If you’re planning on getting an expat mortgage, you first need to ensure that you’re eligible to buy a house in the UK. When it comes down to it, regulations are relatively flexible and lenient. UK residents and citizens can buy property within the UK and foreign nationals can also buy property within the UK. There are no legal restrictions on expats or foreign nationals buying property.
However, it’s important to note that foreign nationals are often expected to have around two years’ worth of residency in the UK and a job within the UK. Those without this may face more stringent requirements and may have to put down a much larger deposit. In terms of overall costs, the price of property will be the same for residents and non-residents alike. Stamp duty will be paid at the same rate and Capital Gains Tax will be paid at the same rate.
Criteria for Expat Mortgages
If this sounds good to you and you are interested in moving forward with buying a house in the UK, you are likely to next be interested in common criteria for expat mortgages. Here are some challenges that expats are likely to face when applying for an expat mortgage.
Credit History
All lenders will check your credit history when you apply to borrow money. This goes from something as small as a phone contract, so it’s not all too surprising that mortgage lenders are going to want in-depth insight into your credit history before handing over a large amount of money to you. This is likely to be relatively straight forward if you are only recently an expat. However, if you have been an expat for a long period of time, your UK credit history may be a little more difficult to trace.
Income
Any mortgage lender is going to want to see proof of your income before agreeing to offer you a mortgage. Generally speaking, lenders tend to consider expats higher risk than standard applicants, as there may be different employment rights and regulations overseas that could cause your income to be less reliable. If you have difficulty proving your income, your application may be rejected.
Employment
Closely tied to income is employment. If you are employed overseas, mortgage lenders are more likely to approve your application if you’re working for an international company rather than a local or remote company. They are also likely to request that pay-slips and other documents highlighting proof of earnings are translated into English. Finally, some lenders may require that your income is paid into an English bank account, rather than an overseas bank account.
Specialist lenders would still consider your foreign income. If you are working at a multi-national company which has a branch in the UK, it would be easier for the lender to verify your income. It means that your income is taxed in the UK and the lender can track your employment records easily. If they need to contact the employer to request more information via employer reference letter, it would be easy to reach them.
On the other hand, if your employer is based in a foreign country and you are paid in the relevant currency of the respective country, it would be difficult to track your income. The lender would be exposed to a higher risk. This is the reason why some lenders are not accepting certain countries due to the high financial risk. The same rule applies if you are sourcing your deposit in a foreign currency. It is advisable to speak to an expat mortgage adviser to discuss all the matters in detail.
Self-Employment
If you are self-employed and looking for approval on an expat mortgage, the usual self-employed criteria for mortgages will be required. But on top of this, you will also likely have to show that you are using the services of an internationally recognised accountant.
Factors That Can Impact Expat Mortgages
Taxation – it’s important that you consider the amount of tax that you will be liable to pay in association with your mortgage. This could include both UK taxes and taxes in your country of residence.
Exchange Rates – a small change in exchange rates could drastically impact the value of your property. It’s important to be aware that unexpected changes to exchange rates could make your property suddenly unaffordable.
Translation – the paperwork involved in buying a property is extremely complex. It’s essential that everything is translated properly to ensure that you clearly know what you’re contracting yourself into.
Of course, there’s a lot more to expat mortgages than has been outlined above. But these basics should help to cover some essential information and eligibility criteria to get the ball rolling in the right direction.
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