If you’ve researched buy-to-let mortgages for expats in the past, you’ve probably come across some disheartening facts: they’re difficult to get, they’re expensive, they’re not available to everyone, only a few lenders offer them.
Up until a few years ago, that was all true. But what many people haven’t noticed is that the market has radically shifted – and now expats who want to get a UK mortgage can feel pretty good about the options open to them.
An expat mortgage is a mortgage product for a British citizen who’s currently living outside the UK – usually working abroad.
An expat can only get a UK mortgage – for example, to buy a buy-to-let property – by taking out a specific expat mortgage. That’s because “normal” mortgages require the borrower to be resident in the UK.
Historically, it’s been extremely challenging for expats to get mortgages. There are a few reasons why:
Lenders are concerned about money-laundering, and understanding the source of funds.
Assessing documents issued overseas is more difficult, and means a higher workload than other cases.
It’s more difficult to take legal action against a borrower who’s based abroad.
But over the last couple of years, the market has been changing. Although many non-specialist mortgage brokers still have the outdated perception that it’s difficult and lenders won’t lend to expats, specialist expat mortgage brokers are aware that it’s a lot easier than it used to be.
Expats have former chancellor George Osborne to thank for their increased range of mortgage options.
The changes to mortgage interest relief that he announced in 2015 were the catalyst for many UK-resident investors to start buying property within limited companies. That means that lenders who don’t lend to limited companies were suddenly competing against each other for a share of the shrinking personal mortgage market – and as a result, they started reaching out to borrowers in new markets in an attempt to maintain their market share.
This competition has benefitted borrowers in lots of previously neglected niches, but expats are bigger winners than most. Previously, expats’ only options were big international banks like HSBC, Santander, Natwest and Barclays – who had limited options and uncompetitive interest rates.
But in the last couple of years, major buy-to-let lenders like Paragon have come into the expat mortgage market – and others like Keystone have revamped and improved their expat product range. That means vastly more choice, better rates, and better service.
There are two major factors that determine the difficulty of an expat getting a mortgage.
The first is which country you’re resident in. The Financial Conduct Authority used to publish a list of countries that they considered to reflect a high risk of bribery, corruption or money laundering. The official list has been withdrawn, but they still require lenders to maintain their own country risk categories – which means that residents of certain countries that most lenders deem to be high risk, like Nigeria and Colombia, will have more difficulty finding a lender willing to take on their case.
The second factor is who you work for – although this is becoming less restrictive than it once was. Lenders prefer you to work for a multinational employer, because it means there’s often an office in the UK who they can speak with to verify details about your employment. If you work for a smaller local company, this is more difficult – and documents like payslips and contracts might even need to be translated.
Lenders are easing up on this restriction, though – and it’s now even possible for self-employed expats or those without an income to get mortgages.
Interest rates and fees are still higher than for borrowers who are resident in the UK, to reflect the fact that expat applications take more work and are considered higher risk.
The difference isn’t dramatic, though. Expats can now expect to pay rates similar to UK limited company applicants – which have also come down by a large amount over the last couple of years due to increased lender competition.
There’s one thing above all that expats need to be prepared for: a lengthy process before their mortgage offer is confirmed.
Part of this delay is purely practical: different time zones mean that an email sent at lunchtime on one day might not be received until the morning of the next, so the whole process gets stretched out. It also reflects that all the lender’s normal checks will take longer, because they’ll be less familiar with documents issued overseas.
There’s likely to be more for you to do, too. You might need to visit the local UK consulate to get documents certified, or find a local solicitor who can do the same thing. You might also be quizzed in depth about the source of your deposit funds, because of lenders’ money-laundering concerns – meaning you’ll need to demonstrate the full trail of how the funds came to be in your account.
The good news, though, is that you should be able to complete the whole process from whichever country you live in — without having to come back to the UK. You can work with a UK solicitor and mortgage broker without meeting them face-to-face, as long as you have acceptable certified ID. And although your mortgage deed will require an inked signature, you can print this locally and post it back to your solicitor in the UK.
The most important thing, says mortgage broker Dave Cookson, is to choose a lender based on their service levels for expats rather than whoever offers the lowest rates.
He gives the example of HSBC, who he refuses to deal with because they’re known for being slow and offering poor service – even though they do have among the best rates. They required a customer to fly from Hong Kong back to London to open a bank account, even though they have branches locally – then changed their lending criteria and refused to lend at all!
Unfortunately, this isn’t an isolated case. So because the process is going to be longer and more effort-intensive than a normal application by its very nature, it’s even more important to choose a lender who won’t make life more difficult than it needs to be.
It’s also important to use a broker who’s experienced in the expat market. They’ll be able to help you select the best lender in the first place, and guide you through the inevitable delays and requests for further documentation with a minimum of fuss.
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