One of the most common requests we get at Saffron Building Society is for Expat Buy to Let mortgages. According to the Office of National Statistics, since the EU referendum in 2016 there has been less immigration, but more UK nationals have decided to uproot and move overseas. In June 2016, 95,000 people left the UK and it was estimated that by September 2017 this had risen to 135,000.
The Expat Buy to Let segment is booming as more people leave the UK but still want to take an income from UK property or let their house while overseas. The application process is very similar in some respects to that for a normal buy to let mortgage but there are certain rules and nuances which apply. I want to give you a whistle-stop tour of some of the pitfalls and problems that can occur with this type of product, and I hope it might save you some time when dealing with applications.
Where are they now?
Is your applicant still here or overseas? One of the problems brokers can encounter is that they start the application before their customer has moved overseas and are unable to confirm their new address. Lenders may need evidence that applicants are already living overseas. If they can’t supply evidence then they may be ineligible for the mortgage until they are settled in their new residence abroad. It pays to double check their location up front if the lender so requires.
At Saffron Building Society we don’t have a list of specific country restrictions but applicants must be able to prove they live abroad. We look at applications individually and make a decision on their circumstances. However, many lenders do have country restrictions in place and publish a list of countries for which they will not consider mortgage applications.
Some Expat Buy to Let mortgages will stipulate a minimum income in addition to sufficient rental income. Just like a standard buy to let product, this will vary from one lender to the next. For experienced overseas investors this is not normally a problem, but if applicants are overseas on a medium-term work assignment, and looking to invest in property while away, they may not always have thought through the numbers in detail. This is a common cause of failed applications.
Proof of residency
Those living in Middle East and in Arab countries will often use a PO Box as their address. While this is not an insurmountable problem, proof of residency can be more complicated in this region. An experienced lender will be able to advise you about how to deal with Middle Eastern applications. It’s also worth bearing in mind that proof of residency is a common cause for delay, so inform people of this requirement at the start. Briefing your customers, and getting them started straight away, will avoid unnecessary hold ups.
While there may be great demand for people wanting to rent a thatched cottage in the Cotswolds, it may present a problem for many lenders. A detailed understanding of the kind of property involved will quickly help you narrow the search or even eliminate problem applications.
People don’t want Buy to Let
You may be surprised to hear that some people start an application for an Expat Buy to Let mortgage but fail to disclose that this is for a residential purchase. This quickly becomes apparent when proof of overseas residency is unavailable. As obvious as this may seem, clarifying the use of the property will save you a lot of wasted effort at the start.
Lenders need some certainty that they can contact the applicant in the event of future problems or default. When the customer is living overseas the communication can be more difficult. Lenders may insist on using a UK solicitor, including specific restrictions on the size of the practice, to whom they can serve notice in the event of a default. This has the potential to block the application if your customer is unable or unwilling to comply.
I have read one report suggesting that there has been a 30% rise in demand for Expat Buy to Let mortgages every year. The UK property market is still regarded as a good prospect for growth by many and the additional three per cent stamp duty has not deterred investors.
The Expat Buy to Let sector is complicated and applications can be time consuming. However, by asking the right questions you’ll be able to identify those genuinely in a position to apply and you can tap into a buoyant and growing sector of the market.