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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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Expats will be ready to buy once the lockdown is lifted

Expat mortgage broker Guy Stephenson of Offshoreonline is positive interest in UK property from overseas will start strong once the UK lockdown is lifted.

Stephenson said enquiries are now coming from Asia, adding that some parts of the world are less affected by the outbreak than the UK.

He said: “The vast majority of expat buyers of UK buy-to-let property come from parts of the world which have suffered far less from COVID-19, areas such as the Middle East, Singapore and even Hong Kong (pictured).

“Buoyed by the success of containing SARS in 2003, Asian governments have deployed tried and tested techniques which have helped them recover quickly. Already we are seeing enquiries coming from Singapore and Hong Kong again.”

He added that people with UK expat mortgage applications approved will be the first ‘away from the starting gun’ once the UK recovers.

The expat mortgage market was performing strongly before the lockdown, as uncertainty over Brexit had been lifted by Boris Johnson’s victory in the December General Election.

As a result, Offshoreonline saw more expat mortgage enquiries in January 2020 alone than in the whole of the last quarter of 2019.

BY RYAN BEMBRIDGE

Source: Property Wire

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Returning expats face property tax bombshell

Expats looking to move back to the UK after Brexit could find themselves hit with an expected property tax bill, an accountant has warned.

At the end of September Prime Minister Theresa May promised the Conservative party would introduce a new surcharge to be levied on top of all other stamp duty payable on second home and buy-to-let purchases.

Stamp duty starts at 3 per cent for homes valued less than £125,000, increasing to 5 per cent for homes worth between £125,000 and £250,000 and 8 per cent for homes worth up to £925,000.

Wales and Scotland have different rules on stamp duty.

The government stated it will consult on the precise details of the plan, but Mrs May said the additional tax charge on top of stamp duty would apply to “foreign buyers” and was a move “to help UK taxpayers buy a property.”

But George Bull, partner at accountancy firm RSM, said he feared it wasn’t just foreigners who will be hit with the extra tax charge.

He said people who have moved abroad who want to move back to the UK in the aftermath of Brexit could face this additional tax charge too as he feared they would be deemed non-UK residents.

Mr Bull said: “The headline writers have portrayed this as a tax on ‘foreigners’ buying property here but citizenship is not a concept which has relevance to UK taxation.

“Others have said that the charge will apply to those who ‘do not pay tax in the UK’. And the Conservative Party’s official Tweet says ‘we will apply a higher rate of stamp duty for non-UK residents’. These are all subtly different tests.”

When asked to clarify would expats face Mrs May’s proposed charge, a spokesman for HM Treasury said: “The Prime Minister has announced that foreign buyers looking to buy homes in the UK will face a higher stamp duty rate.

“We will consult on the details in due course.”

According to Mrs May, the cash raised by the extra tax charge will be used to fund services for the homeless.

She said: “Currently foreign buyers can purchase homes in the UK as easily as people who live here but there is evidence this is inflating house prices.

“At Conservative conference last year, I said I would dedicate my premiership to restoring the British Dream, that life should be better for each new generation, and that means fixing our broken housing market.

“Britain will always be open to people who want to live, work and build a life here.

“However it cannot be right that it is as easy for individuals who don’t live in the UK, as well as foreign-based companies, to buy homes as hard working British residents.”

Brian Hill, of advice firm Jones Hill, said: “I would expect the impact of this would be marginal because the majority of overseas buyers in London wouldn’t blink twice at an increase in stamp duty.

UK expats returning ‘home’ are more likely to rent until they become UK residents, in which case stamp duty wouldn’t impact them in the same way as if they were non resident.

This is more of an attempt to curry favour with people who are struggling to buy a home, particularly in London, where they are often outbid by wealthy overseas investors.  It’s unlikely Theresa May would go as far as the New Zealand government’s total ban that came in August.”

Source: FT Adviser

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Stuart Marshall: buy-to-let changes may mean more expats doing buy-to-let

The reduction in buy-to-let mortgage tax relief may cause more people to emigrate abroad and invest in UK buy-to-let from overseas, the managing director of Liquid Expat says.

Stuart Marshall is the managing director of Expat Packager, which submits UK buy-to-let cases for expats, and Liquid Expat Mortgages, which offers buy-to-let mortgages for expats.

Marshall said: “Lenders not already operating in the expat marketplace will have to start thinking about tapping into it because of more people leaving and becoming expats.

“With Brexit, a lot of the talent pool will leave and this is good for our business. People are realising there’s a big world out there and can experience more cultures and not living in the UK, paying UK taxes.

“If you’re an expat there’s genuinely never been a better time to take out mortgage finance. A lot of the specialist lenders have been looking for new niches.”

The mortgage tax relief changes, phased in over four years, mean 75% of finance costs are deductible from rental income from 2017 to 2018. The year after it will be 50%, the year after that 25% and from 2020 none.

Marshall added: “Some landlords may be selling off some units in the UK because of being hit harder with tax changes.

“We’ve seen more expats wanting to buy into a limited company to do buy-to-let deals but we’ve been educating them, showing a lot of the time, it’s not worth the time and the cost to set up.

“Expats can earn a certain amount in the UK before paying tax and property purchasing may not take them over that amount, meaning they wouldn’t be affected by these tax changes.”

Landlords have had to pay 3% more stamp duty since April 2016, something which Marshall found positive for expats.

He said: “It hasn’t had a negative impact on the number of mortgage applications from overseas landlords. It just means they are looking at more efficient properties and doing due diligence on them with the cost involved and rental yield.”

The Prudential Regulation Authority brought in regulation from 2017, requiring applicants with four or more mortgaged buy-to-lets to provide more information about their existing portfolio.

Marshall said: “There won’t be much change because in the expat marketplace lenders are more cautious, always looking at affordability and there’s more underwriting too.”

He said that it’s this manual underwriting that makes the process take longer. “Getting tested and certified passport copies is the most difficult because a British embassy may be far away and there may be a long wait.”

Marshall reckoned that with technological improvements, the process will quicken eventually.

He said: “It will do but will take one major player with a lot more digitally driven processes and once established, lenders will have to follow suit.

“Marsden is the first lender we have trialled doing these passport checks digitally and achieved a 100% success rate, meaning they all worked digitally without needing having to go to an embassy.”

He felt the expat marketplace for lenders is as competitive as ever and new entrants must add something new.

He added: “There is space for new entrants if they have a clear criteria and rate that fills the gap existing lenders are not covering.

“We aim to continue to bring new lending products expats can benefit from, make application process smoother and educate all the expats that see getting a mortgage in the UK as a problem.”

Source: Mortgage Introducer