Mortgages for UK Expats
For many, living and working outside the UK provides fantastic opportunities to explore more varied employment options, greater wealth, improved lifestyle, new cultures, and, of course, taking advantage of far better weather systems.
However, when it comes to purchasing accommodation back home or refinancing an existing property, there are a few steps that make getting approval a little more complicated.
What is an expat?
An expat, in this instance, is a UK national living overseas. It’s an abbreviation of the word expatriate, defined as ‘someone living outside their native country.’
The term often refers to professionals and skilled workers who have relocated to work abroad or retirees moving overseas to take advantage of a preferable lifestyle.
What is an expat mortgage?
An expat mortgage is a loan geared specifically towards UK nationals living abroad to pay for a property in the United Kingdom.
The mortgage itself is practically the same as any other regular UK mortgage. The difference is that overseas borrowers are considered a higher risk, and it’s harder to attain suitable eligibility checks. Because of that, they’ll pay higher deposits and are typically charged slightly higher interest rates to balance the risk.
What’s the difference between an expat mortgage and an overseas mortgage?
An expat mortgage is used by a UK national living abroad to buy a house in the UK, funded by a UK lender.
An overseas mortgage is used by a UK national, living at home or abroad, to buy a house outside the UK, funded by a UK lender.
What are the key differences between local and expat mortgages?
Most mortgage lenders hope to achieve a healthy return on their investments with minimum effort and risk. Traditionally, that equates to lending money to someone in the UK to buy a standard build home who can comfortably afford the repayments for the term of the loan. To ensure they’re a safe option and a low risk, lenders carry out a range of checks and affordability assessments to confirm that’s the case.
When an applicant lives abroad, it’s a little harder for them to prove the points they need to know. For high-street banks and lenders, that’s enough to put them off straight away. Specialist lenders are happy to go the extra mile, yet they’ll expect a little more return on their investment to cover the additional work and risk.
Proof of income
Proving how much you earn in the UK is relatively simple. You can provide payslips (a legal document from your employer) or three years of tax returns if you’re self-employed, a freelance worker, a contractor or have an irregular income.
Working abroad will often mean that wages are subject to different taxes, and making payments to a UK lender will mean converting them to pounds sterling subjecting them to international exchange rates. Fluctuating exchange rates can lower the value of your foreign earnings, making meeting your monthly payments a little more challenging in certain circumstances. Because of that, lenders will expect to see higher salaries than those of applicants in the UK.
Country of residence
The country of residence carries a lot of sway with the lenders. Most expat mortgage specialists will be happy to deal with borrowers living in the US, Canada, Singapore, or UAE, but you might have to explore the market to find lenders happy to work with those who live in less affluent countries and societies.
Deposits and international anti-money-laundering laws
Another critical area is the deposit. As a higher risk, you’ll be expected to match a lower LTV, with many lenders demanding deposits of around 25%. Also, international anti-money-laundering laws require lenders to attain proof that buyers’ deposits come from legitimate sources.
Problematic credit checks
Mortgage lenders carry out credit checks on all applicants. It’s how they determine the financial behaviour of applicants and one of the tools they use to assess whether they can realistically afford to make their monthly repayments.
If an applicant has lived outside the UK for over six years, there’s a chance that all of their credit opportunities, borrowing and spending behaviour will have disappeared along with their credit report. Lenders need that information to ensure their investment is a low-risk and promising opportunity. Without an appropriate credit report, many lenders will reject an application straight away, too.
UK expat mortgage lending criteria
The criteria demanded by lenders aren’t vastly different for expats as they are for UK residents; it’s just a little more complex, providing acceptable forms of proof.
- Proof of ID – passport, driving licence, etc.
- Proof of employment – ideally, a contract
- Proof of income – payslips or accounts provided by internationally recognised accountants if self-employed or similar, pensions, dividends, and other income streams
- Proof of deposit and how you raised the amount
- Proof of address – rental contract, utility bills, etc.
- An appropriate credit history
- Aged from 18 to around 70 years, depending on the provider
- Country of residence
- Proof of affordability – all income and expenditure, existing mortgages and rentals, bank and credit card statements, loans, subscriptions, and lifestyle expenses
Deposit criteria for expat mortgages
Expat mortgage lenders typically expect an LTV of 75%, meaning you’ll have to find around a 25% deposit. However, the greater your deposit, the better your chances of securing a loan at preferable interest rates.
Deposit criteria are tighter with expat mortgages, primarily due to international anti-money-laundering laws. Lenders must be careful about where deposits come from, ensuring borrowers can justify their sources. Again, this can be problematic, as tracing international sources often isn’t as straightforward as it is within the UK using local and national accounts.
Standard acceptable forms of deposit:
- Savings accounts (UK or overseas)
- Investment accounts (stocks, shares, capital, UK or abroad)
- Finance from a property sale
- Using the equity in another property
- An inheritance
- A gifted deposit
If you can’t raise the expected 25% for your deposit, some specialist expat lenders may offer a deal of as high as 90% LTV. You’ll have to meet stricter criteria and incur higher interest rates with the added perceived risk.
Credit check criteria for expat mortgages
With a national mortgage, lenders have access to 6 years worth of information about your spending habits, credit performance and any potential issues via your credit report. Unfortunately, for those who have been living abroad for some time, many of those actions will have disappeared, making credit limits, borrowing habits, payment histories, defaults and issues harder to check for lenders.
If you can keep a UK credit report active, it can help with expat mortgage applications. Otherwise, you’ll have to find alternative ways of providing proof of the things lenders will expect to see.
• 3 to 6 months of bank statements conveying healthy practices and transactions • Utilities, telephone, and mobile phone bill schedules, showing regular, on-time payments • Credit card statements • Personal loans, vehicle finance, and other avenues of credit and finance statements
What types of mortgage can an expat apply for?
Expat mortgage amounts are similar to their traditional counterparts, estimated at a starting point of around four times the applicant’s salary, considering their affordability assessment, and are available on the same products.
Interest-only and repayment mortgages
You’ll be entitled to apply for both repayment and interest-only mortgages as long as you can achieve the specific criteria of each lender.
Expat homeowner mortgages
Residential mortgages are available for expats expecting to move back to the UK in the foreseeable future and need somewhere to live. Alternatively, the buyer may live overseas while their family needs a home in the UK.
Many lenders don’t look favourably on expat mortgages used to buy holiday homes or as an investment likely to remain empty or unlived in. However, specialists are available for every eventuality; a good broker will help you find the best provider for your needs.
Expat buy-to-let mortgages
Expats hoping to invest in property are best suited to buy-to-let deals. Typical expat buy-to-let opportunities are based around interest-only mortgages, but again, by employing an experienced mortgage broker, there is always an exception to the rule.
One slight advantage is that expat BTL mortgage deposit requirements are often slightly lower at around 20%.
Remortgaging as a UK expat
There are several reasons an expat may want to refinance a home they own in the UK.
The most common reason to remortgage is to find a better deal and save money. However, with expat owners, it’s unlikely to be worth the time and effort, given higher interest rates and charges, unless they’re looking for an upgrade to an existing expat mortgage.
However, if your personal circumstances change, for example, you can afford to pay more towards your monthly payments (due to a wage rise) or pay off a lump sum of the capital (lowering your LTV ratio), you may well achieve preferable interest rates by remortgaging.
Remortgaging to a buy-to-let expat mortgage
Another reason for remortgaging is to transfer a residential mortgage to a buy-to-let option, meeting expectations from lenders as the property changes use.
Owning an empty property is a lost opportunity in rental income. Although the process is very similar to applying for a residential expat mortgage, it’s a process many expats enter into to take full advantage of their new situation.
Talk to a specialist UK expat mortgage broker
When buying a property in a different country—whether you’re moving home after working abroad or making an investment—the process will be far less challenging with an expert on your side. Professional mortgage brokers work with lenders of every type and understand what it takes to deliver a seamless and straightforward application.
Not only do they ensure the correct completion of your paperwork and that applications are made precisely how they need to be, but they’ll also match you with a lender ideally suited to your unique situation. So they won’t just save you time and money—they’ll save you from all the additional stress of tracking down and appeasing a specialist expat mortgage lender.