If you have been living abroad for three years or longer, then it is likely that you will experience difficulties when trying to find a mortgage provider who is prepared to lend to you. This is because expats are often perceived as representing a high borrowing risk.
Under the provisions of the Mortgage Market Review- a regulatory overhaul introduced in 2014 to eliminate risky or irresponsible lending practices within the mortgage sector-affordability requirements are assessed at increasingly stringent levels. This means that lenders will consider all applications on the basis of a complete financial picture, taking outgoings as well as income into account. Debts or regular expenses (relating to childcare, subscriptions, mobile phone contracts, energy bills, loans, health care and a whole raft of other spending factors) are deducted from total incomes, thereby driving down overall
earning potential as well as possible loan amounts. Moreover, all financial details will need to be verified by the lender (meaning that self-assessment is no longer accepted).
Expats who are unable to provide a full UK credit history, or who are absent from the electoral register and other databases used in financial profiling, will often find that lenders are unable to judge their circumstances or loan reliability, with basic credit checks usually yielding poor results (irrespective of actual wealth). This means that you might find it difficult
to secure competitive or flexible mortgage terms from your lender, while interest rates may be higher than usual (so as to offset a perceived risk of default). It is therefore extremely important for you to demonstrate that your current account is at least three months in credit and that income is not being surpassed by spending (so, overdrafts are a no-no!).
Moreover, paperwork detailing earnings, spending patterns as well as up to date statements for all other accounts should also be provided. If there is any incidence or history of missed payments (for example) as a result of relocation and/or a necessary realignment of finances overseas, it may be possible to have a ‘notice of correction’- essentially, a statement detailing any applicable or extenuating factors- added to a credit report. These reports can be obtained from any one of the three main credit score providers- Experian, Equifax or CallCredit. In addition, some experts suggest that you should try to maintain or reinstate an address in the UK (preferably a family members or friend) so as to receive correspondence from a bank or building society. This will mean that your mortgage lender will be able to credit score your application from that address, thereby improving your options. The longer you have a registered UK address, the better your credit rating will be.
Ironically enough, there are more expat buy-to-let mortgages available on the market than residential ones! However, you will need to provide a minimum 25% deposit on the property and to prove that the rental income will exceed mortgage payments by a ratio of 145% (on possible rates of 5.5%). Again, a good broker should be able to help you shop around and get the best deal.
“Our experience of Charles Louis, from start to finish, was fantastic. Zoe seemed to know everything you could possibly need to know about the house (including all the neighbours!) when we first viewed it with her and was very accommodating when we asked for a second viewing the very next day! Our experience up until that point was that we often felt rushed when viewing a property or told to ‘call the office’ if we had a question.
Once we had our offer accepted, I found James to be very responsive and I was never left waiting if I emailed or text across a quick query throughout the process. Having a named person who I could just ring whenever was a massive win and removed much of the stress – I never once had to explain who I was or why I was ringing – it felt like a very personalised service. Having just moved to Ramsbottom we have already recommended them to a few people!”Robert Cregeen
Whole Market Access