How To Get A UK Mortgage For British Expats Living In Germany
If you want to invest in the profitable UK rental market, or your posting to Germany is coming to an end and you want a place to come home to, organising property finance as a UK expat needs experience and expertise.
You’ve got your Bergmannkiez and Bahnhofsviertel, but they’re not Bethnal Green or Bruntsfield. Buying a home in Britain, or building a UK investment portfolio, offers security and good returns. But the higher charges for expat mortgages mean that you need good advice to secure the best deal available, to make sure that the sums add up for you.
Why do you need a UK mortgage?
1 I want to buy a home to return to in the UK
Living in Germany you will have become accustomed to the high standard of secure rented accommodation available at reasonable cost. But if you’re looking to return to Britain you may want to avoid a long stretch renting while you’re home-hunting, in which case you’ll be looking to buy now in the UK with an expatriate residential mortgage.
You’ll usually be required to put down a 25% deposit. To qualify as residential rather than a more costly buy-to-let mortgage (interest rates commonly 1% higher) a lender may set a window on your return, and there will be restrictions on renting out the property in the meantime.
Conditions will vary, but your lender may grant you a Consent to Let for up to, say, 24 weeks a year, so you will need to factor these restrictions into your affordability costings.
You will be tied in to your fixed-term mortgage when you return, at the higher expatriate rate, so you will want to predict your return-date as accurately as possible, and take out your expatriate mortgage for the shortest term you can afford.
2 I want to re-mortgage a property I own in the UK
If you already own UK property and it has been on an introductory rate that’s coming to an end, you may want to re-mortgage to avoid reverting to your lender’s (considerably higher) standard variable rate.
If you’ve built up equity in your property (by capital repayments on your mortgage, or by making substantial improvements, or because prices have gone up) you can either use that equity to negotiate a better rate on a new mortgage, or re-mortgage to release that equity for a new investment project.
3 I want to sell and buy another property
You may want to buy a more substantial property back in the UK. Or perhaps a smaller city house or apartment would now suit you better as a UK landing-pad, rather than the family home you left behind.
Or perhaps you’re planning to return and know that you need to be based in a different area, closer to a new job, or family. Again, whether you plan to return to the UK permanently, and whether you intend to let out the property or keep it for your own use will be important factors.
4 I want to buy a rental property
Buy-to-lets in the UK have been showing good returns, with rental yield in England and Wales around 4.4%. The deposit required is usually 35%.
If you’re an experienced landlord in the UK you may be looking to invest in a student-letting type house in multiple occupancy (HMO), which is rented out to three or more unrelated tenants using shared facilities, each on a separate tenancy agreement. HMOs have more stringent regulatory requirements, but can offer rental returns up to three times higher than single tenancies.
What do I need to know about applying for a UK mortgage from Germany?
Proof of income
A Euro income imported into the UK to pay a mortgage will be affected by fluctuating exchange rates, so your earnings will be subject to additional ability-to-pay stress testing. Salaried employment is quite straightforward, and you may only need to provide copies of three to six months’ payslips.
If you have a complex income, a mortgage broker may need to find you a lender who will take the full range of your assets into consideration (such as stocks, shares and pensions).
Freelance or self-employment requires more detailed proof of earnings – possibly two to three years’ worth of accounts, certified by an accountant who is a member of a recognised professional organisation.
The effect of the European Mortgage Credit Directive
New regulations were incorporated into the domestic law of EU member countries in 2016 which affected all expat borrowers with mortgages in EU member countries.
The aim of the Mortgage Credit Directive (MCD) was to give some protection to lenders from currency fluctuations. Borrowers now have the right to convert their payments on an MCD-regulated mortgage into an alternative currency, under specified conditions.
Unfortunately the effect has been to make lenders more cautious about providing expat mortgages, and many of them withdrew from the market, or transferred these products to separate international entities.
However, other niche lenders are stepping into the space vacated by the high street lenders. Most of them are little-known to customers, or are accessible only via brokers.
UK mortgage rates can be misleading
Before you calculate your ROI on a UK property investment, you need to be aware that the fees for expat mortgages are different to those quoted for domestic mortgages, reflecting the greater time-costs involved in verifications and setting them up.
An experienced broker will package your application as advantageously as possible, to minimise the additional costs.
Go to a specialist mortgage broker
If you’re trying to arrange finance from Germany, or on a brief visit back to the UK, you can’t afford to be waiting around while your application waits to be approved by a lender who doesn’t accept your particular criteria.
An experienced expat mortgage broker will be able to package together all the information a prospective lender may need, and will take your application to the right lender to suit your circumstances – resulting in a speedier process.
Call Clifton Private Finance to speak to a broker experienced in expatriate mortgages