How to Get Mortgage Finance for Non UK Nationals Buying Property in London
London is still one of the most attractive locations to buy a property in the UK and particularly for international buyers.
With uncertainty over Brexit and recent falls in London house prices, if you are a non UK national, who does not have permanent residency in the United Kingdom, it may be a good opportunity to purchase a property in the capital.
When it comes to securing finance, whether you want to purchase a residential property for you and your family or you want to invest in an attractive buy to let property, the good news is that there are a range of mortgage options open to foreign nationals.
In this article we look at both the residential and buy to let mortgage market and the challenges facing non UK nationals buying property in London.
If you are a non UK national looking for a mortgage to purchase a residential property, it may be useful to familiarise yourself with what you are likely to face if you apply for a mortgage with a traditional lender.
Issues with Traditional Lenders Residential Mortgage Service
A common complaint about traditional lenders is that they often do not have the expertise to deal with non UK nationals’ requirements. Traditional lenders often do not have a flexible process that considers complex income or even foreign currency.
For various reasons, such as time spent living outside the UK, the majority of non UK nationals may not have a clear credit history. Typically, traditional lenders will not grant a residential mortgage to a non UK national without a traceable credit history. In the event that a traditional lender agrees to provide funding to a non UK national without a credit history, it is likely that the non UK national would have to provide a much larger deposit.
Not only are the traditional lenders’ application process often rigid and restricting, it should be noted that an application with a traditional lender can take up to several weeks or even months before it is approved. Traditional lenders’ lengthy application process may cause costly delays, which could put in jeopardy your property purchase. Being able to move quickly is often key when buying in London market.
Where speed is the priority, bridging finance may provide a solution or temporary ‘stop gap’ in financing a purchase, whilst a mortgage is put in place. As a result of their application process, traditional lenders may not be able to provide a mortgage that accurately reflects a non UK nationals’ financial position. This means that the majority of non UK nationals that approach traditional lenders for residential properties may receive an unsatisfactory financial solution.
Specialist Residential Mortgage Lenders
Specialist lenders generally have a more flexible application process for their residential mortgages than traditional lenders.
Where traditional lenders try to force a non UK national’s unique circumstances into a set of predetermined conditions, specialist lenders review each applicant on a case by case basis.
Specialist lenders’ residential mortgage services usually give non UK nationals more freedom than traditional lenders. For example, some specialist lenders can provide joint mortgages to non UK nationals. This would be ideal where one partner lives in the UK and the other lives abroad.
Also, it is possible to secure a residential mortgage from a specialist lender with a relatively small deposit. Unlike traditional lenders, who may require a much higher mortgage for non UK nationals, specialist lenders may grant residential mortgages with a smaller deposit if the applicant provides extra security.
Clifton Private Finance
As a specialist property financial broker, we have experience in arranging mortgages for non UK nationals with market leading rates and favourable terms. Through our relationships with specialist lenders we can find the best mortgages available to non UK nationals that are not available in the high street.
Clifton Private Finance Non UK National Residential Case Study
An example of our non UK national residential mortgage service can be found below.
A non UK national based in Singapore wanted to purchase a new home for his wife and children. He found a residential property in Oxford worth £2.25 million. Although the non UK national was working for an investment management firm and was earning in an excess of £1 million annually, he needed to source at least £1.6 million to complete the purchase.
Initially, the non UK national approached a high street lender for the mortgage. Unfortunately, the lender was not prepared to provide the mortgage he was looking for; all the traditional lenders he applied to refused to grant him a mortgage because he was not a UK tax payer and he was being paid in a foreign currency. Frustrated with the traditional lenders’ inability to accommodate his needs, the non UK national contacted Clifton Private Finance to find an alternative solution to borrow the capital he needed.
When traditional lenders fail to provide the finance needed, we use our wealth of experience and professional links to specialist lenders to get the funding required. Specialist lenders are more flexible than high street banks and assess applications on a case by case basis, which means that the client’s residency, tax status and currency of income were not an issue.
We acted quickly and we were able to swiftly secure a 20 year interest-only mortgage of £1.6 million for the non UK national with a 70% LTV at an attractive rate of interest. As a result of our established relationship with the lender, we were able to get the case submitted and approved within just 7 working days.
We also negotiated the option for the non UK national to make capital reductions in the future, so he could reduce the rate of interest further. For every 5% reduction in the capital, the interest rate would fall in accordance with the lender’s tiered rates at that time.
As a result of the additional terms, the non UK national was able to complete the purchase of his new property without delay. He was so impressed with our service that he then asked us to find a buy to let remortgage deal for his £1.2million London property, which we were happy to handle for him.
Changes to the Buy to Let Market
In 2016, the Bank of England’s Prudential Regulation Authority (PRA) reviewed the lending patterns by traditional lenders in relation to buy to let mortgages. After putting the entire industry under the microscope, the PRA concluded that high street banks and building societies needed to change their lending policies to those applying for buy to let mortgages.
As a result, the PRA introduced new regulations that affected the way traditional lenders reviewed buy to let mortgage applications.
There are a limited number of traditional lenders who provide mortgage services to non UK nationals; however, if you find a traditional lender who does provide buy to let mortgages for non UK nationals they will focus on the following to comply with the new regulations: Review of Portfolio: If you have a number of buy to let properties, a traditional lender will review your entire portfolio to ensure all your properties are profitable. If the lender finds one property that does not provide a positive return, then your application will be unsuccessful.
Income Stress Test: A traditional lender will implement a strict income stress test. This means that your income will be scrutinised more closely than before and in order to satisfy this test you will have to demonstrate that you can afford mortgage repayments in the event that the interest rate hits 5.5%. Rental Coverage Ratio: Traditional lenders typically require a rental coverage ratio of up to 145% for standard buy to lets and up to 170% for houses in multiple occupation. This means in order to secure a buy to let mortgage you have to provide a valuation from a professional surveyor, which states your property will gain up to 145% of the monthly mortgage payments.
Although there are some traditional lenders that provide a non UK national buy to let service, most traditional lenders fall short of their clients’ needs. Also, traditional lenders are steadily increasing their interest rates and they do not look to be stopping any time soon.
If you want to avoid the stringent application process of a traditional lender, you may benefit from contacting a professional broker.
Specialist Buy to Let Lenders
Specialist lenders could be a viable option for non UK nationals to access a buy to let mortgage. Unlike traditional lenders, specialist lenders have a more flexible approach and each application is viewed on its individual merits.
In addition, specialist lenders have the expertise to take into account factors such as salary paid in a foreign currency and complex income (including from stocks and shares). This means that specialist lenders may provide mortgages that more accurately reflect non UK nationals’ true income. Specialist lenders are also likely to consider non UK nationals’ other income as well as their property’s rental income when calculating affordability.
Non UK nationals will usually need a deposit of 25% of the value of the property in order to obtain a buy to let mortgage, however this may vary depending on the lender and the non UK national’s personal circumstances. Some lenders we work with will go up to 95% depending on the client’s background.
The details of a specialist lender non UK national buy to let mortgage can be sorted efficiently by a good specialist property finance broker, to ensure that the terms suit your needs.
Clifton Private Finance Non UK National Buy to Let Case Study
An example of our non UK national buy to let mortgage service can be found below.
A non UK national based in Hong Kong required funding to purchase a buy to let property for £1.6 million. In order to complete the purchase, he required an interest only mortgage and a flexible drawdown facility with no penalties. The non UK national required a loan to value of 77% to buy the property.
The non UK national approached a variety of traditional lenders. However, the traditional lenders refused to provide the buy to let mortgage that the non UK national need because his salary was in a foreign currency, he did not pay UK tax, his income was complex and he had unique loan requirements.
After receiving instructions, we contacted a specialist lender with experience in non UK national finance. The lender was prepared to provide the entire cost of purchase on an interest only basis.
Furthermore, we negotiated with the specialist lender and secured finance with a flexible drawdown facility with no penalties at a market leading rate. In addition, the non UK national received an interest rate that reduced by 0.5% after the first two years. The decrease in interest after two years resulted in a 20% reduction in the loan’s capital every year.
As a result, the non UK national was able to move forward with their investment purchase while minimising the interest on their loan and maximising their return on investment.
Clifton Private Finance
If you are a non UK national and you want to purchase a family home or invest in a buy to let property, then you may want to contact a professional broker to arrange finance through a specialist lender.
As a specialist property finance broker, Clifton Private Finance can provide the financial solution that caters for your needs. Call us on +44 203 900 4322 or alternatively fill in our callback form.