Expatriate Mortgages

Expatriate Mortgage Fundamentals

This is an expatriate mortgage for British nationals only, i.e., a British national working abroad and looking to buy a property in the UK for investment purposes.

An expatriate or expat is a British national who lives and works in another country. You could have relocated to another country to seek better employment opportunities or been sent on secondment by your employer in the UK. It’s estimated that there are about five million British expats living and working abroad.

The typical scenario is that you are a:

1. British expat that plans to return to the UK within the next few years and you want to buy a residential home, and it’s your intention to rent it out the during the period.
2. British expat that bought a tiny two bed flat many years ago but you are now looking for a larger property to accommodate your new family when you return, and it’s your intention to rent it out during the period.
3. British expat that wants to buy a property purely for investment purposes.
4. British expat that has a BTL property(s) in the UK but wants to buy another BTL property.
5. British expat that has BTL property in the UK and you are looking to remortgage, e.g., you are currently on a variable rate and you now want a five year fixed rate.
6. British expat that has a BTL property in the UK and you’re looking to capital raise to purchase another property in the UK or a property overseas.

Expatriate lenders

The majority of the BTL lenders do not provide expatriates mortgages for British expats. A number of lenders such as Lloyds Banking Group pulled out of the expat market a few of years ago. The lenders that dabble in this niche area are:

• Market Harborough Building Society
• Saffron Building Society
• Kent Reliance Building Society
• Skipton International
• Clydesdale Bank
• Nat West International
• Barclays
• Nat West
• Newbury Building Society
• Newcastle Building Society
• HSBC
• Niche lenders: Experienced brokers have access to underwriters and niche lenders that adopt a lateral thinking approach to lending and if the case makes sense to the underwriter or Credit Committee, they’ll do the deal

The key lending themes for expatriate mortgages are:

• Although it’s a BTL mortgage, some of the lenders will assess the application based on your income and overall affordability as opposed to rental income. Your income has to be able to afford the mortgage, including any commitments you have overseas
• If you’re paid in a foreign currency, lenders will apply a haircut to hedge against currency fluctuations (typically 10% to 20%). For example, if your income is $175,000 USD, the lender will reduce your income by 10% = $157,508 when calculating affordability
• Some lenders will only consider employed applicants working for a multinational or global firm, i.e., a firm with offices in at least five countries. The criteria is rather stringent for those of you that are self employed but if you can evidence your last three years tax returns and your accounts are compiled by one of the top accounting firms, then you’ll be considered favourably
• It’s your intention to return to the UK at some point (within two to five years)
• The lenders will allow you to rent out the property whilst living abroad
• Anti Money Laundering (AML) and proof of deposit: Rigorous checks will need to be carried out to comply with AML, which invariably causes delays
• Some lenders do not have the licence to lend to expats in certain countries. For example, some lenders do not to lend to British expats in Australia or some sanctioned countries
• The rental income must sufficiently cover the interest only mortgage payments by at least 125% using a notional rate of 5% to 7%
• The majority of lenders will allow interest only but some insist on repayment if over 60% LTV
• You must have a UK bank account. Although some banks, as part of their on boarding process, will open an account for you
• Some lenders will only consider applicants on secondment and will need to see documentation from your employers confirming secondment periods and likely return dates to the UK

Documentation

The biggest challenge you have with expat mortgages is that it can take up to three months to obtain a mortgage offer which in today’s frenetic property market could mean the difference between a successful completion and the sale falling through. But if it’s fully packaged, it can be done within three weeks with the right lender.

Lenders apply rigorous Anti Money Laundering checks when processing your mortgage application. The turnaround time between lenders differs considerably and there are a few lenders that take f-  o-  r-  e-  v-  e-  r.

If you are looking to buy a property, the first thing you need to do is speak to an experienced independent mortgage broker in the UK. They will complete a full mortgage fact-find over the phone and will proceed to obtain a decision in principle. Most importantly, they will be able to advise you on the key bits of information that the lender requires to process your application and how you can expedite the AML process.

If you can complete a fact-find prior to the conference call, this will help tremendously, as they will be able to come back to you promptly on the best mortgage options available based on your financial circumstances. They will give you an up to date assessment on the service levels of the lender and how quickly you can obtain your mortgage offer.

If you’re buying, understanding the timeframes involved will enable you to manage your seller’s expectations on when the sale can be completed. This is critical, especially if buying in London where there is shortage of quality stock but plenty of active local buyers. Speed is of the essence and if the estate agent can’t get hold of you because you’re in a different time zone, then out of sight could mean out of mind. They’ll offer the property to someone else who is prepared to pay more and can respond in a timescale that suits the seller.

The big plus in using a local UK mortgage broker: Greenwich Meridian Time. The estate agent keeps in regular contact with your mortgage broker, who project manages the entire deal whilst you’re working hard abroad. Trying to arrange an expat mortgage yourself with a UK bank directly from Hong Kong or Australia has its challenges.

The typical documents that the lender will require are:

• Certified copies of your passport
• Certified copy of proof of address: utility bill (not more than three months old). Alternatively, if your company provides accommodation, then a letter from your employer confirming when you arrived into the country
• Certified copies of your last three months’ bank statements
• If self employed: your last three years’ tax returns or accounts from an international accounting firm
• Certified copies of your last three months’ payslips
• Proof of deposit and how funds have been built up, e.g., from bonuses, sale of property, investments. They will want to see evidence of this.

If the documents are in a foreign language, then they will have to be translated to English. The lenders will advise your broker on who can certify the documents: Notary public abroad, solicitor, bank official, or an official at the British Embassy. The sooner you start compiling these documents, the sooner you’ll get your mortgage offer.

Home Finders Service

Have you been searching actively for a particular kind of property, and when you’re contact the agent you’re informed that the property has been sold? There is an insatiable appetite for quality London real estate from both local and international buyers. The best properties get snapped up very quickly or they go to sealed bids. In some cases, it’s not necessarily the highest bid that secures the sale but it’s who can move the quickest.

If you want to improve your chances of securing a property and be allowed a reasonable time-frame to arrange your mortgage before the competition steps in, then you need to consider our Home Finders Service. As a result of their extensive contacts in the London and SE region, they can source residential and investment properties in a short space of time and, most importantly, secure the best price possible. In some cases, they are able to secure properties at below market value.

In relation to investment properties, they are involved in the entire value chain: sourcing, finding tenants, property management, and maintenance. If you are looking for a one stop shop — mortgages, property, solicitors, lettings agent, and property management — then you have come to the right place.

For more information about our home finders service please contact: info@mortgageintellectual.com

Mortgageintellectual.com is not recommending that you invest in any specific property. You must conduct your own due diligence before investing in property. Property prices can rise and fall in value and past performance of the UK property market is no guarantee to future performance.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.