When moving to the UK as an expat and wanting to buy a property, one of the most common questions the expats face is about a deposit to secure a mortgage. As opposed to UK residents, expats tend to be required to put down larger deposits as lenders perceive lending to non-residents as riskier. For those new to the process, an expat mortgage advisor can assist you in understanding the nitty-gritty of acquiring a UK expat mortgage.
What Is an Expat Mortgage?
An expat mortgage is a type of housing loan that has been tailored towards individuals who are working and living abroad but wish to buy property in the UK. These mortgages are different from standard UK expat mortgages as they take into account your non-UK residency, income overseas, and credit history — making the application process more complex. International lenders are usually risk-averse, which is a reason why they will ask for higher deposits from expat borrowers.
Why Do Expat Mortgages Cost More Deposits?
Expat mortgages often require a deposit of 25% to 40% of the property’s value, in contrast to the 5% to 10% deposit usually required for UK residents. That is a larger deposit requirement, and it scares first-time buyers off. There are a few reasons for this, however:
Higher Risks for Lenders; Advances consider expats to be higher hazard debtors they may not have an underlain acknowledgment history in the UK. Lenders have a harder time assessing your creditworthiness.
Currency Risk: Exchange rate fluctuations can affect individuals earning in foreign currency in making payments. An example would be if your home currency depreciates against the British pound, you make mortgage payments at a more expensive rate.
Lack of Credit History: Being an expat, your financial background is not readily available for UK lenders to assess. The lender's perspective on mortgage approval becomes riskier due to this lack of insight, therefore they become over-cautious.
How Much Deposit Do You Need?
More commonly, expat mortgages have a deposit requirement between 25% and 40% of the property value. How much deposit will be required will depend on different factors such as your financial situation, the country you are living in and policies of the lender, etc. Here’s what affects the deposit — and how much you’ll need.
Your Financial Situation
Lenders will scrutinize your income, credit score, and savings. If you have steady earnings and a good credit history, you can probably get a mortgage with a lower deposit. But, if your credit isn’t perfect or you’re self-employed, you may have to deposit more.
The Type of Mortgage
Your deposit requirement may also be affected by the type of mortgage you apply for. Buy-to-let mortgages for expats, for example, usually demand larger deposits — around 40% — because such properties are considered riskier investments. By contrast, with a residential property, you can often get away with a 25% deposit.
The Lender’s Criteria
The criteria that different lenders will use to file expat mortgage applications will differ. Some lenders can be more flexible than these terms, while others may ask you for larger deposits, particularly if you’ve been working overseas for years or don’t have strong ties to the U.K.
The Country You Live In
Lenders will likely also consider the country you live in. In a strong financial country, this means that lenders are more likely to approve your application with a smaller deposit. On the contrary, if you happen to be in a country with a very volatile currency or economy, you may face stricter deposit terms to cover the risk involved.
Best Ways to Increase Your Odds of Getting a Mortgage
Talk to an Expat Mortgage Advisor or Broker: An expat mortgage broker or advisor can help you identify the best mortgage options available. These pros know the expat market and can suggest lenders who are more likely to offer favourable terms — particularly lower deposit requirements.
Keep a Strong Credit Profile: One of the most important aspects of getting a mortgage is a strong credit score. Even if you’re living abroad, keep your UK credit history up to date and continue to build a solid credit score. Lenders will consider your creditworthiness to see how much risk they’re assuming.
Know Your Currency Risks: If you are earning income in a foreign currency, prepare to talk with your lender about possible currency risks. They might also wonder about the stability of your home country’s currency and whether exchange rate fluctuations might affect your mortgage payments.
Final Thoughts
The UK expat mortgage process can be complex, however, so it isn’t always straightforward. If you talk to the right people and do the right things, your chance of receiving a mortgage can go way up. Most expat mortgages have a deposit requirement of 25% to 40%, although this will vary based on your financial profile, where you will be living, and what type of property you would like to buy.
An expat mortgage broker or expat mortgage advisor can guide you through the various steps and help you find the best mortgage deals available. You can turn your homeownership dream in the UK into a reality by preparing well and adhering to the requirements.