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Expat mortgages and the process for applying for them in the UK

In the context of mortgage applications, the term expat mortgages applies to anyone who lives outside the UK but wishes to borrow money to purchase a property in the UK.

For practical purposes, the process of applying (and its associated challenges) is essentially the same regardless of where in the world the person is living.

The basics of expat mortgages

There are, essentially, two flavours of expat mortgages. In theory, expats can apply for standard residential mortgages from high-street lenders.

In practice, these mortgages are only likely to be granted to expats who intend for the property to be used by close family during their absence and who can afford the mortgage payments without relying on rental income.

This avoids the risk involved with leaving a property empty for an extended period while reassuring the lender that repayments are unlikely to be impacted by family politics. Expats who intend to let out their property on a commercial basis will need standard buy-to-let mortgages and this is probably the more common route.

Again, theoretically, expats can access the same range of buy-to-let mortgages as UK residents, but in practice, their chances are best with a limited range of lenders who specialise in this market.

Private, international-facing and niche lenders tend to be the best options

There is nothing to stop expats approaching high-street lenders, but mainstream lenders are unlikely to be familiar with expat mortgages and in the current climate are more likely to work on the basis of “better safe than sorry”, especially given the regulatory framework in which lenders now operate.

Whilst the number of lenders offering expat mortgages is limited (which can make them more expensive), more lenders are starting to offer expat buy-to-let mortgage products. The Mortgage Lender (TML), for example, have recently launched their first buy-to-let product range for expats, with rates starting from 3.95% for a two-year fixed mortgage at 70% LTV.

Expats should expect to have their mortgage applications intensely scrutinized

There are three key elements to a standard mortgage application. These are: credit score, identification and proof of affordability.

Having a good credit score is of paramount importance in any mortgage application and so all buyers should do everything they can to make sure their score looks good, this is particularly true for expats, who are likely to see their mortgage applications subjected to particularly intense scrutiny.

Identification itself is unlikely to be a major hurdle for expats, although in some countries providing proof of address may be more of a challenge. Expats should be aware that lenders to have to be very thorough about this partly to prevent money laundering and partly to ensure that they are compliant with any trade restrictions.

Proof of affordability is a key issue for all buyers and may be a sticking point for expats seeking residential mortgages unless they receive their income in pounds. Lenders are likely to apply a very generous margin of risk to protect themselves from currency fluctuations, especially with Brexit on the horizon (even though the prospect of a hard Brexit has tended to weaken the pound).

Expats seeking buy-to-let mortgages may be at something of an advantage here since the weak pound will have enhanced the value of their deposit and the ongoing cost of the mortgage should be covered by the rental income.

Mark Burns is the managing director of property investment firm Hopwood House.

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