Expat mortgages UK: What You Need to Know
If you're a UK expat planning to buy a property back home, you're probably wondering whether you'll be able to get a mortgage. The good news is that, in most cases you can, but the process may be a bit more complex than if you were living in the UK full-time.
We understand you’re likely to have a number of questions about how it all works. It’s for this reason why we’ve put together this guide, to walk you through the process and help you understand what to expect. We’ll cover:
Read on to learn everything you’ll need to know, so you’re properly prepared to purchase a property as a UK expat.
What is an expat mortgage?
An expat mortgage is designed for former UK residents who wish to purchase a property in the UK, whether to establish a base back home, have a consistent place to stay when visiting, or invest in UK property. These mortgages are intended for individuals who no longer live in the UK or have only recently returned after an extended period abroad.
Expat mortgages work similarly to standard mortgages. However, lenders often apply more stringent checks and stricter eligibility criteria, as lending to expats is considered higher risk. But, if you have a substantial deposit, a solid credit score, and a reliable income, there’s no reason you shouldn’t be able to secure a mortgage.
Can I get an expat buy-to-let mortgage?
Yes, you can. Although securing a buy-to-let mortgage as an expat can be challenging, it’s by no means impossible. In fact, with the growing number of people investing in UK property from abroad, several lenders now offer buy-to-let mortgages tailored specifically for expats.
That said, it's crucial to get your application right. Lenders tend to apply strict criteria when assessing expat borrowers, and many have their own specific requirements. For example, some will only lend to applicants based in certain countries. Additionally, it’s worth noting that many lenders will only consider your application if you already own a residential property in the UK.
What is the lending criteria for expat mortgages?
Because expat mortgages are often seen by lenders as higher risk, the eligibility criteria tend to be more stringent than those for standard mortgage applications. Below are the key factors most lenders will assess when reviewing your application:
Credit history
Lenders may find it challenging to verify your credit history if you've spent a significant period living abroad. As a result, you might need to apply for a specialist product such as an adverse credit mortgage. If you're planning to return to the UK, it could be worth taking time to rebuild or strengthen your credit score before applying. If you've continued using a UK-based credit card while overseas, this may work in your favour.
Income
Naturally, lenders will want assurance that you can meet the monthly mortgage repayments. They will closely examine your income to assess affordability. Proving overseas income can be more complicated, especially if it's paid in a foreign currency or comes from multiple sources.
Employment status
Lenders will look for evidence of a stable and consistent income. Being employed by a well-known, international company can strengthen your application. You'll need to provide payslips and other documents to verify your earnings. Some lenders may prefer your salary to have been paid into a UK bank account.
Self-employed income
If you're self-employed, the process is typically more complex, and even more so if you're also an expat. In such instances, your income will need to be verified by an internationally recognised accountant. You’ll also need to meet all the standard self-employed mortgage requirements, which usually include providing at least two-three years’ worth of accounts and tax returns.
How much can I borrow with an expat mortgage?
The amount you can borrow with an expat mortgage will largely depend on two key factors: the size of your deposit and your total provable income.
In most cases, lenders will offer between four to five times your annual income. Though, this isn’t guaranteed, as several other considerations come into play. A larger deposit and strong, stable income, especially if paid in a major currency like GBP, USD, or EUR, can improve your borrowing potential. Conversely, high levels of debt or irregular income may reduce the amount you're able to borrow.
Are expat mortgage rates higher?
Yes, mortgage rates for expats tend to be higher than those for standard UK residents. This is largely due to factors such as differing employment laws and the dynamics of the job market abroad. As a result, lenders will view you as having less income stability if you’re living and working outside of the UK, raising the perceived risk.
Yet, there are specialist lenders who focus on expat markets, particularly those with knowledge of your country of residence. These lenders may offer more competitive rates, as they have a better understanding of your income security, often providing better terms than traditional high street banks.
What deposit do I need to get an expat mortgage?
Expat mortgages typically require a deposit of at least 25% of the property's value. However, the exact amount can vary depending on the lender, the type of property, the location you're buying in, and your personal financial circumstances.
If you're purchasing a buy-to-let property, most lenders will also consider the projected rental income, but you should still expect to provide a deposit of between 25% and 40%. In general, the larger your deposit, the greater the range of mortgage products you'll be eligible for, and the more competitive the rates are likely to be.
Will there be any restrictions on where the money comes from for my deposit?
There are international anti-money laundering laws in place, which mean you’ll come up against strict restrictions concerning how you can fund your mortgage deposit. And, you’ll also need to be able to prove where the money came from. Acceptable sources include but aren’t necessarily limited to:
Your savings
Investments
Money made from the sale of another property
Equity you’ve been able to release from an existing property
Money you’ve inherited
A gift from close family
It’s well worth keeping this in mind before you submit your application as, if your deposit has come from a source that isn’t accepted or you can’t prove where the money has come from, you may be rejected.
Tax considerations for expat mortgages
There are tax implications to be aware of if you’re buying property in the UK as an expat. Specifically, you may be liable for a 2% Stamp Duty surcharge on top of the standard rates, Capital Gains Tax if you sell the property, and income tax on any rental income.
Additionally, owning UK property may affect your tax obligations in your country of residence. Some countries have double taxation agreements with the UK, which can help prevent being taxed twice on the same income.
How to get an expat mortgage
Obtaining an expat mortgage can be more challenging than a standard UK mortgage due to the added complexities and risks involved. As such, working with a mortgage broker who specialises in expat mortgages can streamline the process and increase your chances of approval.
A knowledgeable broker will evaluate your financial situation, provide guidance on your borrowing options, and help you select the most suitable mortgage product. They can also connect you with appropriate lenders, negotiate better rates on your behalf, and assist with the necessary documentation for your application such as proof of your address in both countries.
We hope you now feel that you have all of the information you need to start your journey towards securing an expat mortgage. Whether you’re wishing to put down more permanent roots in the UK or you want to purchase a property as an investment, it can be a fantastic move for you and your family.
We're here to help you through the process, too. So, if you’re set on purchasing a property as an expat and would like us to help you navigate the often confusing process, get in touch today on 01915809890! We’ll be waiting for your call.
The above blog has information contained within which was correct at the time of publication but is subject to change.
FAQs
What is the difference between an expat mortgage and an overseas mortgage?
An expat mortgage is designed for British citizens who are living abroad but wish to purchase property in the UK, with financing provided by a UK-based lender. In contrast, an overseas mortgage applies when a UK national, whether residing in the UK or overseas, is looking to buy property in another country, again with funding typically arranged through a UK lender.
What documents do you need for an expat mortgage?
When applying for a UK mortgage as an expat, you should be prepared to provide:
Valid identification, such as a passport or UK driving licence
Evidence of employment, which might include a signed employment contract or a letter from your employer
Income verification, such as recent payslips or, for self-employed applicants, certified tax returns or accounts
Confirmation of your deposit, along with documentation showing how the funds were sourced
Proof of address, which could be a tenancy agreement, recent utility bills, or bank correspondence
Affordability evidence, usually in the form of personal bank statements covering the last three to six months
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.