Simple guide to UK mortgages for international property buyers
In an increasingly interconnected world, individuals and corporate entities from around the globe are considering purchasing property in the UK. Be it homeownership, a buy-to-let or an alternative property investment, the UK’s diverse real estate market offers attractive opportunities. However, securing a mortgage as an international or non-resident buyer can be complex. Specialised financial advice firms offer crucial guidance and end-to-end mortgage broking services for cross-border individuals or corporations.
Visa and residency status
Different visa, residency or expat statuses may affect your eligibility and available terms with most lenders. Knowing which UK banks offer expat mortgages is half the battle. The other half is understanding the lenders’ requirements; including but not limited to the time remaining on your visa, how long you have been a resident in the UK (if at all), and your relevant UK ties in line with the Statutory Residence Test. This is where a ‘whole of market’ approach to finance broking allows the Moore Kingston Smith team to bridge the gap and consider the whole market to source the most appropriate finance.
If you are not a UK resident or have not lived in the UK for at least two years, you could encounter some restrictions. For example, you may have a smaller selection of mortgage products, reduced borrowing levels, the need for a larger deposit or higher interest rates, to name a few. The considerations you will face will be specific to you and your circumstances.
Identity and credit checks
Foreign buyers from some countries including India and China may be subject to more rigorous identity and credit checks. To overcome this, building a credit history and overall footprint in the UK may be essential. Amongst other things, opening a UK bank account may go a long way in establishing creditworthiness in the eyes of a lender. After building up a credit history, maintaining it will become vital. Missing or outright stopping mortgage payments can have huge implications down the line.
Ownership structure
Setting up a special purpose vehicle or limited company to purchase and hold investment or buy-to let-property may be a suitable strategy for foreign nationals. Alongside mitigating the elevated levels of lender scrutiny, it may also present an opportunity to claim tax relief against mortgage interest and more general expenses.
Long-term view
Mortgages in the UK, often known as ‘home loans’ internationally, follow a standardised structure. Seemingly harmless preferences like paying your mortgage weekly can have drastic impacts on the options available to you. To access the lowest cost mortgages, it is paramount your unique needs are met while adhering with the bank’s requirements.
For instance, instead of opting for a lifetime mortgage which carries limited flexibility and high exit fees, you may consider fixing the interest for five years, thereby maintaining flexibility while maximising your borrowing capacity and ability to refinance in the medium term.
Mortgage planning
Understanding how mortgages work is key but structuring your loan according to your long-term plans is crucial. Questions like ‘how much can I borrow’ and ‘what can I afford’ are important as a starting point but the bigger picture needs to be considered. A topical consideration is timing the mortgage’s fixed-rate period around when interest rates are expected to fall. This may mean considering a shorter-term fixed rate over a lifetime mortgage, for example.
To navigate these challenges, it is advisable to begin your mortgage research in advance. A specialist mortgage broker can evaluate your specific needs and align these with the banks’ stringent criteria, helping you identify a suitable solution and guide you through the intricacies of the application and underwriting process.
For advice on mortgage planning, please do to get in touch with our dedicated Mortgages and property finance specialists for an initial no-obligation consultation.