How Corona virus has affected Expats around the world?
2020 is now predicted to be the year where the World enters the worst economic downturn in living memory and many believe that this could mean that the world as we have known it may emerge from this downturn to be a very different place in the future. Almost every country of economic importance is experiencing severe lockdown measures and are becoming very worried about the scale of the likely shrinkage to their economies.
Although economists vary greatly in their thinking on how any recovery might evolve, most agree that we are likely to be looking at an extended period that will be measured in years rather than months and some believe that we will never quite return to the life we enjoyed at the start of 2020.
Where they generally agree is that unemployment across the world will rise to very high levels and that virtually every type of business, large or small, will have to re-appraise how it is structured and where its business will come from in the future. Those that are unable to make the necessary changes will be unlikely to survive.
We are only a few short months from where this pandemic began and already, we at expatriates.co.uk are receiving enquiries from Expats who are concerned that they may loose their overseas positions and may shortly have to consider returning to the UK. For many, this will mean setting up a new home in the UK and finding new employment to support there new lifestyle.
Each individuals situation will be quite different and will need to be assessed on its own merit to establish the best way to arrange to return and we have prepared this short guide to highlight some of the areas that a returning expat may need to consider before committing to setting up a new home in the UK. We hope this will be helpful but once you have thought carefully about what you would like to do, we will be happy for you to get in touch with us for further discussion.
Hong Kong Residents with rights to reside in UK
It has recently been reported that the United Kingdom would be willing to allow more than 2.8 million people from Hong Kong to come and live in Britain, if China implemented its proposed national security law on the former British Colony.
At expatriates.co.uk, we are already receiving a steady number of requests for assistance from residents of Hong Kong, asking for our help with obtaining UK property. These enquiries are usually about setting up safeguard measures in case the situation within Hong Kong deteriorates, forcing them to consider leaving. If you are concerned about this and would like to look at the options that may be available to you, please complete the simple enquiry form and we will get back to you.
The Post Covid UK mortgage Market
Up and till March ‘20, mortgage availability in the UK was readily available through a large number of diverse lenders providing between them a huge number of individual mortgages products. This meant that generally speaking, people with a good credit history and adequate income would find obtaining a mortgage on a UK property fairly easy to arrange. Expats were also well served by a number of specialist private and off-shore lenders who were very tolerant of these clients special needs.
Today, although these lenders still exist, they have all pulled back their offerings and have severely restricted their lending criteria in such a way that it is now very difficult to obtain a mortgage unless you are seen to present a very low risk to the lender. This will usually require making a substantial down payment on any purchased property.
Expats who have constantly lived abroad for many years, may not be able to show that they have an acceptable credit history here in the UK and this can mean that lenders may find it difficult to verify their financial status to qualify them for a mortgage.
Hopefully, towards the end of 2020, we will see lenders moving their lending criteria back to their pre-corona virus positions which should provide some relief for the property markets. Until then, we must make the best of what is available and monitor carefully any slight changes in lending criteria that would allow a case to complete.
Requesting help and guidance
We at expatriates.co.uk are here to help you in any way we can and we will be happy to share our extensive experience with you while you look to find a suitable way to arrange your return to the UK.
To facilitate this, we have provided an enquiry form that simply requires your name and contact details and provides space to write a short note about your particular situation and what it is you would like to do.
Once we receive your note, we will get in touch with you and hopefully give you some firm guidance on the way forward.
Lending considerations for returning expats
The following information identifies some of the criteria areas that your average High Street Bank will take into consideration when considering a mortgage application from a returning expat. Private and specialist lenders will generally have more flexibility in their approach to these things but will still expect to see sufficient evidence that the applicant will be able to repay any loan.
Employment status - This will always be a key consideration as it lies at the heart of confirming your ability to be able to repay the loan. If you were employed overseas through a UK or international employer and will be able to remain with that employer, you should meet most lenders requirements.
The same may apply if you have managed to secure employment within the UK and have either already started or will be starting that employment in the near future but keep in mind that this may present difficulty for some of the mainstream lenders as they will often require proof of employment for a period of between 3 to 12 months, to qualify someone for a loan.
Where new employment within the UK needs to be obtained, it may be that you will be limited to approaching some of the specialist lenders as most High Street lenders will reject your application. Likewise, if you have been self employed for a period, you may find obstacles presented to you which will further reduce the number of lenders who may be willing to consider you.
We cannot stress enough how vitally important it is to engage with an experienced professional, well in advance of your return date, to ensure you are fully informed about what may realistically be available to you on your return.
Clean credit history - This is an important factor to consider, as when people have lived for a long time overseas with little physical contact with the UK, they may not show up on the standard credit checking systems that lenders depend on. If you think that this might apply to you, much thought will be needed to present an explanation that can be accepted by a lender.
As this is a most important criteria, it is essential that you carefully check your credit file before applying to a UK lender for a mortgage. Should you have a poor credit rating or no credit history whatsoever, you may find it difficult or even impossible to qualify for a mortgage through one of the High Street lenders. Again, this will leave you relying on that small group of lenders who specialise in this type of lending, inevitably at a much higher cost.
Loan to value ratios acceptable on a property - Traditionally, expats taking out mortgages to purchase UK property would generally have had to consider putting down a deposit of around 25% of the purchase price of the property. Sometimes this would be less but in this new environment and for some time to come, lenders will almost certainly be looking for higher levels of deposit and those expats who are able to make deposits in the range 35% -50% of the purchase price of the property, will be more likely to be successful.
Even where it is not strictly necessary to provide such a large deposit, doing so may boost your overall eligibility if other factors are stacked against you. Larger deposits will often pave the way to obtaining a lower rate of interest which will pay dividends over time. If obtaining a higher deposit means waiting a little longer while you turn assets into cash, the long term savings that you will gain could make the wait well worthwhile.
Property already owned In UK - This would most likely be investment property held for the rental market but could occasionally be a residential property. Where a property is owned outright or contains good levels of equity, it can be used as security with a lender to obtain a mortgage on a new home. Where it is not accepted as security, it may be possible to remortgage the property to release sufficient cash to enable a solution to be found to finance the new property. Other assets, such as share portfolios, cash and other valuables may be used in a similar way, to the same effect.
Always remember that most UK lenders will view mortgage applications from expats and other nationalities as presenting them with a higher degree of risk than applications they received from their normal UK based clients and anything that can be done to lessen that perceived risk will be beneficial.
Property and Assets owned overseas - In the same way as described above, it may be possible to have assets that you hold overseas taken into consideration by UK lenders when they are considering your application for a loan. Arranging a UK mortgage secured against overseas assets will always be slightly more complicated to do than would be the case with UK assets but can still be a viable option.
Where such assets can be used to increase the level of deposit put down on the property, it could open the door to significantly lower rates of interest resulting in more competitive overall borrowing costs.