Expat UK Mortgages VS Foreign Income UK Mortgages
Welcome to the next edition of INSIGHTS covering complex UK mortgages
Within a world of faster travel, remote working and commercial globalisation, many clients can find themselves living in one country but working for a firm in a separate country to his/her citizenship and earning a completely different currency to both countries.
Example: UK national who lives / works in Norway for a Canadian Oil/Gas firm and earns in USD.
And the list goes on of the different set ups and variances that could be the case. However what is the difference between an Expat mortgage VS Foreign Income mortgage for UK property?
Expat Mortgages – Generally applies UK nationals living and working in a Non- UK country on a long term or permanent basis whether or not they earn in £GBP or any other currency.
Example Expat – UK national in a permanent employed position with a Pharma company in USA, does not return to UK often other than for holidays. Wants to buy a UK property to let out. Result – Expat BTL mortgage.
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Foreign Currency Mortgages – Generally applies to ANY nationality UK or other with rights to reside/ work in the UK & already proving a residence in the UK (rented or other) while earning a non £GBP income.
Example Foreign Income – Italian National with UK permanent rights to reside/ settled status, in rented accommodation in Bournemouth. Wants to buy his first UK home. Client works on a 6 week on 3 week off rota on a Cruise Ship and earns in USD. Returns to the UK regularly where his family resides. Result – Foreign Currency mortgage
These 2 examples demonstrate that even though in both cases the applicants earns USD and work outside of the UK, one of the applicants is living outside of the UK, while the other has his central family affairs in the UK. These are the small details lenders look at to fit either Expat or Foreign Income policy.
Extra INSIGHT – Does it matter where the client is paying Tax ? In most cases the answer is no, many lenders are comfortable with both Expat clients and Foreign income clients having either no UK tax liability or having a Tax liability in the country of residence outside of the UK. UK lenders will still use the Gross income of the applicant to work out affordability.
Currency Exchange Risks
What lenders do when it comes to affordability especially on residential property (not BTL) is apply a HairCut of 15-20% off the currency gross income to account for FX fluctuations before applying their mortgage affordability multiple to provide a max loan size. Whereas Buy to Let is based on the rental yield.
Extreme Foreign Currency Lending!
Very few lenders in the UK will consider a foreign income for UK resident applicants, and if they do, they usually have a small list of acceptable currencies ie: USD, EUR, AED, CHF.
However we work with some that allow the most unusual currencies:
Extreme Example: UK national with UK residence/ mortgage who was posted 12 months to UGANDA with a NGO organisation for UN research – earning in local Ugandan Shilling, client wanted to re-mortgage their UK property and to release equity for an onward UK BTL mortgage. Result – NOT Expat as this was temporary posting and classed as a Foreign Income Mortgage.
As you can see there are very complex scenarios with this topic, and so it is always best to speak with your friendly Expat/Foreign income Mortgage Specialist about your scenario and lets see how we can help.
Market Updates
- A robust start the year for the UK housing market with HFX housing update read the article here.
- Get up to date with Rob Rob ! the latest February episode is a cracker get the episode here.
- Expat lenders have typically required all applicants to be UK passport holders, however a few new policy changes with expat lenders are now accepting Irish nationals under same terms as UK nationals. Book a call to discuss further.
- Living in Northern Ireland (NI) but working in Republic of Ireland (ROI) ? likely you are earning in EUR – there are some Foreign Income lenders accepting this scenario for employed and self employed applicants and offering best in market rates for residential and BTL in NI. Book a call to discuss further.
Next Steps…
Book a Free Discovery call here & if your not sure what a discovery call is all about Ive made a series of videos on what to expect here.
A Great way to get frequent updates, hints & tips and insider industry knowledge of the complex / expat mortgage market is to join our YouTube channel here.
Our Quick 60sec Quote page allows you to obtain the latest rates to be expected and you can request a specific quote by sending an email to info@mymotgagedeal.co.uk
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