Expat Financing – Mortgages for Expats
Getting an expat mortgage as an expat living outside of the UK can be tricky as most expat mortgage lenders will perceive you as higher risk borrowers. Don’t worry though we have plenty of providers who will offer you a mortgage whether you’re moving back to the UK to live in your UK property, remortgaging to release equity or buying to let as an investment property towards your retirement.
Why is it harder to get a mortgage as an expat based overseas?
There are various reasons why mortgage lenders will be, on the whole, more reluctant to lend to expats. These reasons are centered around the difficulty in following procedures that guarantee the borrower’s financial stability when they have been living abroad for a potentially very long time. Most lenders will offer a full affordability assessment whereby they will access all areas of your income and expenditure and assets and liabilities. If a mortgage provider sees a certain kind of customer as higher risk then they could refuse them a loan altogether, or offer higher interest to offset said risk. But while, as an expat, you might find it harder to get a mortgage and might pay a little more when you do, this doesn’t mean you have to break the bank. We have access to over 45 different lenders so can access mortgage lenders that have good interest rates and with reasonable arrangement fees.
Overseas Income and Credit Rating While Based Overseas As An Expat
If your primary income is earned overseas, then this is fine with the lenders we work with. They are specialists and are used to expats based overseas earning income in various currencies. We have had some applicants being paid in 2 currencies and receiving their yearly bonus in a third different currency and we still helped the client obtain financing.
Things like the sustainability of your income, as well as its actual size are harder to ascertain given things like fluctuating exchange rates. The mortgage provider will also have more difficulty in actually identifying your employer if they are based abroad. The difficulty in getting hold of all of the relevant information, coupled with the risk of fraud that comes with it, lead many mortgage lenders to flat out refuse expats, or to at least charge higher rates to those they do lend to.
It’s a similar story when it comes to credit ratings. Your credit history is not always important to a mortgage lender as by assessing your case on full affordability it allows them to see how viable a candidate you are for borrowing money. If you’ve lived abroad for a relatively long time, your credit history might not be traceable at all but this still doesnt affect your chances of obtaining an expat mortgage whilst based away from the UK or your home country if elsewhere.
Can expats get buy to let mortgages?
The demand for expats to take out buy to let mortgages and capitalize on the rental market in the UK has grown steadily in recent years.
Providers of buy to let mortgages often require deposits of 25% to 30%, reflecting the increased uncertainty of income from rent. There are some lenders available that require 50% deposits but they take into account previous bad credit and adverse situations whilst still granting a mortgage to applicants. Given all of the above, expats who want to take out a buy to let mortgage can expect pay a slightly higher interest rate than if they were based in the UK. This shouldn’t put you off though if you’re set on getting hold of a UK property to rent out, just make sure you shop around online to get the best deals. Whether you’re after a buy to let mortgage or just a residential mortgage, as an expat you should get in touch and speak to one of our mortgage consultants and make sure that you’re getting the best expat mortgage deals available.
What is a Secured Loan?
If you need to borrow a large amount of money and want to avoid paying sky-high interest, then you should consider securing your loan against your property. By taking out a secured loan, you are putting up your property as collateral, and the lender will take possession of it should you default on your payments.
Getting the best Secured Loans
How much do Secured Loans cost?
How much do secured loans cost? The interest rate on your secured loan will depend on (a) the loan amount, (b) duration of repayment, (c) your credit score rating, (d) and the equity (value) you own in your home. The more equity you own in the property secured against the loan and the more it exceeds the amount you’re borrowing, the cheaper your repayment plan will be.
Secured Loans and Second Mortgages
Secured loans are similar to mortgages, in fact a mortgage is basically just a specific type of secured loan. Taking out a loan secured against your home is very similar to taking out a second mortgage, though the latter will typically come with better interest rates.When would you need a Secured Loan
- Home Improvements from light refurbishments to extensions
- Raise deposit to purchase a second property
- Debt Consolidation
- Capital injection into business
- Repay loans on a help to buy scheme or other government funded schemes
- Bad credit where you might not get a personal loan but could borrow against your property
- Where income source is non-confirming or from multiple sources
- Funds can be raised for any reasonable reason
Advantages of a Secured Loan
- Larger loans – it allows you to borrow more than personal loans which are usually up to £25,000
- Long term – similar to a mortgage, it will allow you to borrow funds for a longer term (depending on your expected retirement age/retired income) which in turn helps to keep a more manageable monthly payment, making it more affordable by spreading the cost
- Borrow more than standard mortgages – Lenders of secured loans will typically allow you to borrow more using higher income multiples or higher loan to values or both
- Lower rates compared to certain other types of finance such as credit cards and certain personal loans
- Allows you to keep your existing low rate mortgage product
- Cheaper alternative to remortgaging as you might be tied into your mortgage product and have high exit charges
Disadvantages of Secured Loans
- Interest rates can be higher than a mortgage
- Upfront costs such as lenders arrangement fees and valuation charges
- As monthly payments are spread over a longer period compared to a short-term unsecured loan, you may end up paying more in the long run
- Using the equity in your asset
What is a Bridging Loan?
Bridging loans are short-term property secured loans which are mainly used for a variety of property transactions. They are designed to cover a temporary shortage of credit, hence the term ‘bridging’. In general, bridging loans are normally only taken out for up to twelve months. For example, in a situation where a property buyer needs to pay a down payment on a new mortgage before they have sold their existing home, a bridging mortgage could be suitable.
Bridging loans are now used for a variety of property transactions including refurbishing a property for letting or sale as a buy to let property. Many bridging loans of this type are for non regulated transactions i.e. commercial activity
Despite the fact that most bridging loans of this type are subject to the same regulation as mainstream mortgages, interest rates on bridging finance products tend to be higher than on traditional mortgages, reflecting the risk to the lender and will be subject to arrangement fees.
All bridging loans must have an exit plan.
What is Bridging Finance?
What are Bridging loans used for?
Types of Bridging loan finance
Types of Bridging Finance There are two main types of bridging loans, open and closed bridge. A closed bridge is available to borrowers who have exchanged contracts for the sale of their current property. An open bridge is for borrowers who have found their ideal home but have not yet put their current property on the market. Due to their nature, closed bridge loans are more flexible and affordable than open bridge loans.
Importance of an exit strategy
As bridging mortgages are an expensive way of covering a temporary shortage of credit, bridging loans should only be taken out by borrowers who have a clear exit strategy. If you are taking out a bridging loan to fund the purchase of a new property, it is advised that you already have a buyer in place for your existing property. A lack of this sort of exit strategy could result in serious financial issues if you cannot pay back a bridging loan.
Getting accepted for a Bridging loan
Since the financial crisis, obtaining credit from mainstream lenders in the form of conventional loans has become increasingly difficult. This, coupled with squeezed household budgets, has led to more and more people turning to short-term options like bridging finance. Although increasing numbers of borrowers are using bridging loans as an alternative to traditional loans, this is not advisable, for a number of reasons. Firstly, bridging loans are far more expensive than traditional loans and come with fees which have the potential to mount up to £1000s over time. Secondly, they should only be taken out if there is a guaranteed line of credit which will be available in the near future. If not, the loan could prove extremely difficult to pay back. Finally, as bridging loans are often secured against the borrower’s property, the consequences of not keeping up with payments could be grave. In short, bridging finance should only be used as a last resort, short-term option, for borrowers with a planned exit strategy. With all bridging lending you should ensure the product is right for your circumstances.
Commercial Finance is split into two distinct separate groups:
Semi commercial – This would be shops with residential flats above.
Full commercial – This relates to all remaining commercial premises such as offices, warehouses, pubs, factories, land, certain Buy to Lets, guest houses, farms, care homes, schools, football & other sporting clubs, hotels etc.
Individual lenders tend to specialize in specific sectors and do not deal in all commercial areas, for instance a particular lender may prefer hotels and guest houses but will not lend on factories whereas other lenders may just lend on farms. Historically this long term mortgage funding would have been sourced from traditional high street lenders however their appetite has become very limited since the financial meltdown in 2007/2008, although activity is now gradually starting to improve. When the market crashed, commercial property prices took a bigger hit than residential and as a result many high street lenders lost money on commercial property and withdrew from this sector. There are now generally fewer lenders operating in the marketplace, which left many current and new commercial property owners and purchasers unable to obtain viable support and finance options.
So Called “Challenger Banks”, who usually prefer to deal through specialist intermediaries such as UK Expat Pension Reviews and Premier Expat Mortgages have stepped in to help fill the void. Challenger banks are covered by the same regulatory rules as the well know high street institutions and provide clients with the same level of cover with respect to compensation however they are more likely to take a common sense view on cases and are individually underwritten as opposed to the one size fits all tick box underwriting performed by the larger and better known banks.
As with any finance options, Commercial Finance is agreed depending upon the lenders belief that the commercial property loan will be repaid without difficulties and is split in the following ways:
Owner occupation – The borrower will utilize the security property themselves so the accounts for the business will be scrutinized by the lender to ensure the client will not struggle to make the monthly repayments.
Investment – The monthly payments on the mortgage will generally be covered by the rental payments received from the tenant. The lender will carefully review the comments made by the valuing surveyor so that they are comfortable that the expected rent plus buffer will easily cover the monthly mortgage payments, that the property is in a sought after location for prospective tenants and that the condition of the property will allow immediate occupancy, should the property not already be let.
Commercial Property Loans can additionally be used for business expansion or improvements to a property or even to help with relocating the business.
It is important to note that unlike Bridging Finance, Commercial Property Finance can often be raised by using a combination of the financial success of the business combined with the bricks and mortar value of the property.
As a whole of market broker, we have access to virtually any expat commercial mortgage deal available in the market and based on the needs and requirements of our client’s we will source and recommend only the most appropriate product.
We have strong historic working relationships with all of our lenders, so we fully understand their lending criteria and policies, and can confidently quote terms we know can be delivered and completed. Through these relationships, we can also obtain “special” terms not generally available to other brokers or members of the public.