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Expat Mortgage Rates | What You Need to Know
Expats looking for UK mortgages have a few more hoops to jump through than UK residents, but there’s nothing stopping UK nationals who live abroad from making good use of the UK property market.
Here at Clifton Private Finance, we’re experts in getting the best expat mortgage rates - here’s what you need to know.
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What is an Expat Mortgage
Simply put, an expat mortgage is a UK mortgage for a UK property that’s held by a UK national who lives outside of the country. In many ways it is similar to a standard UK residential mortgage, however there are some additional complications that come from living outside the UK that have to be taken into consideration.
It is important to understand that expat mortgages are used to purchase UK properties and cannot be used to buy property in the country of residence. They are used to invest in the UK property market, or to provide a home to come back to, not to buy a home in the Algarve (or Spain, Greece, Italy…).
Why are Expat Mortgage Rates Different than Domestic Rates?
The main factor that determines mortgage rates is that of lender risk. When the risk is higher, lenders increase the interest rate to ensure that their return from the riskier investment is more worthwhile.
Like many financial services, lending mortgages is a gamble for the lender, where they’re effectively betting on you being a reliable borrower who meets all your debt obligations and pays the mortgage in time - and someone not living in the country significantly increases their risk.
The more you can do to lower that risk for the lender, the better a rate you will be able to obtain, but as an expat, there are certain factors that may be outside your control:
Income Stability
With different employment laws, unknown (to the lender) job market conditions, and fluctuating exchange rates, someone living and working in another country is perceived to have lower income stability than someone settled in a UK PAYE job.
Specialist expat lenders, especially those who have experience in the country of your residence, are likely to have a better understanding of your alien job and income stability, which is why they are more likely to offer you a better rate than a traditional high street bank.
Legal Issues
A large part of mortgage lender’s risk mitigation is the legal framework of the UK that enables them to enforce debt collection and repossession should you fail to meet repayment responsibilities. Risk increases considerably once the borrower is out of the country and subject to other (and sometimes unknown) laws and regulations.
Again, experience is key here, making specialist expat mortgage lenders with comprehensive understanding of the legal framework of your host country far more likely to be willing to lend than those without this specialisation.
Credit History
UK credit scoring is not shared with other countries and only interactions with UK institutions is recorded in the credit history. This means expats often suffer from incomplete or even non-existent UK credit reports.
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To a lender, these gaps present serious concerns as there is no way for them to see your financial responsibility during these periods. Creditworthiness assessment is essential for UK mortgage lenders and will have a major impact on expat mortgage rates.
Documentation
Another aspect of risk management is comprehensive documentation of both financial status and confirmed identity. While technology is constantly improving to make this aspect less of an issue, there are some host countries which can mean that gathering the necessary documentation becomes problematic.
The Effect of Increased Risk
The increased risk of lending to expats means that the following aspects of a mortgage are affected:
- Interest rates - Expat mortgage raters are typically higher than standard UK mortgage rates.
- Loan-to-value (LTV) - Lenders are likely to require a higher deposit from expats to mitigate the risk level of the mortgage. Thus, LTV percentages are lower.
- Property type and location - Expats are more likely to obtain a mortgage in areas of high-demand and standard properties, such as houses and flats. This is because part of risk assessment includes calculating how easy it is to sell on the property should repossession be necessary. Properties requiring work, those of unusual build or type, or in undesirable areas will be more difficult to secure a mortgage for.
Getting experienced advice and help will make it more likely that you can obtain the mortgage you are after.
Clifton Private Finance has a dedicated expat mortgage team with established relationships with the specialist UK lenders who best understand the expat mortgage landscape and its particular nuances.
Speak to us at Clifton PF to better explore the range of expat mortgages available in the UK and let us find you a deal with the best expat mortgage rates.
See the latest market news below.
International Property Market Update
The UK property market, particularly in London, has long been attractive to international buyers due to its stable political environment, robust legal system, and strong rental yields.
Many UK banks and specialist lenders offer mortgage products tailored to expats and foreign nationals. There are challenges surrounding getting an international mortgage, particularly because it can be difficult to get a clear idea of your UK credit footprint and overall financial circumstances if you have spent a significant period abroad.
However, as the international mortgage market becomes more competitive, the rates are coming down for individuals who have spent less than two years in the UK before purchasing a home, and additional eligibility requirements are becoming less stringent. Technology also has its role in expediting the process.
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Tax Considerations for Expats
Understanding both the UK tax laws and those of your country of residence is essential. This is especially relevant if the property is rented out and providing an income.
It is also important to understand the double taxation treaties that are in place between the UK and the host country and how to properly submit accounts to pay the correct tax.
Why Obtain an Expat Mortgage?
Despite the higher rates, expat mortgages offer UK nationals living abroad the opportunity to invest in and gain the advantages of the strong UK property market. Often expat mortgages are used to:
- Purchase a ‘home base’ - The idea of having a UK home to come back to should you choose to leave your host country is appealing to many. This may either be a home that is rented out in your absence, or a UK base to use if you travel regularly between countries.
- Provide a home for children - Many expats purchase a home for their children as a transitional home as they move into adulthood. One prime example of this is buying a property for a child to use while studying at university, which can then be sold or used for other purposes once the study is complete.
- Investing in property to let - Investing in the UK market by buying a property to rent out can provide an income for expats. Additional difficulties that may arise from the distance do need to be considered, and typically it is sensible to use letting agents to act as day-to-day landlords on your behalf. Expat buy-to-let mortgages are available from most specialist lenders.
Get the Best Expat Mortgage Rates with Clifton Private Finance
Clifton Private Finance are experts at expat mortgages, with a history of helping expats living around the globe obtain incredible UK mortgage deals.
Our team of specialist advisors have long-established relationships with the top-tier expat mortgage lenders and can leverage their expertise and knowledge of the UK mortgage marketplace to find superior expat mortgage rates for you.
Speak to a Clifton Private Finance advisor today about your UK property plans.
