Expat Mortgages rise during the pandemic

Expat Mortgages rise during the pandemic

Expat mortgages are available for citizens who are working or living outside the home nation. Normal mortgages in the UK are only for UK citizens who are residing in the country and receiving their income in GBP. These lenders do not like it when applicants’ income is in a foreign currency. Therefore lenders have a special set of mortgage products for UK citizens who are working abroad. The demand for these products has grown as with the mortgages developments during the pandemic.

What are expat Mortgages?

This article attempts to provide insights into Expat Mortgages for the readers to expand knowledge of the UK ex-pat mortgages market. Many mortgage brokers are currently providing services for first time buyers, remortgages, BTL purchases and remortgages, Limited Company BTL purchases etc. A key factor is that all our clients are residing in the UK. However, there are mortgages for applicants who are not residing in the UK as well.    

General or the gut feeling about standard mortgages is that it is hard to get a mortgage,

  1. If you are a non-UK resident
  2. When you receive your salary in foreign currency
  3. If you lack adequate UK credit history

This is the scenario where it makes space for lenders to come up with expat mortgages and insurance providers with mortgage protection insurance. Mortgage providers who understand the above circumstances and flexible with such matters offer applicants with expat mortgages.

Banks historical perception on expat mortgages was based on several important factors.

  1. Banks find it difficult to identify the source of funds
  2. Concerns on money laundering
  3. Assessing proof of income issued overseas is difficult
  4. Hard to take legal actions against non-UK borrowers if necessary

However, this trend has changed drastically over the years! As a result of increased competition among lenders, they have tried to expand into niche markets. Expat mortgages has now become one of the best niche products in the Fin-tech mortgage industry for both lenders and mortgage brokers. So, if we get what has changed in a nutshell,

  1. High street lenders like NatWest, HSBC, Santander offering much competitive expat rates than before.
  2. Non-high street lenders like Paragon also started offering BTL expat rates   
  3. Fin-tech Mortgage brokers also have changed their historical perception of expat mortgages and looking to expand their services to this niche.

Provided all these changes and flexibility from the lenders’ end, there are two fundamental factors they consider when assessing an ex-pat mortgage.

What is the country you are resident in?

It is important to monitor how FCA (Financial Conduct Authority) and other international organizations like IMF (International Monetary Fund) rate the subject country of the ex-pat in terms of money laundering, financial risk, etc. Another scale to measure the suitability of the country would be Fitch credit rating. Expats from high-risk countries in Africa, South America would find it hard to apply for an ex-pat mortgage. Residents from Europe and high-income Middle East countries have a good chance of applying for an ex-pat mortgage.  

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Who is your employer?  

Multinational company employees have relatively a high chance of getting a UK mortgage than self-employed or employees at overseas SMEs. Lenders can easily verify the income of multinational employees from the UK offices. However, lenders are becoming flexible with these criteria. There are opportunities for self-employed expats as well with several lenders to apply for expat mortgages.   

Deep Dive into Expat Mortgages lending criteria

Non-high street lender- Paragon

Max 70% LTV – maximum loan up to £750,000, Max 65% LTV – maximum loan up to £1,000,000

Limited company Expat applicants have more chances of passing the affordability than joint/individual route expat mortgage applicants. This is based on the Interest Cover Ratio (ICR) being considered.

  • Limited company SPV applications with expat directors, personal/joint expat applications are considered.
  • It is compulsory for all applicants to maintain a UK bank account for a minimum of three years
  • All applicants (first-time buyers, remortgage applicants) must provide a certified copy of their current UK passport
  • Three separate proof of residency documents
  • Applications will not be considered where there is evidence of poor UK credit history
  • No minimum income requirement, but applicants must provide details of all income
  • All employment statuses are accepted, all details need to be disclosed
  • Property must be self-contained
  • It is compulsory to obtain services of an estate agent to manage the property

HSBC Expat lending criteria

  • HSBC only provides Tracker rates
  • No early repayment charges
  • Properties must be let under Assured Short-hold Tenancies (ASTs) OR
  • Through a Company Let Agreement where a company takes on a residential tenancy agreement as the tenant on behalf of an employee.

(HSBC has not provided detailed information on their expat lending criteria either on HSBC Expat website or HSBC for Intermediaries website)

UK Expat Mortgages- Interest Rates

There are three main types of Expat mortgage rates. Purchasing first UK property for family, UK property investment as Buy to Let, re-mortgaging an existing mortgage into a expat mortgage.

Paragon

Expat Port 2yr Fixed @ 3.95%, 2.00% Fee

Expat Non-Port 2yr Fixed @ 3.90%, 2% Fee

HSBC

Tracker 2.99% (60% LTV) with product fee of 1797

Tracker 2.49% (70% LTV) with product fee of 1797

NatWest– Buy to Live Mortgages for expats or their immediate family members

2.94% Fixed 2 years 1000 product fee

NatWest– Buy to Let Mortgages

3.05% Fixed 2 years 1000 product fee

UAE/Dubai Expat Mortgages

Challenges to overcome when dealing with UAE/Dubai Expats

  • Dubai and the rest of the UAE are not currently part of FATF (Financial Action Task Force) – this has closed off many high-street banks and building societies to you as a source of finance.
  • Lack of credit footprint activity in UK
  • The difficulty of providing proof of address, proof of income (Applicants might not have utility bills in their name, for example, utility bills are covered as part of salary package for most employees)
Dubai Expat mortgages
Dubai/UAE Expat Mortgage

However, there are few favorable factors as well for the borrowers in terms of the regulations set be European Commission’s Mortgage Credit Directive (MCD).

The borrowers can convert their mortgage into a different currency at any point

Borrowers can benefit from an interest rate cap by mitigating the risk of dramatic interest rate fluctuations.

Even-though these are favorable movements for the borrowers, lenders have to bear the currency risk up to a greater extent. This has resulted in lenders coming up with competitive interest rates.

“The universe of Mortgages has gotten to a place where there is place in it for all”

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