Expats wanting to dip into the Great British Buy to Let Bonanza are finding they are increasingly shunned by mortgage lenders.
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Few banks and building societies seem to want to risk lending to expats, despite the fact that they generally have large cash deposits.
Many lenders have a closed for expats sign on the door, while others carefully cherry pick just a few customers.
The problem is financial regulators in the UK have tightened mortgage lending rules, especially for first time buy to let buyers.
They have to assess stringent affordability restrictions and satisfy ‘know your customer’ rules.
These can be difficult to assess across borders as checking affordability involves checking financial histories. Unfortunately, no international standards are in place, so figuring out if an expat is a credit risk takes time and money many lenders do not want to spend.
Who lends to expats?
Most borrowers fail credit checks because they are not on the electoral roll; do not have a UK bank account or credit card or a telephone landline.
For expats, the likelihood of failing credit searches on all three is high, if not guaranteed.
Knowing a customer would generally involve a face-to-face meeting or telephone call with underwriters, but this is also a problem for lenders and borrowers in different time zones.
Some lenders throw off the yoke of automated risk assessment and approach expat mortgages on a case-by-case basis.
For expats who want a buy to let mortgage, here are some of the lenders to approach –
- Halifax
- NatWest
- HSBC – but beware the bank tends to lend to premier account customers
- Ipswich Building Society – an exclusive to brokers International Mortgage Plans
- Skipton International
The HSBC buy to let lending model helps underwriters make credit risk decisions because a borrower’s salary must be paid into one of the bank’s current accounts for at least three months prior to application.
Lending rules
Most lenders have some rules about the type of property they will lend against.
For expats who want to invest, forget maximising income from taking in tenants on benefits or letting shared houses to students or young professionals.
The best rates come with expats putting in deposits of 35% or 40% of a property’s value, although smaller deposits of as low as 20% are accepted.
Expat buy to let interest rates vary between lenders, but expect to pay between 4% and 5%.
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