Expat Buy to Let Mortgage Calculator UK

Expat Buy to Let Mortgage Calculator: Does the Rent Pass the Lender Test?

Find out if the rent passes before you send a penny to the UK. Buying to let from overseas is judged differently from buying a home to live in. A UK lender looks at the rent first, tests it against a stressed interest rate, and only then looks at you, your country, your currency and your deposit. This calculator runs that same test so you can see where a purchase stands before you speak to a lender.

Enter the price, deposit, mortgage and expected rent, and it shows whether the rent clears the rental cover hurdle, how much you could borrow against it, the Stamp Duty you would pay as a non-resident and the total cash you need to send to the UK. If you are buying a home to live in, our expat mortgage calculator is the better tool. Once you know the loan you need, compare it with current expat buy to let rates.

How to Use the Calculator

Start with the purchase price and the deposit you plan to put down. Many lenders ask expat landlords for at least 25 percent, and some ask for more depending on the country you live in and the currency you are paid in, so try a few deposit levels and see how the result moves.

Next, choose the country you live in. That sets your income currency, and if you type in today’s exchange rate the results are also shown in your own currency. Then say who is buying. A purchase in your own name and a purchase through a limited company are tested against different rental cover figures, so the choice changes the result.

Mortgage details come next. Use the rate you have been quoted if you have one, or leave the illustrative figure in place. Pay particular attention to the fixed period, because it changes the stress test, as the next section explains.

Finally add the rent you expect, a void allowance, your letting and management fee and any other monthly costs. A realistic rent is the most important number on the page, so check it against similar lets in the area before you trust the result.

What the Rental Cover Result Means

Lenders do not test the rent against the rate you will pay. They test it against a higher stress rate and ask for the rent to cover that interest by a set margin, usually 125 percent for a limited company or a basic-rate taxpayer, and 145 percent for a higher-rate taxpayer buying in their own name. Each lender sets its own figures, which is why the calculator lets you override them.

A two-year fix is usually tested at a rate above the one you pay, often the higher of 5.5 percent or your rate plus two percentage points. A five-year fix is commonly tested at or close to the rate you pay. The same property can therefore pass on a five-year fix and fail on a two-year fix, and the worked example below shows it.

When the rent falls short, the results show what would close the gap. You can put in more deposit, find a stronger rent, or move to a longer fix. Treat the maximum loan as an estimate and not a limit that any lender has agreed.

Stamp Duty When You Buy to Let From Overseas

Stamp Duty on a buy to let in England or Northern Ireland is built from three parts. There are the standard residential rates, a 5 percent higher rate because the property is an additional one or is bought by a company, and a 2 percent surcharge if you are not UK resident for tax purposes. The calculator adds all three and shows each one.

On a £300,000 purchase that comes to £26,000: £5,000 at the standard rates, £15,000 for the higher rate and £6,000 for the non-resident surcharge. Scotland and Wales have their own taxes with different rates, so treat the figure here as a guide for England and Northern Ireland only. Whether you count as non-resident depends on how many days you spend in the UK, and we are not tax advisers, so confirm your position with a qualified adviser.

Worked Example: Same Property, Two Fixed Rates

Take a £300,000 flat in a UK city let at £1,600 a month, bought through a limited company with a 25 percent deposit. The deposit is £75,000, the loan is £225,000 and the rate is 5.79 percent.

On a two-year fix the lender tests at 7.79 percent. The interest on that test is £1,461 a month, and at 125 percent cover the rent would need to reach £1,826. At £1,600 the rent covers 110 percent, so the case does not pass, and the rent would only support a loan of about £197,200, which means roughly £27,800 more deposit.

Put the same flat on a five-year fix tested at the pay rate of 5.79 percent and the picture changes. The test interest falls to £1,086, the rent needed falls to £1,357 and £1,600 covers 147 percent. Same flat, same rent, same deposit, and the case passes, with the rent supporting a loan of about £265,300.

Cash is the other half of the picture. Add the £75,000 deposit, £26,000 of Stamp Duty, a 1 percent arrangement fee of £2,250, £2,500 of legal costs and a 0.5 percent money transfer cost, and the total to send is about £106,000. After a 5 percent void allowance, 10 percent management and £150 of other monthly costs, interest-only payments of £1,086 leave about £132 a month, a return of roughly 1.5 percent a year on the cash invested before tax. These figures are illustrations and rates change.

What Lenders Ask of Overseas Landlords

The rent is the main test, but you are still assessed. Lenders look at where you live, the currency of your income, your credit history and how you will evidence your income, and appetite varies a great deal from one country to the next. A lender that is comfortable with a buyer in Dubai may not lend to someone in a country it rarely sees.

Deposits are usually larger for expats than for UK residents, and some lenders set a minimum income or restrict the currencies they accept. Buying through a limited company is common, and lenders then typically ask the directors for personal guarantees. If you already have four or more mortgaged properties you may be treated as a portfolio landlord and asked for a schedule of your portfolio.

None of this shows up in a calculator, which is why the figure it gives is a starting point. A specialist broker can tell you which lenders are open to your country and currency before you spend money on valuations and legal work.

From Calculator to Application

Once a case looks workable, the next step is a decision in principle with a lender that accepts overseas applicants, followed by a valuation, the application and the legal work in the UK. Our advisers can check your numbers against lender criteria for your country, explain what each lender will want to see and place the case with the right one. You can read how lenders treat overseas applicants in our guide on whether expats can get a UK mortgage, or look at the specialist options on our expat buy to let mortgages page.

Frequently Asked Questions

Final Thoughts

If you have any questions relating to expat buy to let mortgages, contact us today to speak directly with one of our expat mortgage advisors.

Expat Mortgages UK is a specialist broker directly authorised and regulated by the Financial Conduct Authority. We work exclusively with expats and foreign nationals buying UK property with overseas income. Your property may be repossessed if you do not keep up repayments on a loan secured against it. Buy-to-let and other business-purpose lending is not regulated by the Financial Conduct Authority.

Call: +44 1494 622 555
Email: info@expatmortgages-uk.com

Related Pages

• How Rental Income Affects Your Expat Buy-to-Let Mortgage Application – how lenders test the rent, with a worked example and what to do if it falls short.
• Holiday Let Mortgage Calculator – check rental cover and cashflow for a UK holiday let bought from overseas.
• How to Leverage Expat Mortgage Calculators for Better Financial Planning – how to get more from calculator results and plan around rate and currency changes.
• Mortgage Rates UK – the current rates behind the figures you test.
• Limited Company Buy-to-Let Remortgage: 17-Property Portfolio Case Study – a real example of an overseas landlord remortgaging through a company.
• Remortgage for Expats – remortgage options for expats and foreign nationals with UK property.