If you’re looking to make the United Kingdom your home, you may be wondering whether you’ll qualify for a mortgage as a non-UK resident. Is it harder for expats to get mortgages in the UK? What is an expat mortgage? How much deposit do you need to get on the property ladder? To answer these questions, we’ll take you through the process what to look out for when applying for an expat mortgage.
Expat mortgages in the UK: how can I get one?
The good news is that you almost certainly will be able to get one, although, as an expat, the process could involve a few extra hurdles. We’ll explain some of the things to look out for when applying for an expat mortgage.
Let’s start by answering the most important questions.
Is it harder for foreigners to get mortgages in the UK?
It is a little harder, but don’t let that put you off.
The bottom line is, if you can make yourself an attractive prospect to a mortgage lender, you should have no problem.
This means having a high household income, a stable career, and a good financial track record.
If you’ve got all these things, you can start to plan your new life in the UK – and there’s almost never been a better time to move to Britain.
On the other hand, certain signals could be instant red flags to mortgage lenders, causing them to deny your mortgage application. For example, if:
- Your main source of income comes from overseas. If your business is registered outside the UK, this will mean less transparency, which mortgage lenders will see as a risk factor. It’s not a deal breaker – but you will need to be meticulous about acquiring all the necessary paperwork to prove your income stream is legitimate and secure.
- Your credit history isn’t traceable. This could be the case if you spent most of your life in a country where financial record-keeping isn’t as strict as the UK. Your mortgage lender will want as much information about your credit history as possible, so if a large portion is missing, incomplete or seems fraudulent, this could be a problem.
- You don’t appear settled. Your mortgage lender will ask to see proof of income and an address history during your application. If you’re a bit of a globetrotter, with lots of different jobs and addresses in multiple countries over the last three years, this could make you seem like a flight risk – literally.
- You’re too old. Unfortunately, mortgages have a time limit. Most mortgage lenders in the UK will ask you about your retirement plans. If you plan to retire in under 15 years, your lender may question whether you’ll be able to keep up with the repayments schedule.
Inez Cooper, founder of William Russell
told Investor Chronicles by Financial Times in June 2021
What do I need to get a mortgage in the UK?
As you’ll see below, the mortgage application process in the UK is long and complex (not to mention expensive). But you can take some of the complexity away by making a few simple preparations when you move to the UK.
For starters, you’ll want a UK bank account. This will make it easier for your mortgage lender to track down proof of income. You’ll need to have a UK address in order to open a bank account, which is why you may want to consider renting before purchasing a property in the UK. In any case, most lenders will expect you to have lived in the UK for at least three years before you can apply for a mortgage.
You will also need a permanent job in the UK. You may be asked to show a contract of employment when it comes time to apply for a mortgage. If you’re self-employed or run your own business, you’ll be expected to show financial records going back three years. You may also be expected to show proof of other forms of income, such as investments.
Is there a special type of mortgage for expats in the UK?
Although it’s not a formal product, many mortgage experts will refer to what’s called an expat mortgage or a mortgage for expats.
What is an expat mortgage?
An expat mortgage is a mortgage you’d take out on a property in the UK while you’re a non-UK citizen. This is different from an overseas mortgage, which is where you take out a mortgage for a property that’s not in the UK but overseas.
These are available through specialist expat mortgage brokers in the UK. These firms are experts in conducting credit searches on citizens of other countries.
You may still be able to take a mortgage with an ordinary high street lender if you’ve been living in the UK for a while and have a good financial history.
Another popular option is to take out a mortgage with the UK branch of a bank you use in your home country.
Whichever path you go down, there are two types of expat mortgage you can take out:
- Mortgage on a main residence: this is a standard mortgage on a property you and your family intend to reside in. It’s not unusual for a married couple to purchase the property between them and take out a joint mortgage, which they pay off with their incomes. These mortgages are available on either repayment or interest-only bases.
- Buy-to-let mortgage: this mortgage is for expats trying to invest in property. Buy-to-let is when you purchase a property with the intention to rent it out to tenants. Flats in city centres and student houses are popular investments in the UK because of the high turnover of tenants in these areas.
What’s the process of getting a mortgage in the UK as a foreigner?
The process is straight-forward, but quite expensive. When looking for a property, you will need to set money aside and be prepared to pay lots of extra costs.
- Get your finances in order. Before you begin to think about taking out a mortgage, you need to be realistic about what’s in your price range and whether you can afford to buy a property. You will need a mortgage deposit (usually 10-20% of the value of the property), plus cash set aside to pay extra fees such as stamp duty, solicitor’s fees, conveyancing fees and survey fees.
- Find a property you like through an estate agent. When you search for property, you will be guided round by an estate agent, who represents the seller of the property. If you find a property you like, you can make an offer (usually based on the asking price). The estate agent will pass this offer on to the seller, and if they accept it…
- Get a mortgage agreement in principle. Once you know the price the seller is willing to accept, you can start to apply for a mortgage. This is usually done online, and you may wish to compare different lenders to get the best deal. An agreement in principle is a soft agreement, meaning no money is put down at this stage.
- Hire a solicitor or conveyancer. Next, you’ll need someone to handle all the legal aspects of buying and selling, such as doing the searches, signing the paperwork and writing the contracts. Your mortgage lender may arrange their own solicitor or conveyancer, or you could choose your own, but either way you should be ready to pay the fees.
- Take out a survey. This is usually an optional step, but if you’re taking out a mortgage, many lenders will stipulate that you must get a survey. This is to judge the condition of the property and consider whether the asking price is fair. If you’re taking a mortgage that’s more than the real value of the property, your lender is unlikely to lend you the money – it will be considered too much of a risk. On the other hand, after completing a survey, you may be able to lower your offer.
- Complete your mortgage application. Now you can finish your application and get accepted for your loan. This involves paying your mortgage deposit and undergoing a full credit check. Around this stage, you will also need to take out life insurance and buildings insurance.
- Exchange contracts. With the searches completed, surveys completed and mortgage agreed, you can finalise the deal with the seller. Your solicitor or conveyancer should be making sure your money is being transferred securely, and will also inform the land registry that you are the new owner of the property. You and the seller can now agree on a completion date – this is the date when you’ll be able to move into your new home.
- Pay stamp duty. The final hurdle is to pay stamp duty on the purchase. Stamp duty is a form of tax that is specific to the UK property market. It must be paid within 14 days of completion. Stamp duty rates are different in England, Wales, Scotland and Northern Ireland, so make sure you’re aware of how much you will be expected to pay. Some mortgage lenders allow you to add the cost of stamp duty to your mortgage.
Should I apply for British citizenship to get a mortgage in the UK?
It’s true that applying for British citizenship could improve your chances of landing a mortgage, although it’s by no means essential.
If you’ve lived in the UK for a certain length of time, you may be able to apply for British citizenship. This includes:
- If you’re married to a British citizen and have lived in the UK for at least 3 years
- If you’ve lived in the UK for 5 years, have received Indefinite Leave to Remain (ILR) and have lived in the UK
for a further 12 months with ILR (6 years total)
- If you’re an EU, EEA or Swiss citizen who has lived in the UK for 5 years and has settled status under the EU Settlement Scheme, and you’ve lived for a further 12 months with settled status (6 years total)
- If you have a British parent
- You’ve previously lived for 5 years in either Gibraltar or Hong Kong
Because of Brexit, which was completed in January 2020, EU citizens no longer have automatic right to remain in the UK, and you will need to apply for residency under the EU Settlement Scheme. Find out more about what Brexit means for expats here.
Is buying a property in the UK worth it?
The UK is one of the world’s biggest property markets and attracts huge interest from foreign investors. DLA Piper has named it the number one property market worldwide.
London is especially popular. Last year, foreign buyers accounted for £3.3 billion spent on real estate in London.
Because of its strong international connections, the UK is arguably one of the best countries in the world to become an expat. No matter where you’re from, you will find a strong expat community to welcome you in the UK.
Plus, the UK has a highly developed services sector with high-paying jobs available in industries such as software, finance, commerce and many others. It’s also one of the 10 best countries to start a small business, according to Investopedia.
The UK is renowned for having a strong education system – so if you’re moving with a family, you’ll find excellent state and private schools, plus some of world’s best universities on your doorstep.
The National Health Service (NHS) is Britain’s pride and joy, providing universal healthcare derived from national taxation, so you can always rely on having access to (mostly) free healthcare. However, more and more people are choosing private healthcare in the UK, as the country has fallen to the bottom end of healthcare spending in the developed world.
Ultimately, there has never been a better time to become an expat, and the UK could be just the place you’re looking for if you wish to start a new life in 2021.
Taking out a mortgage in the UK? Don’t forget life insurance
As part of your expat mortgage application, you’ll be asked to take out a comprehensive life insurance policy. As an expat, your best option may be to choose an international life insurance policy. Better still, you can add international health insurance to take advantage of benefits such as medical evacuation, in case you need to return to your country of origin for treatment.
William Russell has 30 years’ experience in providing international life and health insurance for expats like you. Speak to us to find out how we can protect you and your family in the UK.