Knock, Knock, Knocking on Opportunities Door: How Expats Can Secure a BTL Mortgage in the UK

"WANT TO BUY AN INVESTMENT PROPERTY IN THE UK = YES

HAVE YOU THOUGHT ABOUT HOW YOU ARE GOING TO FINANCE THE INVESTMENT OR BUDGET = NO"

This conversation is surprisingly more common than you think!

For many expats, investing in a UK buy-to-let property can be an attractive proposition. With lowish-interest rates and a strong rental market, buying a property to rent out can be a lucrative investment opportunity. However, obtaining a mortgage as an expat can be challenging.

In this article, we’ll explore the options available to expats and what they should NOW do to secure a mortgage for buy-to-let property in the UK.

Option 1: UK-Based Lenders

The first option for expats looking to secure a mortgage for a UK buy-to-let property is to approach UK-based lenders. This is often the most straightforward option, as many UK lenders have experience working with expats and understand the unique challenges they face.

However, it’s important to note that UK lenders may require a larger deposit than a typical mortgage. In addition, expats may need to provide more documentation to prove their income and employment status. It’s important to work with a reputable mortgage broker who can help guide you through the process and ensure you have all the necessary documentation.

Option 2: International Lenders

Another option for expats looking to secure a mortgage for a UK buy-to-let property is to approach international lenders. These lenders may have more lenient requirements for expats, but they may also charge higher interest rates and require a larger deposit.

It’s important to do your research before approaching an international lender to ensure they are reputable and have experience working with expats. It’s also important to understand the terms of the mortgage, including any fees and charges, before agreeing to any terms.

Option 3: Specialist Expatriate Lenders

Finally, there are specialist expatriate lenders who focus specifically on providing mortgages to expats. These lenders understand the unique challenges faced by expats and have experience working with clients in similar situations.

However, it’s important to note that specialist lenders may charge higher interest rates and require a larger deposit than UK-based lenders. In addition, the application process may be more complex and require more documentation. It’s important to work with a reputable mortgage broker who can help you navigate the process and find the right lender for your needs.

The criteria for obtaining a buy-to-let (BTL) mortgage for expats buying property in the UK can vary depending on the lender and the specific circumstances of the applicant. However, here are some common requirements that expats may need to meet in order to qualify for a BTL mortgage:

• Residency:

Some lenders may require expat applicants to be resident in a particular country, such as the UK or a country within the European Union, in order to be eligible for a mortgage.

The residency requirement is often a key consideration for lenders when assessing expat applicants for a BTL mortgage. This is because expats may be living and working in a country outside the UK, which can introduce additional risks for lenders. For example, an expat who is living in a country with an unstable political or economic climate may be at a higher risk of defaulting on their mortgage.

Usually, lenders will want to see that expats have a strong connection to the UK, such as through property ownership or family ties. Some strict lenders may require expats to be resident in the UK or a country within the European Union in order to qualify for a BTL mortgage.

Others may be more flexible and allow expats living outside of these regions to apply but may require additional documentation to prove their connection to the UK, so be prepared to provide more documentation.

It's also worth noting that the residency requirement can vary depending on the lender and the specific circumstances of the expat applicant. For example, some lenders may be more willing to work with expats who have a long history of successful property ownership in the UK, even if they are currently living and working outside of the country.

• Income:

Lenders will typically require expat applicants to demonstrate that they have a reliable source of income in order to make their mortgage payments. This can be done by providing proof of employment, such as a letter from an employer, or by showing regular income from other sources, such as rental income from other properties or investments. Again, some lender can be more rigorous than others and will require more documents than others.

One of the key factors that lenders will consider when assessing an expat's income is currency exchange rates. If the expat is earning income in a foreign currency, this can introduce additional risks for lenders, as exchange rates can fluctuate over time. Some lenders may require expats to earn income in a specific currency, such as pounds sterling or euros, in order to qualify for a BTL mortgage. Also, it can work in your favour to be an expat as we saw last year when the pound depreciated in value and it was deemed less risk to be an expat.

In addition to demonstrating a reliable source of income, expat applicants will need to meet the lender's affordability requirements. This typically involves showing that the rental income from the property will be sufficient to cover the mortgage payments and any associated costs, such as maintenance and property management fees. Usually, the rule of thumb is around 1.5 income to 1 mortgage payment. Lenders may also require expats to provide projections of rental income and expenses, as well as details of any existing rental properties they own.

It's worth noting that the income requirement can vary depending on the lender and the specific circumstances of the expat applicant. Some lenders may be more flexible than others when it comes to accepting income from different sources or currencies. Working with a reputable mortgage broker can help expats navigate the process and find a lender who can provide the right mortgage for their needs.

• Deposit:

Lenders will usually require a larger deposit for a BTL mortgage than they would for a residential mortgage. This can range from 20% to 40% of the property's value, depending on the lender and the applicant's circumstances. Lenders will typically require a larger deposit for a BTL mortgage than they would for a residential mortgage. This is because BTL mortgages are considered to be a higher risk for lenders, as the property may not be occupied by the owner and there may be additional costs associated with managing and maintaining the property. The deposit required for a BTL mortgage can vary depending on the lender and the specific circumstances of the expat applicant. In general, expats should expect to provide a deposit of at least 20% of the property's value, although some lenders may require a deposit of 25% or more. It is worth pointing out that at present, in the current climate, you are looking at the 25% or more. The deposit can be funded through a variety of sources, such as savings, investments, or equity from existing properties. It's worth noting that some lenders may require the deposit to come from a specific source, such as savings held in a UK bank account. In addition to the deposit, expats will also need to pay other fees associated with obtaining a BTL mortgage, such as valuation and legal fees. These costs can add up, so it's important for expats to budget for them when considering their options. This is key I believe, if you think you are going to earn money abroad and just buy property and think it’ll make you more money. Think again. Planning and budgeting is key to achieve your goals.

• Credit history:

Lenders will typically review the credit history of the expat applicant, just as they would with any other mortgage applicant. This means that a good credit score is important for expats looking to secure a BTL mortgage. Lenders will typically assess an expat's credit history to determine their ability to manage debt and make regular payments on time. This involves looking at the expat's credit report, which provides a record of their borrowing and repayment history. Having a good credit history is important when applying for a BTL mortgage, as it can impact the lender's decision on whether to approve the application and what interest rate to offer. A good credit history demonstrates to the lender that the expat is a responsible borrower who is likely to make their mortgage payments on time. Expats may find that their credit history is more difficult to assess than that of UK residents, as it can be more challenging for lenders to access credit reports from other countries. However, some lenders may be able to work with international credit agencies to obtain this information. If an expat's credit history is not strong, it may still be possible to obtain a BTL mortgage, but the interest rate offered may be higher than for someone with a good credit history. Some lenders may also require a larger deposit or other additional requirements, such as a guarantor.

• Property type:

Lenders may have restrictions on the types of properties they will lend on, such as new builds, leasehold properties, or properties with a low EPC rating, especially with the new laws that are about to kick in.

• Experience:

Some lenders may require expat applicants to have previous experience in managing rental properties before they will approve a BTL mortgage.

It's important to note that these requirements can vary between lenders, and there may be additional criteria that expats need to meet in order to secure a BTL mortgage. Working with a reputable mortgage broker can help expats navigate the process and find a lender who can provide the right mortgage for their needs.

In conclusion, securing a mortgage as an expat for a UK buy-to-let property can be challenging, but it’s not impossible. By working with a reputable mortgage broker *cough* Scott Mitchell at Capricorn Financial Consultancy (1:17 in the above video) and exploring all your options, you can find the right mortgage for your needs and make the most of this lucrative investment opportunity.

Thanks,

Ben