UK mortgage for foreign national buying rental property in England

Foreign buyers can be caught in a trap when buying property in the UK: you need to have an established financial history here (a bank account, credit card, and utility bills in your name) to get finance from a UK lender. But how can you build up that history before you live here?

Many UK lenders require larger deposits from borrowers who are not UK citizens and charge higher rates and fees. But there are alternatives.

The Scenario

Our client rang from Vietnam: she’s a Malaysian national working there, going to be moving to the UK with her fiancé. She planned to buy a property in Leicestershire and rent it out for a year or so before either remortgaging as their own home or selling it.

The issues: UK lenders are reluctant to offer finance to foreign nationals who don’t have a solid financial footprint in the UK. Our client had a bank account and credit card, but no utility bills establishing her residential ties.

Plus we needed to make the affordability work. For a foreign national applying for a buy to let mortgage, most UK lenders would be looking at a 60-65% LTV. Our client had 25% of the purchase price to put down. And the rental returns on properties in the area weren’t very generous.

In addition, her intention to switch the property from a foreign national BTL mortgage once she was financially established here put her in the frame for punitive early cancellation charges. As well as another valuation and more solicitors’ fees.

The Solution

A shariah-compliant ijara mortgage from a well-established UK shariah bank offered a way around all the problems. Our client wasn’t necessarily looking for shariah finance, but this product suited her needs.

The lenders were happy to consider foreign nationals and would accept a 75% LTV. In addition, they would top-slice the affordability, and allow her to make up a small projected shortfall in rental earnings from her income.

And as a shariah lender, they would not charge an early exit penalty. Their 1.5% up-front product fee is substantial, but in line with most expat lenders, and their valuation fees often seem cheaper. There’s no option for overpayments, but that wasn’t something our client was looking for – but she could exit early without punitive charges.

In a similar situation? Please call our mortgage finance team on 0117 959 5094 or book a callback into our diary at a time that suits you.