Expat mortgages now only available from niche lenders

If you’re planning to emigrate and, once settled, getting a UK buy-to-let property for its income potential or are working overseas and fancy a UK property investment, you might be out of luck unless you can buy cash.

British expats living overseas as well as those planning a move to include a buy-to-let in the home country are finding getting an expat mortgage is more of a challenge than in previous years. Due to a government squeeze on expat mortgage lenders, expats are now being forced into a corner containing only a small group of niche lenders. According to the lenders themselves, the expat appetite for mortgages is increasing fast, but the government restrictions are preventing many from achieving their plans.

Due to the rise in overseas relocations at higher salaries, expat professionals are cash-rich especially if they’re working in Gulf State locations. They’re also likely to be paid in US dollars, allowing them access to attractive forex rates against sterling, and also have their housing costs paid by their employers. Money in the bank is the result, and properties in the UK are amongst the best alternatives for making the most of good fortune as well as making more disposable cash. As regards buy-to-let purchases back in the UK, it’s an ideal investment with queues of tenants waiting to sign up and long-term capital growth almost guaranteed. Unfortunately, the majority of buy-to-let mortgage applications are now falling at the first hurdle – finding a lender who wants the business.

Nowadays, expat customers aren’t the flavour of the month, with only a few lenders willing to cooperate. Al Rayan Bank, Market Harborough Building Society and Kent Reliance are three of the few, and all insist on strict underwriting procedures as regards affordability and the identity of the mortgagee. Expats must now put down at least 25 per cent of the full purchase price as a deposit and will be stuck with higher mortgage rates than the average UK buyer as well as being charged higher arrangement fees. Worse still, not all expat-heavy countries are acceptable to lenders, with each having their own lists excluding a good number of Asian and African countries suspected of being hotspots for money laundering.

Also, lenders aren’t happy about expats who’re not being paid in US dollars as the dollar is regarded as being stable enough to stave off unwanted currency fluctuations. UK taxes on British second homes or buy-to-lets are also likely to upset plans for property investment, as is the possibility that owning a UK property may put your non-residence status at risk with HM Revenue and Customs. It’s best to consult a tax advisor on this before applying for an expat mortgage, as this change in your status could cost you a great deal of cash, especially if family members are occupying your new UK property.