Liz Syms

What you need to know about lending to expats




With the pound currently worth less than before the EU referendum in 2016, property investment in the UK is an attractive option for expats.

As the UK market is familiar to these British expats, some are considering further property purchases.

We are seeing expats with existing UK property investments — which may have been their previous home — capital raising and using this to fund deposits for subsequent purchases.

With the increased demand, brokers may come across these enquiries from time to time, so understanding some of the differences between this type of lending and standard mortgages will support brokers to help more of their clients.

First, lenders’ criteria may vary from their standard criteria in some ways, for example, the minimum income or the maximum LTV may be different. Many of the lenders will require the applicants to hold a UK bank account and some will require applicants to have an existing UK credit profile when a credit search is performed.

The country of residency may also have an impact on whether lenders will consider the applicant. Most lenders will not accept applicants from sanctioned countries, for example.

The use of the property is another consideration. For example, if the applicant plans to let out the property, then a BTL loan would be appropriate. However, if the applicants want a family member to live in the property, then a residential lender would be needed.

Translation of documentation and confirmation that documentation is a true copy of the original is another challenge faced by advisers if they are not familiar with this market.

It remains to be seen what action expats living in Europe will take following Brexit. There is talk that travel could become more challenging, applications to continue residency may have more complications and there is also talk about scrapping state pension entitlements for those who live abroad. The down valuation of the pound has also affected the value of the income received, therefore, some Brits may look to return to the UK.

For returning expats, just because they are British citizens that does not mean that they automatically meet lenders’ criteria. For example, many lenders will require a UK address history of three years before considering a mortgage.

More lenders than ever now consider offering loans to expats as part of their criteria. However, some expert lenders in this field do not offer their loans via all intermediaries.

Advisers who receive regular enquiries regarding these types of mortgages have the ability to quickly be able to become familiar with the niche lender offerings if they invest the time. Other advisers may wish to consider partnering with companies that they can refer their clients to who already have the expertise.
 

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