Overseas & Expat Mortgages

• Expat Mortgage:
  • An expat mortgage is designed for UK nationals living abroad who want to buy or remortgage a property in the UK. This could be for a primary residence (e.g., for future return to the UK), a buy-to-let (BTL) investment, or a holiday home.
  • These mortgages account for the complexities of foreign income, often paid in a different currency, and the lack of a recent UK credit history.
  • Example: A UK citizen living in Dubai who wants to buy a UK property for rental income would apply for an expat mortgage.
• Overseas Mortgage:
  • An overseas mortgage typically refers to a mortgage taken out by a UK national (living in the UK or abroad) to purchase a property outside the UK, funded by a UK lender. Alternatively, it can refer to non-UK nationals living abroad seeking a UK mortgage.
  • These are less common from UK lenders, as most prefer to lend against UK properties. Borrowers may need to approach international or local lenders in the country where the property is located.
  • Example: A UK resident buying a holiday home in Spain through a UK lender or a Spanish bank would need an overseas mortgage.

Both types of mortgages are tailored to address challenges like verifying foreign income, navigating currency exchange risks, and meeting stricter lending criteria due to the perceived higher risk of lending to non-residents or for foreign properties.

• Eligibility:
  • Expat Mortgages: Typically available to UK nationals living abroad or foreign nationals with strong UK ties (e.g., previous residency, UK bank       account). Lenders may require proof of intent to return to the UK for residential mortgages.
  • Overseas Mortgages: Available to UK nationals or non-residents, but eligibility depends on the lender’s policies and the country where the property is located. Some UK lenders, like HSBC, offer overseas mortgages in specific countries (e.g., USA, Singapore, UAE).
• Deposit Requirements:
  • Expat mortgages typically require a deposit of 20–40% of the property’s value due to higher risk. Some lenders may accept as low as 5% for residential properties, but 25% is common for BTL.
  • Overseas mortgages often require higher deposits (e.g., 25–50%) depending on the country and lender, as foreign property markets may carry additional risks.
• Loan-to-Value (LTV) Ratio:
  • For expat mortgages, LTV ratios typically range from 60–80% for BTL and up to 95% for residential properties, though non-residents often face lower LTVs (e.g., 70%).
  • Overseas mortgages may have stricter LTV caps (e.g., 50–70%) due to foreign market volatility.
• Interest Rates:
  • Both types of mortgages often have higher interest rates than standard UK mortgages due to increased risk. Rates can be fixed, variable, or       tracker, with fixed rates offering payment stability.
  • Example: An expat BTL mortgage might have a 5.5% fixed rate, compared to 3.5% for a standard UK BTL mortgage.
• Currency Considerations:
  • Lenders convert foreign income to GBP using conservative exchange rates (e.g., the lowest rate over the past 3–10 years) to account for fluctuations.
  • For overseas mortgages, payments must often be made in GBP, requiring borrowers to convert foreign earnings, which may incur exchange rate       fees.
• Repayment Structure:
  • Expat Mortgages: Available as repayment (capital and interest) or interest-only (common for BTL, where the principal is repaid at the end of the term       using UK-based assets).
  • Overseas Mortgages: Vary by lender, but interest-only options are less common for foreign properties.
• Fees:
  • Include arrangement fees, valuation fees, legal fees, and sometimes currency exchange fees. Early repayment charges may apply if the loan is paid off early.
• Documentation:
  • Proof of identity (passport, driving license), proof of address (utility bills or employer letter), proof of income (payslips, employment contract, tax       returns), and proof of deposit source (to comply with anti-money laundering laws).
  • Self-employed borrowers may need accounts verified by an internationally recognized accountant.

• Application Process:
  • Expat Mortgage: The borrower, a UK national living abroad, applies through a specialist lender or broker. The lender assesses foreign income, UK       credit history (if any), and the property’s value. A UK correspondence address (e.g., a family member’s home) can improve approval chances.
  • Overseas Mortgage: The borrower applies through a UK lender with international operations or a lender in the country of the property. The lender       evaluates the borrower’s financial profile and the foreign property’s market.
• Valuation and Underwriting:
  • The lender conducts a property valuation to determine its market value and calculate the LTV ratio. For overseas properties, this may involve local       appraisers.
  • Underwriters assess the borrower’s income stability, often requiring income to be paid into a UK bank account for expat mortgages.
• Approval and Funding:
  • If approved, the borrower signs a mortgage agreement outlining the loan amount, interest rate, term, and repayment schedule. Funds are disbursed       for the property purchase.
• Repayments:
  • The borrower makes regular payments in GBP, which may require converting foreign income. For expat BTL mortgages, rental income in GBP can help cover payments.
• Risk of Repossession:
  • Defaulting on either mortgage type risks repossession of the property. For expat mortgages, the UK lender can seize the UK property. For overseas       mortgages, repossession depends on the local legal system.

• Residential Expat Mortgage:
  • For UK nationals planning to return to the UK or buying a home for family members to live in. Suitable for primary residences.
  • Example: A UK expat in Australia buys a £300,000 home in London for their family, with a 25% deposit (£75,000) and a £225,000 mortgage at 5% interest over 25 years. Monthly payments are approximately £1,330.
• Buy-to-Let (BTL) Expat Mortgage:
  • For investment properties to be rented out, often interest-only to maximize rental income. More widely available than residential expat mortgages.
  • Example: An expat in Singapore buys a £200,000 BTL property in Manchester with a 30% deposit (£60,000) and a £140,000 interest-only mortgage at 5.5%. Monthly payments are £641.67 (interest only), with the principal due at the end of the term.
• Consumer Expat BTL Mortgage:
  • For properties previously occupied by the borrower before moving abroad, now rented out. Subject to consumer regulations.
  • Example: An expat in Canada remortgages a £250,000 UK property (previously their home) with a £50,000 outstanding first mortgage. They take a £150,000 consumer BTL mortgage at 6% interest-only, paying £750/month.
• Holiday Let Expat Mortgage:
  • For properties rented short-term (e.g., via Airbnb) but available for the borrower’s use (30–90 days/year). Requires high-demand holiday location  
  • Example: An expat in the USA buys a £400,000 cottage in Cornwall for holiday lets with a 40% deposit (£160,000) and a £240,000 mortgage at 6.5%. Monthly payments for a 20-year repayment mortgage are approximately £1,790.

• Access to UK Property Market:
  • Expat mortgages allow UK nationals abroad to invest in or own UK property, benefiting from potential capital growth or rental income.
  • Example: A £200,000 BTL property yielding 5% annual rent (£10,000/year) provides steady income.
• Flexibility for Overseas Properties:
  • Overseas mortgages enable UK nationals to buy holiday homes or investment properties abroad, often in familiar banking systems.
• Maintaining UK Ties:
  • Expat mortgages help expats secure a UK foothold for future returns or family use.
• Specialist Lenders:
  • Brokers and lenders like Skipton International, HSBC Expat, and John Charcol offer tailored products for complex income structures.
• Potential Tax Benefits:
  • BTL mortgage interest may be tax-deductible for UK tax purposes, depending on the borrower’s status.

• Higher Interest Rates:
  • Rates are higher due to perceived risk (e.g., 5–7% vs. 3–4% for standard UK mortgages).
• Larger Deposits:
  • Deposits of 20–40% (e.g., £40,000–£80,000 for a £200,000 property) are required, limiting borrowing capacity.
• Currency Risks:
  • Foreign income converted to GBP may fluctuate, affecting affordability. Lenders use conservative exchange rates, reducing borrowing power.
  • Example: An expat earning $100,000 USD annually might see their income valued at £60,000 (using a low exchange rate) instead of £75,000.
• Limited Lender Options:
  • Many high-street lenders avoid expat mortgages, requiring specialist lenders.
• Complex Application Process:
  • Verifying foreign income, providing translated documents, and meeting anti-money laundering requirements add complexity.
• Repossession Risk:
  • Defaulting risks property loss, with overseas properties subject to local legal systems, which may be less predictable.

• Expat Residential Mortgage:
  • Scenario: A UK expat in Hong Kong wants to buy a £350,000 home in Bristol for their return in 5 years.
  • Deposit: 25% (£87,500).
  • Loan Amount: £262,500 at 5% fixed over 25 years.
  • Monthly Payment: ~£1,550 (repayment mortgage).
  • Requirements: Proof of £60,000 annual income (converted from HKD using a 3-year low exchange rate), UK bank account, and a UK correspondence address.
  • Outcome: The expat secures the property, which appreciates to £400,000 by the time they return.
• Expat BTL Mortgage:
  • Scenario: A UK expat in the UAE buys a £250,000 flat in Leeds for rental income.
  • Deposit: 30% (£75,000).
  • Loan Amount: £175,000 at 5.5% interest-only over 20 years.
  • Monthly Payment: ~£802.08 (interest only, principal due at term end).
  • Rental Income: £1,000/month (4.8% yield), covering payments with surplus.
  • Requirements: Proof of AED 300,000 (~£61,000) annual income, UK credit history, and deposit source verification.
• Overseas Mortgage:
  • Scenario: A UK national in London buys a £200,000 holiday home in Spain via a UK lender.
  • Deposit: 40% (£80,000).
  • Loan Amount: £120,000 at 6% fixed over 15 years.
  • Monthly Payment: ~£1,013 (repayment mortgage).
  • Requirements: UK income of £50,000/year, Spanish property valuation, and compliance with Spanish mortgage regulations.
  • Outcome: The borrower owns the holiday home, using it for vacations and occasional short-term lets.

• UK Regulations: Expat mortgages are regulated by the Financial Conduct Authority (FCA) under the Mortgage Credit Directive (2016), requiring      affordability checks and transparent terms.
• Overseas Regulations: For overseas mortgages, borrowers must comply with the property’s local laws (e.g., Spanish mortgage regulations for a Spanish      property).
• Anti-Money Laundering (AML): Lenders require proof of deposit sources to comply with international AML laws.
• Consumer Protections: UK expat mortgages may include cooling-off periods and early repayment options, but overseas mortgages depend on local laws.

• UK Expats: Nationals living abroad wanting to buy UK properties for investment, family, or future return.
• Non-UK Residents: Foreign nationals with UK ties seeking UK properties, often for BTL.
• UK Residents: Buying overseas properties (e.g., holiday homes) through UK or international lenders.
• Investors: Seeking rental income or capital growth in the UK or abroad.

• Affordability: Ensure you can manage payments in GBP, accounting for exchange rate fluctuations.
• Deposit Size: Larger deposits (e.g., £50,000–£100,000) improve approval chances and reduce interest rates.
• Credit History: Maintain UK financial ties (e.g., credit card, bank account) to build a credit profile.
• Broker Assistance: Specialist brokers (e.g., John Charcol, Liquid Expat) access niche lenders and simplify applications.
• Currency Management: Use services like Wise to minimize exchange rate fees when transferring deposits or payments.
• Local Laws: For overseas mortgages, research the property’s local market and legal requirements.

If you have a need for an Overseas or Expat mortgage, please contact us on 0800 061 46 49 or email ask@phillipscapital.info to discuss your options.