UK Mortgages for Overseas Residents: A Quick Guide to Securing Finance in the UK
If you want to buy a property in the UK, but you live abroad, you might want to get a UK mortgage to pay for it. In this report we will look at how to get a mortgage in the UK if you don’t actually live there.
Can You Get a Mortgage in the UK, When You Live Abroad?
The answer as to whether you can get a mortgage in the UK when you live overseas is YES, in many cases.
UK mortgages work exactly like mortgages in other countries in that they are loans to buy property. They are secured on the property itself and use it as collateral. They are similar to what are sometimes called home loans in other countries. There are some differences however which we will explain here.
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UK Resident and Non-Resident Mortgages
If you are resident in the UK then you may be able to get a UK resident mortgage. The availability of this type of mortgage will depend on your length of residency, the type of residency you have, what visas you have if appropriate, your job and your income.
If you are not resident in the UK then you may be able to get a non-resident mortgage, depending on which country you live in. There are fewer lenders who offer non-resident mortgages, however.
UK Expatriate Mortgages
If you are from the UK and are a UK national but are living or working abroad for a period of time then you may be able to get an expatriate mortgage. Expatriate mortgages are much more like standard UK mortgages. There are some lenders who specialise in expat mortgages.
UK Buy-to-Let Mortgages
If you want a UK mortgage to buy a property you will be living in yourself it will usually be known as a residential mortgage.
If you want to buy a property in the UK to let or rent it out to a tenant then you may still be able to get a UK mortgage. This will need to be a different kind of mortgage, known as a buy to let mortgage.
How Big a UK Mortgage Can You Get?
Mortgages to buy property in the UK are available from just a few tens of thousands of pounds to several millions of pounds. The UK mortgage you can get will depend on various factors including your creditworthiness, affordability and the property you are buying.
UK mortgage lenders will want to make sure your credit status and creditworthiness is in good standing. If you already have some financial history and standing in the UK, such as UK employment and a UK bank account, this will be easier to prove than otherwise.
UK mortgage lenders will want to make sure your monthly repayments are affordable and this will depend on your income. Normally the largest mortgage you can get will be approximately four times your annual income, although this is not an absolute rule.
UK mortgage lenders will also normally lend you only a percentage of what the property you are buying is worth. In the UK this is normally a maximum of around 90%, although with a non-resident mortgage or a buy to let mortgage it is likely to be less, perhaps 50% or 60%.
The proportion of the mortgage you can get related to the value of the house you are buying is known as loan to value, or LTV for short.
How to Find a Mortgage in the UK
There are two main ways to find out about UK mortgages if you live abroad:
UK mortgages from banks and building societies. Mortgages in the UK are offered by most banks and also what are known as building societies. A building society is a mutual organisation owned by its members rather than a company but they offer many of the financial services that banks do.
It is important to know that not all UK banks and building societies offer mortgages to those who do not live in the UK.
Banks and building societies may charge what is known as an application fee or arrangement fee for giving you a mortgage. There is not always a fee, however.
UK banks and building societies offering mortgages should generally be approved by the Bank of England’s Prudential Regulation Authority (PRA) and registered with the Financial Conduct Authority (FCA) on the Financial Services Register.
UK mortgages using a mortgage broker. Mortgage brokers are advisers who specialise in finding mortgages for those who want to buy property. The advantage of using a mortgage broker is that they should know what mortgage products are available to buyers in your circumstances from amongst the banks and building societies they work with. They should also be able to find you the best type of mortgage for you, at the best interest rate.
Mortgage brokers should also be able to help you with your mortgage application, which can be helpful if you are not located in the UK.
Mortgage brokers may charge a fee for their services so it is a good idea to check before using a broker.
UK mortgage brokers should be regulated by the UK Financial Conduct Authority (FCA) or be an agent of a company who is. They should hold a qualification that is recognised by the FCA.
How UK Mortgages Work
UK mortgages are different from mortgages offered in other countries in a number of ways.
You need to be at least 18 years old to get a UK mortgage. The mortgage should normally have reached its end before your retirement age, although longer mortgages are possible.
Standard UK mortgages are normally for periods (or terms it is known) of 20 or 25 years. However, they can be for longer or shorter periods too.
UK mortgages can be either what are known as repayment mortgages or interest only mortgages.
With an interest only mortgage (known as a balloon mortgage in some other countries) you only repay the interest on the money you borrow each month. The full sum you borrow is repayable at the end of the mortgage.
With a repayment mortgage the mortgage is amortised. You repay the capital and the interest gradually throughout the term of the mortgage.
UK mortgage interest rates can be either fixed or variable.
With a fixed interest rate mortgage the interest rate you pay is fixed, but only for the period set at the start of the mortgage. This is normally between one and five years, not for the full term of the mortgage as in some other countries.
With a variable rate mortgage (known as an adjustable rate in some other countries) the interest rate varies during the term of the mortgage. Banks and building societies base this on what the Bank of England base rate or bank rate is, plus a margin on top. If the bank rate changes your mortgage interest rate will likely change too.
It is possible to get a Sharia mortgage or Islamic mortgage in the UK. Not all UK banks or building societies offer these though.
What Currency Can You Get a UK Mortgage In?
Standard UK mortgages are normally given in UK pounds sterling. It is also possible to get foreign currency mortgages in the UK, although not all banks and building societies offer them. UK mortgages may be available in the Euro (EUR), US Dollar (USD), Australian Dollar (AUD), Japanese Yen (JPY), Polish Zloty (ZL), Russian Ruble (RUB) and other currencies.
There can be advantages in taking your mortgage in the same currency as your income. If you take your mortgage in another currency your mortgage repayments will be affected by fluctuations in exchange rates.
How to Get a UK Mortgage
- Work out how much you want or need to borrow. Looking at some UK properties for sale will help you decide.
- Decide how much you can afford to borrow, depending on your own finances.
- Collect together the financial information and identity information you may be asked for when you apply for a UK mortgage. These might include: Details of your employment or other income. Payslips. Bank statements. Details of your residency status in the UK including visas if needed. Passport and ID cards.
- Approach lenders, whether banks or building societies direct or through a mortgage broker, to find the best UK mortgage for you. Many lenders will give you a mortgage in principle decision or pre-approval before you even find a property to buy. This means that, as long as certain conditions are met, they will give you a mortgage once you find a suitable property to buy.
- Find the property you want to buy.
- Once you have found your property, you will need a UK lawyer to handle the purchase procedure for you, which is known as conveyancing. Your lawyer will obtain your UK mortgage money directly from your lender and pay it to the seller on what is known as completion day.
This article is intended as general information about obtaining a UK mortgage if you do not live in the UK and is not intended as legal advice or financial advice. It is recommended to take individual legal and financial advice before taking a mortgage.