expat mortgage broker uk

UK Mortgage Challenges for Expats

August 29, 2024

Moving abroad can be exciting, but it often comes with financial challenges. Many expats dream of owning property in the UK, whether for personal use or as an investment. Yet, getting a mortgage as an expat isn’t always straightforward, there are many challenges expats face when applying for a UK mortgage.

Expats Struggle to get a UK mortgage

Expats face unique hurdles when applying for UK mortgages. Most UK lenders offer maximum mortgages between 3.5 and 6 times the total annual income of the applicant(s), but proving this income can be tricky for those living abroad. Banks may struggle to verify overseas earnings or credit histories, making the application process more complex.

Another common challenge is the deposit requirement. While UK residents might secure a mortgage with a 5% deposit, expats often need larger down payments. Many lenders ask for at least 25% for buy-to-let properties and 20% for residential homes. This higher threshold can be a significant barrier for some expats looking to enter the UK property market.

Understanding UK Mortgage Basics for Expats

Expats seeking UK mortgages face unique considerations. Key factors include deposit amounts, income verification, and navigating specialised lending options.

Types of Mortgages Available to Expats

Expats can access various UK mortgage types. Buy-to-let mortgages are popular for property investments. These often require larger deposits, typically 25% or more.

Residential mortgages are available for those planning to live in the property. These may have lower deposit requirements, sometimes as low as 20%.

Some lenders offer specialised expat mortgage products. These cater to the unique circumstances of those living abroad.

It’s crucial to shop around. Different lenders have varying criteria and offerings for expats.

Assessing Risk and Interest Rates for Expat Mortgages

Lenders view expat mortgages as higher risk. This often leads to higher interest rates compared to standard UK mortgages.

Factors affecting rates include:

Larger deposits can help secure better rates. Proof of steady income is vital. Some lenders may require higher income levels for expats.

Currency fluctuations can impact affordability. This is especially true if income is in a foreign currency.

Role of Mortgage and Expat Mortgage Brokers

Mortgage brokers can be invaluable for expats. They have specialist knowledge of the expat mortgage market.

Expat mortgage brokers can:

  • Identify suitable lenders
  • Navigate complex application processes
  • Explain UK-specific requirements

They often have access to deals not available directly to borrowers. This can save time and potentially money.

Brokers can help gather necessary documents. These may include proof of income, tax returns, and bank statements.

Using a broker can increase the chances of a successful application. They understand the unique challenges expats face.

Navigating Financial Requirements for UK Expat Mortgages

Expats Struggle to get a UK mortgage

Getting a UK mortgage as an expat involves unique financial hurdles. Lenders have strict criteria for income, credit, and banking that can make the process tricky.

Income Verification and Credit History Concerns

Expats often struggle to prove their income to UK lenders. Many banks want to see at least three months of payslips and two years of accounts. This can be hard for self-employed expats or those paid in foreign currency.

Credit history is another sticky point. UK lenders can’t always check overseas credit records. This makes it tough to show a good track record of managing debt.

To help, expats should gather:

  • Recent payslips (at least 3 months)
  • Bank statements (6-12 months)
  • Tax returns or accounts (2-3 years)
  • Proof of any rental income
  • Details of all debts and assets

Having these ready can speed up the process.

Currency Considerations and Foreign Income

Dealing with foreign income adds complexity to expat mortgages. Exchange rates can affect how much you can borrow.

Most UK lenders prefer income in pounds sterling. If you’re paid in another currency, they may:

  • Use a lower exchange rate to be safe
  • Ask for a bigger deposit
  • Offer a smaller loan amount

Some specialist lenders are more flexible with foreign income. They might use better exchange rates or accept a wider range of currencies.

It’s wise to speak to a broker who knows expat mortgages. They can find lenders who are comfortable with your income setup.

The Importance of a UK Bank Account

Having a UK bank account is often crucial for expat mortgages. It shows ties to the UK and makes payments easier.

Many lenders insist on a UK account for:

  • Paying the mortgage
  • Collecting rental income (for buy-to-let)
  • Proving your identity and address

Opening a UK account from abroad can be tricky. Some banks offer international accounts, but they may have high minimum balances.

If you can’t open a full UK account, consider these options:

  • Offshore accounts with UK banks
  • Digital banks with UK sort codes
  • Currency transfer services

These can help you manage UK payments and show financial links to the country.

Property Investment Strategies for Expats

Expats Struggle to get a UK mortgage

British expats can invest in UK property through buy-to-let or residential options. Setting clear goals and understanding equity are key to successful property investments.

Choosing Between Buy-to-Let and Residential Property Investment

Buy-to-let mortgages let expats earn rental income from UK properties. These loans often need bigger deposits, around 25% of the property value. Lenders look at potential rental income to decide if you qualify.

Residential mortgages are for homes you’ll live in when visiting the UK. They usually have lower interest rates than buy-to-let loans. But you can’t rent out the whole property long-term.

Some expats buy homes to use part-time and rent out when they’re away. This can be tricky with mortgage rules. Always check with your lender first.

Determining Investment Goals and Property Equity

Set clear goals for your UK property investment. Do you want regular income, a future home, or long-term growth?

Rental income can cover mortgage costs and provide extra cash. But factor in taxes, maintenance, and periods without tenants.

Property equity is the difference between your home’s value and what you owe on the mortgage. As you pay off the loan and if house prices rise, your equity grows.

Consider how much equity you need for future plans. This might include using the property as a retirement home or selling to fund other investments.

Eligibility and Legal Aspects of Obtaining a UK Mortgage

Expats Struggle to get a UK mortgage

Expats seeking UK mortgages face unique eligibility requirements and legal considerations. Lenders have specific criteria, while regulations aim to prevent financial crimes.

Meeting Lender Eligibility Criteria

UK mortgage lenders look at several factors when assessing expat applications:

  • Income: Most lenders offer mortgages of 3.5 to 6 times annual income. Proof of stable employment is crucial.
  • Deposit: A larger deposit improves chances of approval. Some lenders require at least 25% down payment.
  • Credit history: A UK credit record helps, but isn’t always essential.
  • Residency status: Visa requirements vary by lender. British expats may have an advantage.
  • Bank accounts: Some lenders, like HSBC Expat, need minimum balances or high salaries.

Specialist lenders often cater to expats, offering more flexible terms. Expert advice can help navigate these complex criteria.

Understanding Anti-Money Laundering Regulations

UK mortgage lenders must follow strict anti-money laundering (AML) rules:

  • Source of funds: Expats need clear proof of where their money comes from.
  • Identity checks: Lenders will verify applicants’ identities thoroughly.
  • Risk assessment: Extra scrutiny may apply to certain countries or situations.
  • Ongoing monitoring: Lenders watch for suspicious activity throughout the mortgage term.

These rules can make the process longer for expats. Having all documents ready can speed things up.

AML checks protect the UK financial system. They’re a normal part of getting a mortgage, not a sign of distrust.

Overcoming Challenges in the UK Mortgage Process

Expats can face several hurdles when seeking a UK mortgage. With the right approach, these obstacles can be tackled effectively.

Dealing with Deposit and Loan-to-Value Complexities

Expats often need larger deposits for UK mortgages. Most lenders ask for 25% to 40% of the property value. This affects the loan-to-value (LTV) ratio. A lower LTV means better rates but requires more upfront cash.

Some tips to manage deposit challenges:

  • Save in advance: Start building savings early.
  • Use investments: Consider liquidating assets if needed.
  • Explore family gifts: Some lenders accept gifted deposits.

Expats should aim for at least a 25% deposit. This opens up more lending options and competitive rates.

Mitigating the Impact of Currency Fluctuations

Currency shifts can affect expat mortgages. Exchange rates impact deposit amounts and monthly payments.

Ways to handle currency risks:

  • Fix exchange rates: Use forward contracts to lock in rates.
  • Keep a UK bank account: Pay in pounds to avoid conversion fees.
  • Choose the right currency: Some lenders offer mortgages in foreign currencies.

It’s wise to speak with a financial advisor. They can help plan for currency changes and find the best mortgage structure.

Remortgaging and Buy-to-Let Considerations for Expats

Expats may want to remortgage or invest in buy-to-let properties. These options come with unique challenges.

Key points for remortgaging:

  • Timing is crucial: Plan ahead as the process can take longer.
  • Proof of income: Lenders need clear evidence of earnings.
  • UK credit file: Maintain a good credit score even while abroad.

For buy-to-let mortgages:

  • Higher deposits: Expect to put down 25% to 40%.
  • Rental income: Must cover 125% to 145% of mortgage payments.
  • Tax implications: Be aware of recent tax changes for landlords.

Expat mortgage brokers can be helpful. They know which lenders offer the best deals for non-UK residents.

Looking for an Expat Mortgage?

Contact Expat Mortgage Broker today for Free Foreign National and Expat Mortgage Advice.

UK Expat Mortgages

UK’s Expat Demographics & Latest Mortgage Trends

July 21, 2021

Introduction

As of 2019, people born outside of the UK – typically referred to as expatriates or expats – made up around 14% of the UK’s residents. That adds up to just under 10 million people. Now, all of these people need somewhere to live, so there is a lot of movement in the UK expat mortgage market every year. At the same time, many of these expats come with a fair amount of money in the bank, and UK property has long been seen as a sound investment. As a result, the number of expat buy to let mortgages on the average expat mortgage broker’s books has been rising steadily.

But what do we know about these expats? Where are they coming to the UK from, how are they affecting the UK’s demographics, and how are they coping with a mortgage market that is reeling from both Brexit and COVID?

Contact us today to discuss Expat Mortgages and how we can assist you.

Overview of Expat Mortgage market

Expat Mortgage Brokers, banks and other property market professionals are seeing growing interest in expat buy to let mortgages and UK expat mortgages generally. Brexit may have cooled the desire for EU citizens buying 2nd homes in the UK, but it has done nothing to discourage EU nationals, whether expats, expat-hopefuls or not, to buy investment properties in the UK.

There are many reasons for this. The pound is weak relative to many major world currencies at the moment, and those whose currencies are more bullish – expats and investors from East Asia, Canada and the US, among many others – are eager to take advantage of that. After all, when the pound recovers, the value of their investment in their own currencies will rise dramatically. Overall confidence in the UK’s COVID vaccination program and economic recovery are high.

Other factors driving demand for UK expat mortgages and expat buy to let mortgages include the political troubles weakening China’s markets and the UK’s new Visa scheme, which allows BNO passport holders from Hong Kong to relocate to the UK easily.

Specialty Expat Mortgage Brokers are seeing a sharp increase in demand

Many mortgage brokers, banks and financial professionals who specialise in serving clients who work primarily in non-GBP currencies or who hold primarily offshore assets have seen a spike in interest beginning around January or February and continuing into the summer.

Some expat mortgage brokers have reported 3 times as many Hong Kong-based expat buy to let mortgage completions in the first quarter of 2021 than in a typical first quarter. Specialty expat mortgage brokers are seeing a corresponding increase in interest. It is not uncommon for enquiries for Residential Expat Mortgages and Expat Buy to Let Mortgages to have doubled recently, even discounting the extra interest from Hong Kong. Many tell us that even EU mortgage inquiries are on the rise, with around 30% more interest from that region in the last 6 months compared to the 6 before that.

Expat mortgage clients need special support, as it can be tricky to find lenders who are happy to accept payments that aren’t in sterling, or who have the necessary expertise to appreciate the value of offshore collateral.

Beyond Hong Kong, Expat Mortgage Brokers are seeing a lot of East Asian interest

Many overseas buy-to-let and residential expat mortgage specialists have reported year-on-year increases of 10% to as high as 20% from East Asian property buyers. Part of the reason for this is a kind of ‘perfect storm’ effect between London property prices actually falling by 3.4% across 2020 (measured in GBP) and the strength of their own currencies.

Over the course of 2020 a South Korean expat mortgage customer would have seen an effective 6.8% fall in London housing prices in their own currency. The price of an expat buy-to-let mortgage in Chinese yuan fell by 6.2% over 2020. Likewise, the price in Japanese yen fell by 5.6%

There have also been quite a few enquiries about UK Expat Mortgages from property buyers in Canada and the United States. Contrary to what many experts had predicted following Brexit, many expat buy to let mortgage customers in North America seem to feel that the UK is a more attractive place for property investment than the EU.

 A large amount of Expat Mortgage interest comes for UK nationals living overseas.

Another growing source of expat mortgage customers are UK citizens currently living abroad and paid in foreign currencies, but prefer to invest in UK properties. Many UK expats live in places like Germany, Paris, the UAE or the USA, and wish to invest in UK property on a Expat Buy to Let basis or wish to buy a home for family members who do live in the UK. There is an especially high amount of interest at price points around £500,000. Many expat mortgage professionals also report a growing interest in buying flats, which had begun to fall out of favour early in the pandemic.

Because these customers are not paid in sterling, though, they have discovered that they need to seek out specialist expat mortgage brokers like Expat Mortgages UK.

Who are these Expats and where are they coming to the UK from?

There are more people who were born overseas living in the UK now than ever before. Even after Brexit, there has been a steady increase. In 2004, some 5.3 million UK residents were expats. That number had nearly doubled to 9.5 million in 2019. The growth of the UK’s foreign-born has slowed since around 2016 when many began emigrating, but the overall figures still indicate substantial growth.

Brexit has been responsible for a demographic shift, of course. The last decade had seen EU-based immigration rising more rapidly than immigration form other countries. However, the majority of UK immigrants came from non-EU countries, and Brexit has done little to slow it. In 2019, for example, around 38% of UK immigrants came from the EU.

Compared to the native-born UK population, immigrants tend to be in the 26-64 age range. As of 2019, 70% of immigrants fell into this ‘working’ age category, whereas only 48% of UK born residents did.

Around 19% of UK natives were age 65 or older, whereas only 11% of migrants were. However, this varies substantially with country-of-origin. 17% of EU-14 immigrants were age 65+, but only 1% of those from Bulgaria and Romania were 65 or older.

At the other end of the spectrum, the demographics are more similar. UK natives aged 16-25 make up 12% of the population, and 11% of the immigrant population. Again, this varies by place of origin. Some 15% of EU-8 and EU-2 immigrants were younger, whereas only 5% of immigrants from India were aged 16-25.

Where do Immigrant Expats come from?

As of 2019, the last date we have good figures for, most of the expats coming to live in the UK came from either India, Poland or Pakistan. India contributed around 9% of the total immigrant numbers, as did Poland. Pakistan was slightly behind, at 6% of the total. Poland had been solidly in first place until around 2018. Roughly 100,000 Poles left the UK in 2018 and 2019.

What brings Expats to the UK?

The most common reason given for non-EU immigration was ‘family reasons’, at roughly 49%. Another 21% of non-EU immigrants said they came to work. Many of these people entered on family visas, and therefore are more likely to settle permanently in the UK compared to those on student visas or work visas.

Among EU-based immigrants, 48% said they came to work. Those numbers are even higher for immigrants from new EU member states – 62% of EU-2 immigrants came to work, and 59% of those from EU-8 countries.

Where do Immigrant Expats tend to live?

Unsurprisingly, London has a higher immigrant population than any other region in the UK. In 2019 35% of all immigrants to the UK lived in London and a further 13% lived elsewhere in the South East – accounting for just under half of all immigrants, more than 4.5 million. By comparison, only 10% of the UK’s native-born population lives in London.

On the other end of the spectrum, Northern Ireland, the North East and Wales each received only 1-2% of 2019’s immigrants to the UK.

Summary

Expats make up around 14% of the UK’s resident population. Expat mortgage brokers – those who specialise in serving clients who either currently work or have worked primarily in non-GBP currencies, or who hold primarily offshore assets – are seeing growing interest in Expat Buy to Let Mortgages and UK Expat Residential Mortgages generally.

This may be because at the moment the pound is weak relative to many major world currencies, but confidence in the UK’s COVID vaccination program and economic recovery are high, so that trend is expected to reverse. In short, money spent on UK properties now will be worth more in the Expat’s home country soon. Expat mortgage clients typically need specialist advice and guidance, as it can be tricky to find specialist lenders who are happy to accept payments in overseas currencies and with different work and immigration statuses etc.

If you would like to speak with one of our Specialist Expat Mortgage Advisors today, simply get in touch via the Short Form below, or call us on +44 1494 622 555 and we’ll gladly provide you with free advice, guidance and mortgage quotation.

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