Since the EU referendum back in 2016 there has been significant pressure on the sterling exchange rate. During this period we have seen an increase in overseas investment in the UK property where the exchange rate premium has sometimes risen to in excess of 20%. Not surprisingly, many expats who left UK shores many years ago are now looking back towards their former homeland and property investments. However, securing expat mortgages may not be as easy as you might think!
Lack of financial footprint
When applying for mortgage finance, mortgage companies will look for financial and physical footprints for each applicant. If the applicant has been out of the country for some time then they may not have any recent credit history in the UK and no physical footprint. This makes it very difficult for mortgage companies to even consider providing finance, especially with ever tightening regulations surrounding mortgage funding.
There are ways and means around a lack of financial/physical footprint many of which involve private banks. That is not to say that private banks are any more prone to risk than their traditional banking counterparts but they tend to look at the overall picture. So, a lack of financial/physical footprint may not be the end of the world.
Proving income
Many expats will have a similar problem when proving income for mortgage affordability calculations. It is likely that many will earn the vast majority of their income in their overseas homeland. As a consequence, it can be difficult to prove income unless for example it is via a company which abides by official/UK accounting standards. There is also the option of having your income “rubberstamped” by a third party such as an accountant, solicitor or even local bank.
When it comes to foreign currency income you will probably have to concede some kind of discount for the “currency risk”. This is a little ironic bearing in mind the performance of sterling over the last few years. So again, while it may be challenging to prove overseas income it is not impossible.
Using overseas assets as collateral
There may be occasions where the added risk of an expat mortgage may require additional collateral. It is quite likely that the vast majority of expats will have assets overseas which may be under different legal jurisdictions to the UK. There are ways and means of utilising overseas assets as collateral against mortgage lending but for some the process can be quite complex.
For example, if you had a buy-to-let property in Italy the laws very different to those in the UK. It could take years to remove a rogue tenant which would effectively remove this type of asset from the collateral equation. It will depend upon the type of asset and where they are held, together with the local legal restrictions, but again there are ways and means around this. You are more likely to secure mortgage funding using overseas assets as collateral via private banks as opposed to traditional banks.
Summary
The expat mortgage sector has always been fairly active while not as competitive as the traditional UK mortgage market. Things are starting to change with more people now looking overseas for their new lives yet perhaps looking back towards the UK for their property investments. It is also worth noting that many traditional banks also operate subsidies around the globe which can offer a very important link back to the UK. The expat mortgages available via traditional high street banks tend to be more vanilla, as opposed to flexible, while private banks tend to look at the overall picture and make an informed decision.