Accounting & Finance

Buying Property Abroad? Here’s your Guide to Expat Mortgages

The financial system is set up with a clear vision of a buyer in mind: someone who lives where they were born, earns the same currency they want to spend, and has a full-time contract lasting for many years.

In today’s world, more and more people are not only leaving the city but the country they were born in. Around five million UK citizens emigrated from the country to live and work. They move from contract to contract, city to city, but they still want to become homeowners in their home country.

If you’re a British citizen or a non-resident and find yourself nodding along, then the financial products you need are expat mortgages.

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What Are Expat Mortgages?

Expat mortgages differ from the traditional mortgage in that they have more restrictions. In fact, they’re becoming even more difficult to get as lenders tighten qualifications.

Some lenders even ditched the product entirely. NatWest and RBS cut the program in May 2016 to restrict mortgage applications to UK residents only.

As a result, the first step to finding an expat mortgage is finding a bank willing to lend to expats at all. Barclay’s and HSBC offer expat services including traditional residential mortgages and buy-to-let mortgages.

Your local building society or bank may also offer these services.

Once you’ve done that, you’ll need to meet the myriad of requirements the lender sets.

In fact, the most important thing to understand about an expat mortgage is that unlike a traditional mortgage, lenders’ criteria and policies vary dramatically between lenders.

What Expat Mortgage Lenders Want from Expats

Some of the basic criteria remain the same. Lenders look at:

Credit history
Income
Financial association in the UK
Currency

Banks want expats with good credit, good jobs, and who haven’t yet cut off all ties to the UK. You’ll find it easier to apply for offshore mortgages when you have a bank account, credit card, or residential (but not permanent) address in the UK.

Currency is another essential issue made prominent by recent European rules. British banks must consider how the currency you’re paid in fluctuates compared to the pound with the intent of assessing your global financial position.

If your currency makes serious losses on a regular basis, you may not be allowed a mortgage out of fear that currency fluctuations will give you undue financial hardship.

While these aspects of the process are important, they’re trickier than they might seem. Keeping financial and residential ties to the UK makes it easier to apply for financial products, but it may open you up to taxation issues.

Can I Buy-to-Let?

At present, banks seem more willing to provide buy-to-let mortgages.

Buy-to-let mortgages are more favorably viewed because they’re seen as investments for expats. The property purchased is then managed by Letting Agents in the UK, which allows you to use the rent to pay back the mortgage principal.

Buy-to-let is a good option for those who want to buy a home but who won’t live in it in the near future. There are also more products available. However, because these mortgages are investments and technically business transactions, the best expat mortgage rates are reserved for residential mortgages.