Expat Buy to Let Mortgages

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Your home may be repossessed if you do not keep up repayments on your mortgage.

Whether you already live outside the UK or are planning to become an Expat, being resident outside the UK can make it more complicated to get a Buy to Let mortgage. It’s not impossible though, with the right advice and a suitable lender.

What is a Buy to Let Expat mortgage?

If you live overseas but want to own and rent out a property in the UK, you will need an Expat Buy to Let mortgage.

You might be planning to move overseas for some time and let out your home to tenants. Alternatively you might already live abroad and want to buy a UK property as an investment. It can be a good way of planning for your return to Britain in the future.

What’s involved in getting a Buy to Let Mortgage?

Generally, a Buy to Let mortgage operates much like a residential one, but they tend to require a larger deposit and have higher interest rates. This is because they are seen as commercial lending, designed to make the landlord a profit.

Any homeowner should have a Buy to Let mortgage in place when renting out a property. Standard residential mortgages are based on the fact that you will be living in the home.

If you already own a property, you can ask your lender if they will switch your mortgage to a Buy to Let – but often people find they can get a better deal with a new lender.

What deposit will I need for an Expat Buy to Let Mortgage?

Some lenders will only grant Buy to Let mortgages to people with a 40% deposit. You can usually find others willing to accept something closer to 20% – but as always with property, the bigger the deposit, the better the rates.

Many lenders will also want you to own your own home as well as the property you are seeking to buy.

How much rent should I charge?

Establishing the right rent is a crucial part of Buy to Let. Lenders will expect the rent to exceed the mortgage payment with a fair margin – aim for at least 125%, but ideally more.

You need to research your chosen market well. The rent needs to be fair for the type of property and the local area – if it’s too high, you might not be able to attract a tenant.

What are the challenges in getting an Expat Buy to Let mortgage?

There are a few reasons why it can be more challenging to get a Buy to Let mortgage as an expat. First is the fluctuation in the exchange rate between the country you’re working in and the UK.

Lending criteria revolves around affordability. Although your tenants will be paying the rent, the bank or building society want to be certain that you can afford the monthly mortgage payments if you don’t have a tenant in place. Having to allow for exchange rates can make lenders see you as a more risky customer.

Another issue is checking up on your employment status – this is easy in the UK, but poses more of a challenge to the lender when you are overseas.

Additionally, you will need to have a good credit score in the UK. If you have lived abroad for a few years and have no UK address, this can be another hurdle.

Repayment vs Interest-only Buy to Let mortgage?

Buy to Let mortgages are available as repayment or interest-only. Many landlords choose the latter – where your monthly payment only pays the interest on the loan and doesn’t decrease the overall debt.

The advantage of an interest only Buy to Let mortgage is that monthly payments are lower, so you make more profit from the rent. A smart landlord will put some profits away and use it when they remortgage the property to reduce the overall amount owed.

Risks of Expat Buy to Let mortgages

Buying a Buy to Let property can be a good investment, but there are additional costs and risks involved. If you are unable to keep up with repayments on your mortgage the home may be repossessed.

Factor in stamp duty as part of your calculations, and remember that if you sell the property it will be subject to capital gains tax. You will also need to complete annual income tax returns based on rental income profits.

There is also the risk of house prices falling, which could leave you with negative equity.

You should also consider the risks associated with currency and exchange rates, especially if you are purchasing in another currency. Exchange rate movements can work to your advantage, too.

How can a Mortgage Broker help?

Mortgage Brokers are professional experts that specialise in the mortgage market. We have years of experience in finding the right mortgages to suit people in all kinds of unique situations.

We will do all the groundwork and checks – for example that the lender is on the Financial Services Register, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority. Let us take away the hassle of finding an expat mortgage for you.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

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