WHO CAN GET EXPAT BUY-TO-LET MORTGAGES?
Lenders offering expat mortgages take into account two additional factors, as well as the usual background checks and proof of income.
Mortgage companies prefer borrowers who are employed by multinational companies, this allows them to confirm employment details and verify documentation. It is much easier than having to deal with an unknown overseas employer with the need for translation of documents, contracts and pay slips. If you’re self-employed, lenders would like to see your accounts being done by a small to medium-sized accountancy company which can be verified and has accreditation.
The second issue mortgage companies look at is the country in which the expat is based. Some countries are deemed higher risk due to the history of widespread bribery, money laundering and corruption practices. Borrowers in such countries as Nigeria and Colombia may have a tough time finding a lender willing to offer them an expat mortgage.
WHAT ABOUT INTEREST RATES?
The increased risk of lending to an expat is reflected with slightly higher rates of interest, but the difference is marginal. It’s always wise to compare products before signing any mortgage offer.
While interest rates are a consideration, lower rates may reflect a company known for its poor service, sloth-like speed, and unnecessary paperwork. You could lose weeks, only to have your application rejected, which could cost you your purchase.
THE APPLICATION PROCESS FOR EXPAT MORTGAGES
You should be able to complete your expat mortgage application by email, fax or courier without having to return to the UK in person. However, one word sums up the difference between applying for a domestic mortgage and an expat mortgage – time-consuming! Checks take longer and different time zones slow down communications and responses. Dealing with language barriers and processing unfamiliar documents all take extra time.
If you are applying for an expat mortgage, be prepared for extra paperwork. You may need to visit your local British Consulate to have documents certificated. You will also need to provide proof of the source of your deposit with a full history of where the income was sourced and how it found its way into your bank account. It is tedious but essential, due to strict money-laundering laws.
WILL PAPERWORK BE DIFFICULT TO ORGANISE AND TIME-CONSUMING?
Paperwork and applications can often leave you with a headache because of the paperwork requested by the banks and the lawyers, but as an expat there may be specific challenges to you collating the information you need (even proof of address or utility bills for example). Typical paperwork the lender likes to see is listed below:
- 2 Forms of identification. (Passport and Country ID Pass)
- Proof of Address (Utility Bill – dated within last 3 months)
- Proof of Income (3 Pay Slips or Copy of Employment Contract)
- Proof of Income (3 Months Bank Statements)
The above are usually required across all lenders and some lenders can request other financial information such as the below.
- Property Rental Income (Bank Statements)
- Pension Income (Bank Statements)
- Guarantor Income (Bank Statements and Pay Slips)
WHY ARE BUY-TO-LET MORTGAGES FOR EXPATS HARD TO FIND?
Lenders understandably assess borrowers on risk. Expats may represent a higher risk for various reasons:
Lenders need to be sure of the provenance of any funds used as a deposit when buying a property.
If the borrower is based overseas, it can be difficult to assess documents and check their validity, so the workload is increased.
In the event of non-payment of the mortgage, lenders may find it difficult to prosecute someone who is not in the UK
For these reasons, if you want to apply for an expat mortgage you need to use a specialist broker. Fortunately, it is easier to get an expat mortgage now than it was in the past.
WHAT RECENT CHANGES HAVE AFFECTED EXPAT MORTGAGES?
In 2015, the UK Chancellor, George Osborne, made important changes to mortgage interest relief, restricting the tax benefit on buy-to-let mortgages. This prompted landlords to operate buy-to-let properties within a limited company framework.
The increase in demand for buy-to-let mortgages was matched by a lower demand for personal mortgages. The financial market responded by seeing a new influx of lenders who were keen to lend money for expat buy-to-let mortgages. As usual, increased competition from more players meant that new expat mortgage providers competed for business with more attractive interest rates, a wider product range and better service.
THINGS TO CONSIDER BEFORE APPLYING
When applying for an expat mortgage, the most important part of the process is to find the right lender who understands and specialises in expat mortgages. Find a broker who is familiar with expat mortgages and can recommend the most suitable company for your needs. Don’t forget to liaise with your expat financial planner, who can also give helpful tax advice on your international income.
