5 Top Tips For UK Expats Getting A Buy To Let Mortgage
You want to invest in the UK: you’re a UK national, this is familiar territory, so it ought to be straightforward – right?
Not necessarily: the regulatory landscape has changed, and there are now fewer lenders working in this market offering really competitive deals.
A specialist broker will steer you around the pitfalls and find you the finance that will make the sums add up for you.
Here are the five top tips from our case files:
1 Get a separate survey and valuation of the property: it's money well-spent
Uncertainty in the market (don’t let’s mention Brexit again) means that no-one’s very clear what a property’s worth.
We’re seeing an increasing number of down-valuations by lenders on the projected rental incomes for proposals we take to them. And the impact on your yield calculations can stall your purchase.
- Obviously you won’t just take an estate agent’s word on the value, but don’t look to Zoopla for verification.
- Criticism of Zoopla’s “secret formula” algorithm for valuations is rife, not least because the “Refine the estimate yourself” functionality allows owners to up-value their own properties.
In this case, the client was making a more realistic estimate than Zoopla. But if you don't have the local knowledge, pay the £400-£1,000 it may cost to have a valuation done by a surveyor qualified to asses rental yields.
You may not like the answer you get, but it will be the answer you need - in order to make the returns add up long-term.
2 Run your own credit report at the outset
This is one that can come back to bite you – particularly for expat clients who’ve been out of the country and assume their record must be clear.
- Not only can lack of activity affect your UK credit rating (keep using a credit card on your UK account).
- You may find an adverse rating lurking there.
3 Tell your broker your long-term plans
They may impact on what you’re seeing as just an isolated financial decision.
- You may just be looking for five or 10-year finance on a BTL.
- But is it possible you might move back to the UK during that time and will want to live in the property?
Some lenders will accommodate that, but we need to know so that we can approach the right lender on your behalf.
4 Give your broker everything
We need to see the whole picture – even though we may not need to give it all to a lender. Your accountant may not understand our process, and things may have changed since you last needed to access finance.
In the current regulatory climate, underwriters are inquisitive about everything.
- Be upfront with us about debt.
- Be prepared to provide details about the source of your deposit.
(It’s perfectly acceptable for it to come from India. But you may need to provide a few months’ statements on your Indian bank account.)
If you have more than four properties your entire portfolio needs to pass a rental stress test: you can’t just offer your most profitable property as surety.
If you have your portfolio financing on a spreadsheet, your broker loves you:
- We need to know the loan-to-value (LTV) for each property
- And the terms of their financing (for example, are any of them coming to term and may revert to a higher interest rate?)
5 Consider whether you should be using a limited company to manage your property
As a mortgage broker we’re often telling our clients they should get independent financial advice about whether they should be holding their properties within a limited company structure.
We will be working to get you the best deal on terms and rates, but we don’t want you to be ignoring significant tax advantages that could be available.
Get experts to work on finding your finance
Getting the investment mortgage you need when you’re an expat doesn’t have to be a drama – but it is more complex than when you’re a UK resident.
There’s a lot of documentation to be produced, and providing lenders with exactly the information they want (and not a lot of information they could find misleading) will streamline the process.
If you’re starting to look for UK property finance for yourself (or you’re being bombarded with offers from lenders), the first offers you see aren’t necessarily going to be the best ones for you.
Considering the cost of finance over the period of a mortgage term, you definitely want to be considering the widest-possible range of finance options.
We’re experienced expatriate mortgage brokers, and we have contacts with specialist lenders across the whole of the expat lending market. Give us a call, and see what alternatives we can suggest (there’s no charge for our advice, until you decide to go ahead):
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