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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