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Can an expat get a UK mortgage?

Each year, many Brits are leaving their small, humble island behind and moving abroad as the call of global adventure grows ever stronger. Taking a step into the unknown can be scary and some of us take comfort in knowing we still have a foothold back home.

Funding your travels by renting out your UK property

Owning and renting out a property in the UK is arguably a sound way to fund your world adventure for months or even years on end. It’s also nice to know that when you start to miss those familiar British comforts, like a cup of tea, a sarcastic comment or a hearty pub lunch, you can return and continue to be supported by your property’s rental income, or even potentially convert your mortgage and move into the property yourself.

Despite the ups and downs of the UK economy, house prices in many areas continued to rise in recent years. So, if you are thinking of making an investment, buying and renting out a property in the UK could still be a sound option if you’re exploring ways to continue earning whilst you’re having the time of your life overseas.

What is an expat mortgage?

As an expat, you’ll probably be well versed in the effects of a floating exchange rate - sometimes it will help you, other times it will hinder you, but it almost always makes things more complicated for you!

The fluctuation in foreign currencies have transformed the way expats can apply for UK mortgages. But by taking a more personal approach, specialist lenders are able to see beyond these complexities and can offer expats essentially two types of mortgages. But how do you choose which mortgage is right for you?

This decision is considerably less complex than you may think; it all depends on the intended purpose of the property. Whilst living abroad, if you want to rent out your property and build up your savings through rent collection, then you’ll need to apply for a buy-to-let expat mortgage. Whereas, if you want to own a UK property that you intend to move back to, or for family to live in whilst you’re off exploring the world, you’ll need a residential expat mortgage.

However, nothing worth having comes easy. Regardless of which mortgage you require, you’ll likely have to pay a higher deposit for your British bolthole and will have to hop through a number of financial hoops. Here are three hurdles you’re likely to come across and our top tips for jumping over them:

1. Credit rating

The longer you’ve been globetrotting, the harder it is to prove your credit history in enough detail, especially when you’ve been living away from the UK for longer than three years! Although it is not always required, your credit rating helps lenders determine whether you’ll be able to make the repayments on your mortgage.

Top tip: make sure you update your address on your bank accounts to ensure you can evidence your address history when applying for finance.

2. Deposit Currency

We’ve already acknowledged that where foreign currency income is involved, this can throw a spanner in the works – especially if your deposit has built up in a foreign currency. Exchange rates make it harder for UK lenders to ascertain the true value of your deposit, so mortgage providers will ask you to show where exactly your foreign currency deposit has come from.

Top tip: store your bank statements, this will show how the savings you’ve used for your deposit have built up over time.

3. Repayment Currency

Fluctuating exchange rates will also cause your salary to appear less stable and therefore flag a riskier investment to lenders, which may affect the likelihood of your mortgage approval.

Top Tip #1: When checking out specialist expat mortgage providers, see if they have an ‘approved currency list’. Match the currency used by your current country of residence before applying.

Top Tip #2: If you’re applying for a buy-to-let expat mortgage, the rent you’ll be charging should cover the repayments and this may be enough to secure the loan.

Seek independent financial advice

As with all large financial investments, you should speak to an expert. Applying for a standard mortgage is strict and complex enough, let alone applying for a UK mortgage as an expat. Don’t forget to do your own research by having a look around at what options are open to you. Specialist lenders will assess your case individually rather than using an impersonal computerised system, so are a good place to start your search.

Written by: Ipswich Building Society, a specialist lender creating wider choices for UK nationals currently living abroad.

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