New rules that were introduced in 2014 made things tricky for all potential borrowers whose income and expenditure had to be evidenced after this time. For expats things are tougher still. Following European rules introduced in 2016, individuals paid in a foreign currency must now come under closer scrutiny during the application process for mortgages.
Factors such as exchange rate fluctuations must be taken into account and not just the current value of the currency. Many lenders go to great lengths to assess a potential borrower’s global financial position. This is to ensure that they feel comfortable the new mortgage will not put them under undue financial stress now or in the future.
Additionally, lenders operating in this sector will need to conduct enhanced due diligence on each application which, in turn, means more detailed administration. This has caused a number of lenders to withdraw from expat lending as a direct result of the European rules.
Applying for an expat mortgage
It is essential to find a good broker who can guide you through the process and match you with the best lender. Be frank and open in all the information you supply and keep in mind what you are trying to achieve with your available budget.
Due to the increased risk to the lender there is usually a premium on expat mortgages so don’t expect to get the headline mortgage rates on comparison sites.
Therefore, it is wise to obtain an agreement in principle first so you understand what you can afford to borrow before you start looking at property.
Generally, applications will take around six to eight weeks before a mortgage offer will be issued.
Buy-to-let mortgages are usually easier for expats to get. The rule of thumb is you will need a minimum 25% deposit for buy-to-let, with the rental income effectively defining how much you can borrow. In an example where the lender offers a rate of 5.5%, the majority of lenders would require the rental income to exceed the mortgage payments by a ratio of 145%.
However, it is possible to find lenders who will take applications where there is a rental shortfall.
It is also worth noting that if you have just accepted a new job with a new employer, this could cause you to fall outside of lenders’ criteria. Long-term employment is factored in and this could work against you, especially if you are still in your probation period.