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Top 10 Mortgage Tips from an expat Mortgage Broker for Expats Mortgages Worldwide! Image

Top 10 Mortgage Tips from an expat Mortgage Broker for Expats Mortgages Worldwide!

March 09, 2021

Are you an Expat or Foreign National overseas? You will agree that globalisation, expanding lower cost travel networks and advances in technology & energy sectors has made the world a smaller place. It is not uncommon for career professionals, sports people, entrepreneurs expanding their careers or businesses to move to far flung worldwide locations. It could be a career boost, lifestyle change, an improvement in business operations or efficiency or a mix of all!

 

Even the rise of social media influencers, bloggers and the like, are now packing their bags along with their laptop and heading to far corners of the earth for a cheaper ‘low tax’ or ‘no tax’ region!

 

Whatever the case those successfully plying their trade or profession worldwide will ultimately want to invest their surplus capital for good returns!

 

Property has long been seen, as quite literally ‘a safe bet’ even with turbulent housing markets in recent memory, most notably post 2008. However, property has generally bounced back and even if it doesn’t immediately … the idea that you can buy a property, get expat mortgages and rent the property out to a tenant, whereby, that tenant is then effectively paying your expat mortgages and you see a decreasing debt and hopefully a capital gain over the medium to long term can seem the perfect scenario. Or for the more experienced landlord having a portfolio of properties can generate a supplementary income for life well past retirement age!

So where to buy the property?  UK, Europe, USA or Australia or other? … well for the purposes of this discussion we will focus on the UK property market for 2 main reasons;

  • There is a very advanced market for expat mortgages UK.

&

  • Prices are generally stable & there is a housing shortage in the UK, meaning there is usually a buyer to cash out your asset or a tenant to rent it out.

Here we will discuss the top 10 tips for UK expats or expatriate Foreign nationals who wish to buy, refinance or release capital UK property … so here goes:

1. Buy to Rent out! Also known as Expat Buy to Let Mortgages. The way an Expat or FN (Foreign National) is assessed for expat mortgages is less strict when the property is going to be let out to a third party, there are more banks in this market and so there is more availability.

In contrast to buy for own or family use is also possible, however the number of banks are fewer and the criteria is more strict, though the plus side is if you do want it for family use usually the rates are less than buy to let.

2. Don’t be put off by your own age - Many expats believe at 60+ they are past it when it comes to getting a UK mortgage. Generally, a mortgage for own use property can be taken to age 70/75 by most lenders However, there is a big difference when taking a mortgage on a property to rent out called Buy to Let. There are some lenders who will permit expat mortgages up to age 90. Additionally, there are even now some lifetime mortgage providers who will consider expats returning to the UK, and rates have become increasingly competitive in this market.

3. Research the Best Rental Yield areas – In the UK the house prices are much higher the closer to London you get… oddly though if you were to compare a 3-bedroom mid terrace home in Greater Manchester worth £150K renting for £750 (5% yield) with a similar home in Harrow worth £400K renting for £1500 (3.75% yield) you may be surprised to learn that the better investment would be the one in Manchester this is because £ for £ the rental yield is a much better %, than the Southern property. I recommend also using property finder agents who can often add more value by obtaining off market or distressed sales and I believe this will be a growth area in the next 24 to 36 months.

4. Don’t ignore lower property value areas – further to point 3 some of the best yields are found when you purchase property in the £50K to £100K range, the risks of getting good tenants may be higher and the difficulty level of finding mortgage borrowing is also a challenge, however get those two factors right by getting a good agent and a specialist expat mortgage broker and you could be looking at 15-30% return on investment per annum.

5. Establish and Improve Credit rating – While there are some lenders for Expats and Foreign Nationals that don’t require a credit footprint at all in the UK, these usually only apply to the top tier of client profiles, meaning earning £75K to £100K per annum. It is recommended that Overseas clients where possible establish a credit footprint. Usually if the client has a close trusted friend or family member in the UK, obtaining small credit facilities in their name at that UK address can start the ball rolling. For example, one client obtained a SIM only mobile phone contract (which is a legit credit facility) and also took over one of the utility bills such as the broadband. Also, clients already with UK bank accounts, could change the address to the friend or family UK address, to again improve credit rating especially if the account has tied credit facilities such as an overdraft or credit card build in. Having an established UK credit profile, will ultimately always assist with the obtaining expat mortgages UK approval.

6. Consider Interest only lending – Many considering entering UK property ownership want to have the expat mortgages on a repayment basis. This makes sense if the property will be your forever home and you plan to live there post retirement. For most though who are buying to let, it makes sense to take the mortgage on an interest only basis, this frees up your own cash and in most cases the rent from the property tenancy can build up a nest egg for any possible void periods or future repair or refurb works required. Additionally, as the pot fills up it can supplement future deposits for more onward property purchases.

7. Asset Rich, Cash poor? Have no fear! – Expats may at times find that they have several properties in the UK but little or low cash flow, perhaps having retired, changed jobs or moved to self-employment. They may conclude that it is not possible to obtain a mortgage due to the low levels of personal income. However, there are some UK and offshore lenders who can provide lending facilities with a ‘no minimum income’ availability, this is because the lender is looking at the bigger picture of the assets in the background and equity within, then applying a lending decision on the rent generated rather than the personal income of the applicant.

8. Consider a Ltd Company Structure – For experienced landlords that may be planning further Expat Buy to Let purchases in the UK in the near future, it may be advantageous to consider buying property within a SPV (Special Purpose Vehicle) basically a Limited Company that holds properties to rent or sell. This SPV can attract more favourable tax breaks than an individual and so overall may be financially favourable, of course it is best to run the numbers with an accountant, as there are set up and annual costs to maintain a SPV entity. Interestingly there are more lenders moving into the Ltd company Expat Buy to Let Mortgages market and some of these will also consider Expats, with rates similar to personal name deals.

9. Qualify for Private Banking – If you have assets of £2m or more or are earning £250K+ per annum or more then you may qualify to sit at the table with a private bank. This could be a great option if your plans are long term to build a property portfolio and multiple assets in the UK. A private banking arrangement also attracts ultimate flexibility, and they can often provide mortgages that UK High St banks would never consider. Additionally, there are some private banks that will not require assets under management which is an advantage as this frees up clients’ cash to make the most of funds on hand.

10. Choose the right UK regulated Expat Mortgage Broker – One of the most important decisions you can make, If you are considering UK mortgages, then it is vital to use an FCA (financial services watch dog) UK regulated broker. There are many expat mortgage brokers worldwide who claim to provide expat mortgage broker services to the UK market, however for sure they will not have access to all the lenders that a UK regulated broker would have, so they cannot possibly give best advice. Additionally, quality of the UK broker should be carefully considered, do they have independent online reviews? Are they a specialist? Especially when it comes to expat mortgages which is a niche area. Any trusted expat mortgages broker with this specialism will also be able to provide peace of mind by showing their practicing licence and professional indemnity cover. Also ask the questions about fees and refunds, even with some regulated UK brokers they may ask for a non-refundable study fee, so even if they eventually cannot help you, they still get paid! that just seems unfair! A good Expat Mortgages Broker should be able to offer a ‘No offer, No fee’ promise so the client is not out of pocket due to the broker not being able to provide the service.

We hope these 10 top tips provide some useful guidance for expats or foreign nationals considering property purchasing in the UK, there are many things to consider and buying a home is always a big decision and a big investment. However, there are some big up sides to be had and possibly the security of an attractive income stream or retirement fund.

Whatever the case it is best to seek the right advice from the right professionals, have lots of fact-finding discussions and do your own research when it comes to property and areas to purchase in the UK. No doubt with the current shortages of good housing, the UK market continues to be an attractive region for property investment!

 

Webinar with mortgage expert Simon Murphy on 'Expat Mortgages'! 

 

 

Article by Simon Murphy, founder of www.MyMortgageDeal.co.uk which is a UK FCA regulated and licenced specialist expat mortgage broker (FCA 794799) providing decades of specialist mortgage advice to clients worldwide.