Our Guide to Expat Mortgages
Approximately 5.5 million British people live abroad, according to some estimates.
Some of them consider purchasing property back in the UK. That may be as an income-generating and capital growth investment, a holiday home or, as preparation for a potential permanent return home as owner-occupiers.
Unfortunately, securing an expat mortgage on a UK property can be challenging when you’re based overseas – unless you have help.
Why can it be difficult to get mortgages for expats?
Mortgage lenders typically base their decisions on whether to advance, as well as the potential sums they will lend (called the loan-to-value ratio or LTV), largely around the concept of risk assessment.
Risk can be broken down here into three general categories:
- the current valuation of the property and its potential future value projections, measured against the requested sum;
- the accurate and complete identification of the borrower and their previous history of conducting their financial affairs in a responsible fashion;
- an assessment of the borrower’s ability to maintain repayments of the sum borrowed in accordance with an agreed schedule over time;
In principle, these factors are consistent whether lenders are considering applicants based in the UK or overseas.
However, satisfying the requirements of the second and third points above can be far more challenging for lenders where the applicant is living outside of the UK and seeking mortgages for expats.
The reasons for that are straightforward:
- legal jurisdiction. Borrowers outside the UK are not easily held accountable under British laws;
- currency. Existing currency conversions and uncertainty over forward exchange rates;
- establishing proof of identity, permanent place of domicile and notably income, can be far more troublesome when the mortgage applicant is overseas.
None of these things is necessarily an insurmountable obstacle in terms of securing expat mortgages for non-UK residents.
Is buying property in the UK from overseas possible?
The simple answer to this question is – yes.
Potential lenders will need to find ways to address some of the above-mentioned practical complications and may typically also require more supporting detail than would be the case with UK-based applicants.
The first step is to identify a potential lender or lenders with a track record of providing mortgages to overseas buyers. Some providers do not operate in this market and you will save yourself a considerable amount of time and effort by only approaching those that do.
What documentation will I need to apply for an expat mortgage?
Each individual lender will most likely have their own views as to the specific information they require from you. Most are likely to need:
- evidence of your income. This will need to be verifiable and from a recognised employer. If you are self-employed or a business owner, you will typically need equally traceable and verifiable accounts and possibly bank statements;
- a satisfactory credit history check. This may be difficult if you do not have a UK address but there may be some acceptable equivalents from certain countries. The mortgage provider or an independent consultant will typically offer specific advice on that;
- a UK bank account;
- irrefutable proof of your identity and permanent place of domicile. What exactly is acceptable in that respect may vary from one lender to another but in some cases, up to three separate proof of residency documents may be required.
Typically, your required mortgage term will not be able to pass your 70th birthday.
What mortgage types are available for expats?
You might be able to obtain a residential expat mortgage or buy to let expat mortgage for UK property.
How much deposit will I need?
Most lenders will regard expat mortgages for non-UK residents as being higher risk.
That means that their maximum LTV may be lower for expat applicants than UK-based individuals. Some may not exceed 75% and many may not go past 65%-70%.
You will therefore typically need a deposit of somewhere around 25%-35% or possibly even slightly higher. Some factors involved in this calculation will also be influenced by things such as an assessment of the reliability or otherwise of your income.
Anything you can do to ameliorate risk will be welcomed by the lenders. Therefore, the more deposit you can put forward, the more likely you will be to secure your mortgage.
In some cases, you may be able to borrow against existing assets such as other property. They will usually need to be located within the legal jurisdictions of the UK.
Does it matter where my deposit comes from?
International money laundering laws mean that there will be audit requirements if you are transferring large sums into the UK for the purchase of property.
You will usually need to conduct your money transfers through a traceable UK banking account which can be directly associated with you.
Providing the legal requirements are met, lenders might accept a wide range of suitable sources.
They will normally insist upon the source being an on-demand and irrevocable instrument, such as UK savings accounts, stocks, property sales etc.
Many overseas international mortgage lenders might decline to accept deposit sources which are not settled or guaranteed. An example there might include wills that have not yet completed probate.
Other potential sources might include gifts from close family members. A gift deposit from a third party or friend might be acceptable but typically only with a very few lenders.
Are there mortgages available for expats returning permanently to the UK?
Yes, please read Our Guide to Just Back in The UK Mortgages.
Next steps to getting an expat mortgage
Mortgages for expats are available and with help, there may be no fundamental reasons to stop you from getting one.
However, the process isn’t necessarily straightforward and the unwary can find themselves wasting a lot of time in what subsequently prove to be fruitless applications.