UK Mortgages and Home Loans
As most British expats will be aware, arranging mortgage finance in the UK market at the moment can be difficult. Most importantly, the great majority of lenders in the market simply won’t currently deal with UK expats or non-residents. There are very few remaining lenders in this market, and those that remain have created strict lending criteria for British expats and offshore investors.
Note that owner-occupier loans will only be available to UK non-residents who are shortly returning to employment in the UK and therefore the only loans available to both expatriates and foreign investors will be Buy-To-Let loans (BTL).
Provided below is a general snapshot of how the market looks at the moment in mid-2017 with respect to BTL loans for British expats - both in terms of financing the purchase of new properties, and re-financing existing properties.
Maximum Loan to Valuation (LTV) Ratios
BTL loans are currently available up to a maximum of 70 - 75% of the property value, depending on the lender. So if you are buying you will need to factor in paying a 25 - 30% deposit, plus the other purchase costs. In relation to stamp duty particularly note the relatively recent introduction of higher stamp duty rates for "second properties".
Minimum Rental Income
Almost all available lenders for new BTL lending require that the proposed rental income from the property exceeds a certain minimum amount, and it is expressed as a percentage of the anticipated interest payable on the proposed loan. This ‘rental-income hurdle’ is calculated in a number of arcane ways but one very prevalent formula requires that the mortgage x 6% x 130% be less than or equal to the annual rental return. Typically this tends to mostly limit the financing of more expensive properties, where the rental yields tends to be lower.
Minimum Loan Sizes and Property Valuations
Lenders will normally require a minimum loan size of £100,000, some higher, and a minimum property valuation of £150,000. Additionally, much will depend upon the precise address of the property, although most larger urban locations are not problematic.
It should be clear from the above that any financing/re-financing should ideally be done before you leave the UK, whether you are leaving temporarily as an expatriate or perhaps emigrating overseas.
Please also note that lending policies can and do change regularly, and as increased competition returns to the market you can expect some of the stricter conditions to relax somewhat. If you are certain about your intention to either acquire a property or re-finance an existing property, and your situation basically meets the above criteria, the best approach is to arrange an initial, no commitment, discussion with our UK mortgage broker.