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Brokers see uptick in expat mortgages as Covid regulations soften – analysis

Brokers have reported an increase in expat mortgage enquiries over the past few months as borders reopen and Covid restrictions are rolled back, with expectations for the market will grow more in the near future.

Anthony Rose, co-chief executive of LDNfinance said it had seen a “healthy increase” in expat mortgage enquiries, and said when it compared increasing enquiries against timelines it could be attributed to post-Covid borders opening up with looser restrictions on international travel.

Daniel Yorke, managing director at Expat Mortgages UK which is specialist division of Commercial Finance Network, said it had seen a “gradual increase over the past 12 months” but this had become more pronounced over the past three months.

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Chris Sykes, associate director and mortgage consultant at Private Finance, added that expat enquiries had fallen during the pandemic due to travel restrictions, but there had been an “uptick” in such enquiries in recent weeks.

According to figures from Knowledge Bank, expat residential searches increased by seven per cent from 2020 to 2021, and 16 per cent for buy-to-let (BTL) searches over the same period.

Matthew Corker, operations director at Knowledge Bank said it had 24 categories covering various criteria and it had been growing them as expats looking for UK properties had risen.

Corker said: “While the growth has been steady in residential searches, there has been a significant increase in ex-pats look for BTL properties. Partially driving this interest is the volatility in the stock market, coupled with UK house prices exceeding all growth expectations.

“Lenders are also reacting to this trend and there have been more and more adding products for expat borrowers. With house prices and rents looking set to keep increasing, we anticipate this growth to continue in 2022.”

Primis’ figures for Q4 also show that expat lending, which includes residential, BTL borrowers and foreign income lending, grew in Q4. This was partially attributed to the return of high loan to value (LTV) BTL mortgages for expats and a softening of criteria to apply for these products.

Yorke said there were multiple factors in the increase in enquiries, which included Covid-19 becoming more normalised, interest rates staying “exceptionally low”, Brexit leading expats to return to the UK and the UK property market’s strong growth and activity.

Sykes said he believed the growth in enquiries was due to the UK’s “light touch approach to Covid” in terms of restrictions, which meant it was the “least restrictive place in Europe”.

Rose added: “Most of our enquiries have been expats returning to the UK looking to buy, or they’re refinancing their existing UK properties. However, we have also noticed that the end of the stamp duty holiday and strong property market post-Covid has played a vital role in clients obtaining expat mortgages for BTL properties.”

Challenges of lender choice and case complexity

Rose said one of the biggest challenges for brokers in sourcing expat lenders was the number offering suitable products.

He explained: “It’s a small, niche space which can involve placing square peg clients in round holes. Often, expats have bespoke circumstances that require providers to have a flexible approach to lending.

“A classic example is intended date of return home; some lenders require a specific date whereas others need some ballpark timelines. Naturally these times can change so it’s difficult for clients to pinpoint precisely. Lenders need to be mindful of this.”

Sykes said another issue was the “very manual process” to find a lender for an expat mortgage.

He said lenders needed to consider more factors such as what country the client is a resident in, what country they are domicile and pay tax in and what currency they are paid in.

Sykes added that some lenders needed borrowers to be employed at a “blue chip company” earning £50,000 or more, whereas others were more flexible on earning structure.

He also noted that along with the added complexity, some brokers would not have relationships in place with international and expat lenders to source the most competitive expat mortgage deal.

“If you don’t know who you are asking to narrow down these products then you cannot quote the most competitive deal,” Sykes said.

Yorke said on the biggest challenges were the increase in interest rates and LTV reductions which made it harder for expats to borrow money.

He added: “Complicated income structures make it harder for clients to be able to secure funding, or at least at the level they would ideally hope for. We overcome this by working closely with our clients to help educate them and make aware of exactly what documents & figures the lenders will need for an application.”

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Expat mortgage market expected to grow post-pandemic

Sykes said that expat enquiries had fallen during the pandemic due to travel restrictions but it “remains to be seen” if there would be a return to pre-pandemic levels or if there is a “great deal of pent-up demand” after two years of restrictions in the UK and globally.

However, he added: “We do now see this as an area that we expect to grow post-pandemic, especially as London returns to life and with prices having stagnated in the capital, this could be an attractive time for expat buyers and importantly investors.”

Yorke said Expat Mortgages UK received over 20 expat mortgage leads per week and it planned to double this volume in the next six months and double it again in the last six months of the year.

He continued that it was a growing market as expat mortgages tended to have high value properties and loan values. He also said expat mortgages encouraged a deeper relationship with the client and there was less competition in the market.

Sykes said the average size of an expat case was usually higher than a normal first-time buyer case due to the increased complexity.

Rose said despite the lengthy and complex process of an expat mortgage the “job satisfaction” advisers got from completing these mortgages made it “worth the time and effort”.

He added: “Each client has a unique story to tell which keeps our job interesting and exciting. In delivering an excellent service, we can also benefit from the referrals we receive off the back of them.”

He also noted that clients who used LDNfinance for an expat mortgage were more likely to return when it came to remortgage their UK residence when they returned home.

By Anna Sagar

Source: Mortgage Solutions

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Securing an expat mortgage for a UK property

In 2019, the United Nations estimated that 13.1% of the total population of Spain were migrants, some of whom are British expats living in Costa Blanca and Costa Calida. Despite moving overseas, these expatriates may wish to retain a property in the UK as a form of rental income or as a personal dwelling if they plan to eventually return to the UK.

Despite various uncertainties, such as Brexit disrupting the UK’s economic climate, domestic house prices continued to rise in recent years. No matter the reason, if you are considering making a financial investment, purchasing a property in the UK could still be a viable option.

Can an expat get a UK mortgage?

Since the introduction of the Mortgage Credit Directive (MCD) in 2016 by the European Commission, applying for a UK mortgage whilst living abroad is no longer a simple and straightforward process. Volatile exchange rates have caused many high street lenders to turn away from offering foreign currency mortgages, as their computerised systems deem expats as high risk and lenders are unwilling to monitor many exchange rates at one time.

However, this does not have to be a cause for concern if you are considering applying for a mortgage on a UK property as there are other options available to you. Specialist lenders, such as building societies, are able to offer expats mortgages using various foreign currencies.

What is an expat mortgage?

After reviewing each case individually, these specialist lenders can fundamentally provide two different types of mortgages to expats; a residential mortgage or a buy to let mortgage. Residential mortgages are reserved for those intending to use the property as their primary UK residence or for family remaining in the country, whereas buy to let mortgages allow overseas landlords to rent out their property and generate an income whilst living and working in Spain.

Borrowers can expect to pay a higher deposit and overcome considerably more obstacles than when applying for a regular, residential mortgage. Hurdles include:

  • Credit rating: being able to prove you have a good credit history is a good indicator that mortgage repayments will be met. Make sure you update your address details on your bank accounts so lenders can evidence your address history when applying for finance.
  • Deposit currency: when it comes to expat mortgages, fluctuating exchange rates can cause major issues when determining the size of your income in relation to the GBP loan you are applying for. Lenders will ask you to provide evidence of how you accrued your deposit, e.g. the accumulation of savings over time through bank statements.
  • Repayment currency: exchange rates can also give the impression that your salary seems unstable, thus alluding to a high-risk investment. By reviewing each case individually and using an approved currency list, specialist lenders can often see past these complexities. When it comes to buy to let mortgages, the rental payments you will be charging your tenants will be assessed to see if this provides adequate cover for your prospective mortgage repayments.

Should I seek independent financial advice?

When applying for an expat mortgage, you will soon discover that the process can be significantly more complex, demanding and stricter than a regular mortgage application. It may, therefore, be beneficial to seek independent financial advice or do a comprehensive comparison of specialist lenders. The process used to approve mortgages by these specialist lenders allows them to assess your individual situation appropriately rather than relying on an impersonal and automated process, increasing your chance of success.

Source: The Leader

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Getting An Expat Mortgage Is Not As Easy As You Would Think

British expats with home thoughts from abroad find getting a mortgage is a challenge.

Many of the 4 million Brits choosing to live overseas want to keep their options open by owning a home in the UK.

But a government-initiated squeeze on mortgage lending has confined expats to seeking loans from a small group of niche lenders.

Although lenders say the number of expats wanting to borrow is increasing, government restrictions are keeping a lid on the market.

Expats are cash-rich as they often pick up tax-free salaries in locations like the Gulf States.

They are likely to be paid in US dollars, which has an attractive exchange rate against the Pound, and probably have the bill for accommodation costs picked up by their employer.

This leaves them with money in the bank.

Property is an ideal investment

British buy to let property is seen as an ideal investment, with good capital growth and often a queue of tenants willing to pay the rent.

Many mortgage applications fall at the first hurdle.

Only a few lenders want expat customers – top of the list are Kent Reliance, Al Rayan Bank and Market Harborough Building Society.

They operate strict underwriting procedures to determine identity and affordability.

Expats will also find they have to put down a minimum 25% deposit against the property value and will probably pay a higher interest rate than UK borrowers – and higher mortgage arrangement fees as well.

Expat tax status at risk

But beware. Not all countries are accepted as suitable places for lending to expats. Each lender will have their own list and may exclude many African and Asian countries with a reputation as money-laundering trouble spots.

If an expat is not paid in US dollars, this could impact their borrowing as the lender will want to safeguard the loan against exchange rate fluctuations.

Another issue to consider is tax.

If you buy a property in the UK for your family to live in and stay there when you visit Britain, you could find your non-residence status as an expat at risk with HM Revenue & Customs, so consult a tax adviser before making a mortgage application.

Source: Money International