3 Points Before Applying for an Expat Mortgage
Looking for An Expat Mortgage? Check these points first
UK and other nationals who live overseas, or expats, as they are more commonly known, will often have an interest in buying UK property. This could be as a buy to let investment or it could be that they want to buy a home that eventually they might reoccupy, or they may simply not want to be out of the UK property market.
I live abroad – can I still get a UK mortgage?
Funding such projects can be complicated, as the range of lenders offering products for this market is small. Within this group, lenders will also pick and choose where they will take clients from. Often, the countries where lenders cannot help are obvious – people resident in Iraq, for example, would almost certainly not be able to find a lender, at least not at normal market rates, nor would they in countries where sanctions are in force, such as Iran.
Other locations may surprise – Australia, a frequent destination for expats, is off the approved list for several lenders, as is South Africa, another common destination and Singapore, again popular. So it pays to check first with lenders before putting in an offer.
Can I get an expat mortgage without a salary?
Many expats are self-employed and this can cause difficulties. Banks will often ask for three years of accounts, with these having been prepared by a recognised international accounting firm or at least one which is part of a global association. If you live in Dubai or elsewhere in the Middle East, for example, by and large, these are tax free countries, so there is no need to submit a tax return and therefore people think no need to retain the services of an accountant. Equally, you will not be able to fall back on local tax returns, as there are none to submit, so proving income becomes problematic.
Contract workers may also have to clear a number of hurdles – lenders will want to see evidence that a contract has been renewed at least once, in many cases, or has a certain length of time still to run, usually over six months when applying for an expat mortgage.
How much can I borrow?
Lenders will underwrite loans using several different approaches, but broadly these fit into three categories – affordability, on the basis of rental income or a mixture of these. The UK regulator has set strict rules that lenders have to follow to ensure loans are affordable and safe for both parties, the borrower and the lender. Some lenders will apply regulatory stress testing rules at the highest levels, insisting on high levels of rental income to cover the cost of the mortgage interest. This has the effect of reducing the effective loan as a percentage of the sale price which is possible, often to below 65% for rural properties where rental yields may be very low, so making the purchase more difficult. In these circumstances, clients may need to look at different lenders with different rules, which may mean paying higher interest rates.