A lenders main concern when deciding whether to offer an expat a mortgage on a UK property will be the degree of risk that the lender will accept on the possibility of the borrower defaulting and the lender losing money. The following shows some of the more important areas that can make expats appear to be of higher risk.
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- Credit history – lenders rely on the main credit rating agencies to give them a picture of a borrowers credit rating. Where an expat has been living overseas for some considerable time, their credit history may not be complete or may not even exist. In such cases, lenders will be reluctant to offer a mortgage.
- Employment – Lenders want to be sure that within reason, the borrower is in secure on-going employment that will support their lifestyle as envisaged at the time of making a mortgage application. Where the expat is employed by a firm registered in the country in which they live, lenders will find it much more difficult to assess the security of that employment or assess how likely it would be for the borrower to obtain similar employment, should things go wrong.
- Self employed – If you are self employed, in addition to the things that a lender will look for with employed people, they will want to verify your income over a period of 2 to 3 years. To do this, they will look for copies of your accounts over that period or copies of your tax returns. Unless you can show proof of your earnings over the required time period, your application for a mortgage will most probably be rejected. The longer the period over which you can show your accounts, the better. If you cannot produce two years accounts, some mortgage lenders will still consider your application if you can prove a track record of regular work or if you have left employment to work as a contractor in the same industry and can show evidence of work you have in hand for the future.
- Currency exchange – Where the borrower is paid in currencies other than sterling, the risk of exchange rate movement comes into play. Lenders will view this as a serious risk which will become acute if the currency is not one of the established hard currencies.
- Identity requirements – Expats who have lived overseas for a considerable period of time may have arranged their lives around their local environment and have little contact with the UK. Their bank accounts may be local and they may have no UK contact address or UK service contracts in place which would make identification of the borrower a little more difficult.
- Legal concerns – Should things go wrong and the borrower were to default on repaying the loan, the lenders recourse to recover losses through the UK courts may become frustrated due to events that will be difficult to define at the time the mortgage application is made.
There are various other reasons why mortgage lenders will be more reluctant to lend to expats and why, when they do so, the interest rates they charge can be a bit higher than you would see from their published rate tables as applicable to those who normally reside in the UK.
