Project Description

July 2, 2020

Applying for a UK mortgage as an Overseas Investor? Here’s everything you need to know.

Our compact guide to obtaining a UK mortgage as an overseas investor

The demand to capitalise on the UK rental market has exploded in recent years, yet, one of the biggest challenges that expat and foreign investors still face is securing a mortgage.

It can be challenging as some lenders view you as a higher risk. However, some providers specialise in tailoring options for those living overseas.

If you are well-prepped, you can avoid some of the more common challenges. These can range from time differences, difficult lenders, or getting documentation prepared and certified.

Most lenders prefer borrowers that work for large multinational companies, with a minimum income of at least £50,000, this can make it even harder for entrepreneurs and the self-employed. There are options available; however, interest rates and the deposit requirements can be high.

In 2016, the European Mortgage Credit Directive was introduced, which means applicants paid in foreign currency come under more scrutiny. Lenders will take possible fluctuations in exchange-rates into account during the underwriting process, in addition to the borrower’s overall financial position.

Why the challenges?

There are a few reasons why some lenders are more reluctant to lend to a non-resident, it is usually more mainstream banks; and commonly, these are an investor’s first point of call, giving the impression that funding is not available. The reason they are less willing is centered around the challenges in ascertaining the financial stability of the borrower as they may have never lived in the UK or could have been living overseas for many years. The banks that will lend and the offer you receive can vary depending on your nationality, the company you work with, and your financial position.

Working with competent people that understand financing for overseas investors is essential. Whether you’re looking for a regular buy-to-let or a commercial mortgage for a holiday rental, you should always seek impartial advice from a qualified mortgage broker to make sure there are options available to you, and you’re getting the best product possible.

British Nationals

In most cases, it’s relatively straight forward to get a mortgage if you’re a British national living outside the UK. Lenders have more rigorous information requirements regarding evidence of earnings, anti-money laundering, and your country of residence.

Additionally, they may charge higher interest rates to counter the risk of tracking down and recouping from a borrower who defaulted while living in another country.

The application process is slightly different from applying in the UK, but that doesn’t mean it is difficult or impossible. The key to making it streamlined and stressfree is preparation and working with the right people.

Non British nationals

Even if you don’t live in the UK, you can buy as a foreigner. There are mortgages available, and a lot of the documentation and paperwork will be similar to those required for a non-resident British applicant. Eligibility can depend on your nationality as some countries are considered higher risk than others. There are banks in Asia and the Middle East that will lend on UK property. They generally prefer to fund purchases in London, and the amount you must borrow to qualify is usually quite high.

The country where you reside and your visa status play a role, and higher deposits of 35–40% are not uncommon as your circumstances or income could result in you being viewed as a higher risk. The process can be more challenging, and as with any advice, you need to seek out the help of a qualified mortgage broker to get a clear understanding of the products that are available to you before committing to an investment.

Important Points For Consideration

Understanding overseas income & currency fluctuations

Foreign earned income can presents problems for lenders on a few different levels. Their ability to verify your actual income and it’s size due to fluctuating currency exchange rates can be challenging. Therefore, they will view different countries in different ways. The more stable the country, the better. If a mortgage applicant is based and paid in a country with a volatile currency, getting financing will be difficult.

Taxation

You must keep the tax office informed if you buy a property. Those that live outside the country for six months or more each year and own residential property will be classed as “non-resident landlords” by HMRC for tax purposes. Regardless of where you are resident, the rental income from your property will be taxed. There are tax advantages to non-residents, and it’s essential to have a competent tax advisor who can help you maximise your investment to its full potential.

Summary

If you are going to invest in off-plan or new build UK property, make sure you understand what you are getting into. It’s true, there are loads of great opportunities in the market, but unfortunately, there are lots of slick sales guys that don’t highlight what can happen in a worst-case scenario.

If you are struggling with a UK mortgage or want to understand your options more thoroughly,
Contact us here
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Article by: Rory van den Berg