How To Get A Mortgage On A UK Property If You Live In Australia
If you live in Australia, securing a mortgage to purchase a residential or buy to let property in the UK can be challenging.
In this article we will explore the options available to you and the best ways to access mortgage finance for purchasing or remortgaging UK property.
Save Time By Avoiding Traditional Lenders
Any property transaction can be time sensitive; any delays can be costly and wasting time with certain lenders can result in potentially losing out on an attractive opportunity.
Typically, when looking at options for mortgage finance people look to traditional lenders to access the finance they need.
Firstly, UK traditional lenders are generally not geared up in dealing with Australian nationals or British expats’ unique requirements. Traditional lenders do not have a flexible application process capable of dealing with complex income streams or foreign currency requirements.
For expats even something small like a proof of address can be difficult for people living outside of the country. This is because many people who live and work abroad have their utility bills paid for by their company and do not have any credit cards or bank account linked to their address abroad.
An application to a traditional lender for an for a customer base abroad can take months. For anyone who is trying to purchase a property overseas, they will know just how costly a delay of several months can be.
Finally, traditional lenders will not process a UK mortgage application for a person living in Australia without a traceable credit history. This makes it tricky for British expats living in countries like Australia, where time spent living outside the UK may result in an unclear credit history.
Bottom line . . .
Traditional lenders may not be able to provide a mortgage that accurately reflects your financial position.
Why does this matter?
You want to get the best mortgage available and make sure you have finance in place to ensure your property transaction is cost effective and stress free.
Access the Mortgage You Need Through a Specialist Lender
Specialist lenders are ideal in working with clients based in Australia that are paid in foreign currency or have complex income streams. Also, when reviewing an application specialist lenders will take into consideration the client’s income and property rental income. This means that, unlike traditional lenders, specialist lenders are more equipped to provide mortgages that fairly reflect an international client’s income.
That’s not all . . .
Specialist lenders typically have a variety of mortgage products that are well suited for international clients, eg. Where one party lives in the UK and the other party lives abroad or where income is paid in more than one currency.
Not only that but . . .
It is often possible to get a mortgage on a smaller deposit with a specialist lender. Some lenders will be happy to accept a deposit as low as 15% of the property purchase, as long as they are happy with the income and asset profile of the client.
Bridging Finance: The Answer to Short Term Funding Needs?
If you have found a residential property already then you are on the clock. You need to move quickly in order to secure the property you intend to buy. If you cannot access the finance you need swiftly, you may lose the property to another buyer.
Bridging finance may offer an alternative way to source finance when facing a tight deadline. Bridging loans are a type of short term loans that may provide a temporary financial solution or a ‘stop gap’ in financing a purchase, until a mortgage can be put in place. This type of finance may be suitable if you already have existing property assets in the UK.
Clifton Private Finance
Securing a residential mortgage from overseas may seem overwhelming, especially when the majority of specialist lenders are not available on the high street. This is why it is advisable to contact a specialist property finance broker.
Through our relationships with specialist lenders we can find the best mortgages available to British expats living abroad including Australia.
Not only do we have a wealth of experience in providing mortgages for British expats, we can also arrange market leading mortgages for Australian citizens, who are looking to buy or remortgage UK property for investment purposes.
An Expat Mortgage For A Buy to Let Property
As it becomes increasingly difficult for first time buyers to get on the housing ladder, there is a growing demand for rented accommodation. If you are living in Australia looking for your own UK buy to let property, you should consider the recent changes to the UK buy to let property market.
Be Aware of the Prudential Regulatory Authority Buy to Let Regulations
The Bank of England’s Prudential Regulatory Authority (PRA) heavily scrutinised traditional lenders’ lending patterns in relation to buy to let mortgages. After a full scale review of banks and building societies’ buy to let mortgage process, the PRA concluded that changes needed to be made to avoid irresponsible lending.
The PRA introduced certain regulations that changed underwriting standards of traditional lenders.
Look . . .
As a result of the PRA new regulations, traditional lenders altered their buy to let mortgage application processes and potentially made it more difficult for applicants.
Increase Your Chances of Securing a Buy to Let Mortgage
There are only a limited number of traditional lenders who are prepared to provide mortgages to British expats that live in Australia. If you find a traditional lender who does provide buy to let mortgages for British expats then they will focus on the following:
Income stress test
Traditional lenders have introduced a strict income stress test. The test will review your income and identify whether you can afford mortgage repayments. You will only be able to satisfy the traditional lenders’ income stress test, if you can illustrate that you can afford mortgage repayments in the event that the interest rate hits 5.5%.
Here’s the problem. . .
As stated above, traditional lenders do not have the expertise to deal with foreign currency and complex income streams. This means that British expats often struggle to satisfy the income stress test, as traditional lenders do not take their full income into account when checking if expats can afford mortgage payments.
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. The reason for the rise in rental coverage ratio is to provide a safety net for when landlords’ properties are without tenants.
What does this mean . . .
Therefore, in order to secure a buy to let mortgage you have to provide a valuation from a professional surveyor that states your property will gain up to 145% of the monthly mortgage payments.
Review of portfolio
Traditional lenders will review property portfolios to ensure all properties are profitable. If the lender finds one property that does not provide a positive return, then your application will be unsuccessful. This may make it particularly difficult for you if you have a number of buy to let properties.
Know this . . .
As traditional lenders require all properties to be profitable before granting a buy to let mortgage, the more properties you have in your portfolio the more expensive it will be to ensure all your properties are profitable; in effect, this may cause the cost of borrowing to increase.
Realise Your Buy to Let Property Aspirations with a Specialist Lender
In comparison to the rigid buy to let mortgage criteria that traditional lenders have, specialist lenders’ application process is more flexible and every applicant is viewed in light of their specific circumstances.
Flexibility . . .
In most cases, British expats will require a deposit of 25% of the value of the property to secure a buy to let mortgage. With traditional lenders, the need for a 25% deposit is more or less set in stone. However, some specialist lenders are prepared to consider applications with a lower deposit. Some lenders we work with will go up to 85% LTV depending on the client’s background.
Specialist lenders are also more equipped to deal with British expats and foreign nationals; they are more likely to be able to provide a buy to let mortgage that fairly reflects their financial position. This is because 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). Specialist lenders are also likely to consider expats’ other income as well as their property’s rental income when calculating affordability.
The details of a specialist lender British expat 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
If you are a British expat or Australian national and you want to purchase a property in the UK, whether for residential or buy to let purposes, you may want to seek the advice of a professional broker to obtain the mortgage from a specialist lender.
As a specialist property finance broker, through our extensive links with private banks and specialist lenders, we can help source the financial solution that caters for your needs.