we can help you, and how quickly we could have finance in place for you. Call us whenever it suits you: