Are you an expat who would love to own property in the UK? You’re not alone. The UK housing market is a popular investment for many expats and foreign nationals due to the historical strong returns it provides. If you’re moving to the UK for work, investing, or planning on returning at some point in the future, figuring out how much deposit you’ll need to get a mortgage is a critical part of the process.
In this blog, we’ll run through the key points to bear in mind and then run you through everything you need to know to help you determine how much deposit you will need to put down when securing a UK expat mortgage.
What is a Mortgage Deposit?
So firstly, what is a mortgage deposit? The mortgage deposit is the amount of money you personally need to put down initially into the purchase of a property. It’s usually stated as a percentage of the property’s purchase price. For instance, if you’re looking to buy a £300,000 property and you needed to put down a 20% deposit, you would have to £60,000.
The higher your deposit, the better deal you’re likely to secure on the mortgage, since lenders will consider you to be a lower risk. Additionally, that means you may also be eligible for lower interest rates and loan terms.
How Much Deposit Do You Need as an Expat for a UK Mortgage?
The deposit amount needed for a UK mortgage as an expat is usually greater than that needed by UK nationals. Although UK natives usually require a minimum of 5% deposit, expats may be expected to put down between 15% to 25% of the property’s value as a minimum.
Here are a few of the most common reasons expats need to put down a larger deposit:
Volatility in Currency Exchange Rates
With many expats and foreign nationals earning their income in foreign currencies, fluctuations in currency exchange rates can affect your prospects in mortgage repayments. This new uncertainty in finances can lead lenders to requesting a higher deposit to cover their risk.
The Different Criteria for Lending to Expats
Most UK mortgage lenders will have different lending criteria for expats when compared to UK residents. Expats, for example, often have additional lender requirements, including the need to have been living outside your home country for a certain timeframe (generally a minimum of 12 months). If you are an expat applying for a mortgage, lenders with UK expat mortgage solutions will be the most appropriate for you.
Factors That Can Affect Your Deposit Size
The deposit size and amounts required may vary and are dependent on several different factors, such as:
Your Employment Status
For example, if you earn a regular full-time income, lenders are more likely to give you a mortgage with a low deposit. But if you’re self-employed or your income fluctuates from month to month you might have to increase your deposit to show you can meet the monthly mortgage payments.
Your Credit Score
Your credit score factors heavily in the deposit value that you’ll be required to put down. A higher credit score shows that you can manage debt responsibly which makes you a lower risk to the lender. Conversely, if your credit score is not so good, you’ll likely need to pay a bigger deposit to balance the risk.
Expat Mortgage Lender’s Policies
Expat mortgage lenders have various rules and guidelines on how they provide mortgages to expats. There will be lenders who will offer mortgages with slightly lower deposit requirements and others who have more rigorous criteria. You should compare mortgage companies UK to find the best mortgage deal for your own personal circumstances and criteria.
Property Type and Location
Different property types can also affect how much money you’ll need to put down as a deposit. For instance, you might have to put down more deposit when buying a property in a big city (if, say, you’re buying a home in London) than when buying out in the suburbs or more rural areas. In addition, certain types of properties – such as new-builds or high-rise apartments, may have stricter lending requirements.
Expert Advice for Expat Property Buyers in the UK
For expats or foreign nationals considering a property purchase in the UK, here are some key pointers to help guide you through the mortgage process:
Use an Expat Mortgage Calculator
Use an Expat Mortgage Calculator to calculate your potential monthly repayments and gauge how much you’d be able to borrow before you make any decisions on a mortgage offer. Such calculators can allow you to be more proactive about your finances and give you a better sense of what you’ll need for a deposit and monthly repayments upfront so you’ll be well informed to source appropriate properties.
Improve Your Credit Score
Your credit score is a crucial factor; before applying for any mortgage, always check your credit score and make sure there’s nothing appearing on your credit report which could be damaging and is also unexpected. Clear any debts and have a clean finance record, so as to increase your possibilities of securing a mortgage with a lower deposit.
What Foreign Investors Should Know About Lenders
As a foreign investor, some of the most important things is what lenders look for in foreign investors to approve your mortgage are your financial history, your income stability and the amount of one-off deposit you have. Foreign investors may at times have less of a financial history / credit footprint in the UK than others, so it’s important to make a strong case which is where specialist expat mortgage brokers can really help.
Lenders will usually focus on:
- Your ability to afford the monthly loan payments
- The size of your deposit
- Your creditworthiness (even if you’re overseas)
- Your job situation and earnings
If you know and understand these things, you’ll be much better prepared to discuss them with lenders and ultimately securing the mortgage you require.
Final Thoughts
Expat UK mortgage deposit requirements (UK nationals or permanent residents): The deposit required for a UK mortgage as an expat / foreign national is generally higher than for UK residents, with most lenders expecting you to put down a minimum of 15% to 25% or more. The exact amount varies based on key factors such as your credit history, employment status and the lender’s unique guidelines and criteria.
Wondering How Much Deposit You Need for an Expat Mortgage?
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