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How To Get A UK Expat Buy To Let Mortgage
An expat buy-to-let (BTL) mortgage is an ideal financial product for nationals currently living and working in another country. At Clifton Private Finance, we specialise in matching expat clients with understanding lenders, achieving BTL mortgages with low rates and essential flexibility.
Living outside the UK doesn’t mean cutting ties with your home. For many UK nationals living abroad, the idea of investing in the UK property market is an appealing one - working with a property market you understand well, maintaining a foot in the UK, and giving yourself and your family the option to return in the future. All while securing an additional monthly income and long-term return.
Recent Expat Mortgage Case Studies
What is an Expat Buy-to-Let Mortgage?
A specialist variant on a standard UK buy-to-let (BTL) mortgage, an expat BTL is a secured loan for UK non-resident nationals designed to purchase a UK property as an investment. Buy-to-let property mortgages are:
- Specifically designated that the home is to be let out to third-party tenants
- Typically interest-only (though capital repayment BTL mortgages do exist)
- Restricted from owner-occupancy
While standard BTL mortgages are for use by UK residents only, an expat BTL can be obtained by those resident in other countries. While you do not need to have full UK citizenship to get an expat BTL mortgage, you will need to be able to demonstrate ties to the UK. Most lenders will require that you:
- Have a UK passport or have a history of previous UK residency
- Hold a current UK bank account
- Can provide proof of income and identity
As expat BTL mortgages are a limited, niche product, there are differences in terms between those and standard UK-based BTL. These include slightly higher interest rates and lower loan-to-value (LTV) offers.
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Why Use an Expat BTL Mortgage?
There are several reasons why a buy-to-let mortgage makes sense for those living outside the UK. Some of the most common reasons include:
Remortgaging Your Existing UK Residence
If you have recently left the UK, you may still be in possession of your old home. Many expats move away with their original residential mortgage still in place and look to rent out their home rather than sell, aiming to keep the investment and use the rental income to cover expenses and maintenance, as well as a potential monthly profit.
Many residential mortgages allow temporary letting under the ‘consent-to-let’ clause. This is a formal arrangement made with your residential mortgage provider that gives you a short-term agreement that allows renting out to tenants.
A full expat BTL mortgage is the correct long-term solution, fulfilling all legal requirements for long-term landlordship. Switching to an interest-only BTL structure will immediately improve cash flow, as you change from a capital repayment to a more appropriate investment outlook.
Investing in the Vibrant UK Property Market
Despite occasional hiccups, the UK housing market has remained a strong investment strategy for many decades. Individuals earning higher incomes overseas can improve their long-term financial planning through a stable investment in UK property that, when well managed, is almost guaranteed to provide a strong return after a 15 to 20 year mortgage term.
Planning a Return to the UK
For many expats, the time away from the UK is a mid-term position, with the intention to return home when employment or other circumstances change. Keeping ties to the UK, especially when family is considered, can be extremely important.
Note however, that the standard terms of an expat BTL would expressly forbid immediate family from becoming your tenants as it greatly increases risk - landlords are far more likely to excuse rent arrears or discount rent to family members.
If this is something that is important to you, discuss this with your CPF mortgage advisor from the outset so we can approach flexible lenders who allow family lets under the right terms.
Case study: Our case study below details how we helped two self-employed expats living in Holland secure a £387k mortgage
Personal Reasons
There are no requirements to outline your reasons for an expat BTL if you do not wish to, though it may help frame your application efficiently if you share these with your Clifton Private Finance advisor.
A considerable number of expats have simple emotional reasons for their interest in the UK market, many simply wanting to keep a door open at home.
How Much Can You Borrow?
Because expat BTL mortgages are considered higher risk for lenders, the loan-to-value (LTV) size of the mortgage is somewhat lower than a standard BTL. LTVs are limited to 60% to 70%, meaning you’ll need a deposit of at least 30% to be considered for a mortgage.
If you already own UK property, it is typically possible to use the existing equity to offset the larger deposit requirements, making the direct capital investment more flexible.
At Clifton Private Finance, our mortgage experts can help you evaluate your financial profile to make the best use of existing equity to lower the required LTV on your expat BTL.
Case study: Our case study below details how we helped two UK expats remortgage their buy to let to raise funds for a property in Thailand.
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Affordability and Top-Slicing with Overseas Income
One challenge for expats obtaining BTL mortgages is the affordability checks. With both credit status and foreign income more difficult to prove than domestic income, lenders may insist on comprehensive paperwork and rigorous affordability testing.
Furthermore, affordability stress tests involve measuring rental income against a higher interest rate (to consider possible future market conditions) and adjustments for Interest Cover Ratio (ICR), a multiplier that considers headroom for additional costs and profit.
It may be the case that the rental yield on the property is insufficient to pass the mortgage stress test. When this happens, expats may want to consider top-slicing, a process whereby personal income is taken into account to meet the affordability threshold. This is particularly useful if you:
- Are high-earning and in a stable position
- Are looking to achieve a strong return on investment in a desirable location where rental yield is relatively low (for example, central London and other major cities)
Both expat mortgages and BTL mortgages with top-slicing are uncommon products, making a combination of the two particularly niche. Engaging with an experienced broker, such as us at Clifton Private Finance, is vital for success.
To learn more about top-slicing and the calculations that govern BTL stress tests, read our comprehensive guide What is Top-Slicing in Buy-to-Let Mortgage Borrowing?
Case study: Our case study below explores how we secured market-leading rates on a Surrey BTL for two expats living in Singapore
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Spending Time in the UK
It is fairly common for expats with property in the UK to want to spend some time in the UK each year, and look to their investment property to house them while they do.
Because expat BTL restrictions are strict, without pre-empting, it is extremely unlikely that the terms of your mortgage allow for this eventuality. Furthermore, with the expectation that the property is tenanted throughout the year, leaving it purposefully vacant for a period, or relying on short-term tenancies to allow for time in the UK is complicated.
Holiday-let mortgages are perfectly suited for landlords looking to utilise a very short-term let structure, such as Airbnb and vacation rentals. This provides profitable rental income and flexibility regarding use of the property.
An expat holiday-let mortgage is an extremely specialist product, that must overcome several challenges:
- Assessing income risk when rental is ad-hoc and potential unreliable
- Flexibility for owner UK visits throughout the year
- Meeting both expat regulations and those for domestic holiday-let mortgages
For this reason, expat holiday-let mortgages will:
- Require a larger deposit
- Have slightly higher interest rates
- Involve a more detailed application process
Let your CPF mortgage advisor know at the outset that you need the additional flexibility of a holiday-let mortgage.
We can help you construct a comprehensive overview of your needs to present to lenders, match you with the specialist mortgage providers who understand the complexities, and ensure you get the best terms and interest rates.
Case study: Our case study below details how we helped a British doctor living in Canada purchase a base in London
Additional Considerations
When applying for a BTL mortgage as an expat, there are several additional considerations:
- Tax - The rental income is UK taxable. You may also be liable for taxes in your country of residence. Taxes should be calculated to assess profitability and viability before moving forward. Your CPF advisor can help you understand your UK tax obligations.
- Legal support - Your lender may require you to employ a UK-based solicitor for the legal work.
- Management - Administering a UK property from abroad can be difficult, with maintenance and acquiring tenants both challenging. Partnering with a third-party management company is wise, but will incur additional costs that diminish profitability.
- Currency exchange - Your UK-based lender will require all payments to be made in sterling (GBP). As foreign exchange (FX) rates fluctuate, your mortgage costs and income may vary month-on-month. This is of particular concern if your mortgage includes top-slicing.
Clifton Private Finance is here to help you understand these additional complications. We can introduce you to trusted partners, and help you set up a backup line of credit to ensure that mortgage payments are always covered and FX timing can be optimised.
Expat Buy-to-Let with Clifton Private Finance
Finding a compatible mortgage lender with the expertise you need for your expat BTL mortgage can be challenging. The complexity of expat-based underwriting, negotiating LTV and interest rates, and allowing for essential flexibility according to your personal needs is often overwhelming without expert help.
At Clifton Private Finance we:
- Have experience securing cost-effective BTL mortgages for expat landlords worldwide
- Have access to the entire market of UK lenders, including those with specialist understanding in expat needs, top-slicing, holiday-lets and more
- Assess your needs and finances holistically, working to reach the optimum solution across multiple potential debt finance products
- Provide ongoing support and advice for the future, including remortgaging and any further reassessment
- Will work with you should you wish to expand your landlord position, with portfolio mortgages and more
We work to find the best possible mortgage for your circumstances and will support you for the long term, as your needs evolve. Speak to our international mortgage team today to move forward with your lucrative investment in the UK property market.
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