How providers are catering to expat landlords

But many UK expats will still want to keep ownership of a property in their home country, even if they are living overseas for the foreseeable future.

For example, they may want to keep the property they called their family home and rent it out, or purchase a buy-to-let (BTL) property to keep a foothold in the UK, while at the same time earning some income.

Whatever the reason, what type of mortgage products cater to this specialist market? 

Guy Nyirenda, a partner at Coreco, observes: “There has been a large increase in the availability of expat mortgages in the past few years as lenders look for other ways to meet market demand.” 

As with holiday lets in the UK, it is generally a part of the market catered for by more niche lenders. Often, this area is provided for by building societies or the offshore arms of some UK banks, he notes. 

Expat landlords generally need an individual lending and underwriting approach, rather than one that relies solely on automated decision making.Mike Taylor

Mr Nyirenda adds: “Often expats have very good income and very low outgoings which make them a strong borrower in the eyes of the lenders.

“So long as the lenders are happy with where the borrower is resident (there are some countries that are deemed a higher risk than others) and they have a stable income, preferably with a recognised company, then the lenders are happy to lend. 

“As per normal BTLs, the lenders look for the rent to support the mortgage, along with the usual financial strength of an expat borrower adding to this.”

Mike Taylor, head of products and savings at Mansfield Building Society agrees it is a niche market even though there is a small, but increasing, number of lenders offering expat buy-to-let mortgages.

“Expat landlords generally need an individual lending and underwriting approach, rather than one that relies solely on automated decision making,” he points out.

“There are a number of mortgage brokers who specialise in the provision of financial and mortgage advice to UK citizens living abroad and this is where prospective expat landlords should start their research.”

The Mansfield BS launched an expat buy-to-let mortgage in June this year, with up to 70 per cent loan-to-value (LTV) for expats in Financial Action Taskforce (FATF) member countries, Hong Kong, and member states of the Gulf Corporation Council.

“In common with most lenders in this market we require a UK service address and a UK based sterling bank account,” he says.

Despite the differences, he reassures potential expat landlords that a lot of the documentation that is required is not that unusual compared to a typical mortgage application.

Business decision

Karen Bennett, managing director of commercial mortgages at Shawbrook Bank, says: “Often, the motivation for moving abroad will be an attractive salary at a reputable firm, making these affluent customers for any lender.” 

She admits that criteria varies broadly across the market, but highlights some key considerations before they lend to expats: 

• Country the borrower resides in.
• Whether they have a UK credit footprint.
• How the property will be managed remotely.

“Lenders will be mindful of whether or not the applicant lived at the property before moving abroad, with most categorising this as a regulated BTL loan,” she notes.

Stephen Marcon, expat, international and overseas mortgage specialist at Connect Mortgages, reiterates that the decision to let out a property in the UK as an expat is a “business move”.

“We do have some lenders that will look at expats on a residential basis, but [who] have a timeframe from which they are returning to the UK,” he says.

Country of residence

The country that the expat client is now resident in can be an obstacle in the lending process though.

“One of the key challenges in this area tends to be the countries in which expats may be living,” acknowledges Danny Belton, head of lender relationships at Legal & General Mortgage Club. 

“There are rules in place that prevent some lenders from offering access to BTL mortgage products for expats living in particular areas, such as Australia.”

Expats who are resident in what are deemed to be ‘high risk’ countries, may find it more difficult to get a mortgage for a property in the UK.

Paul Clampin, chief lending officer at Landbay, explains: “Some areas of the world may be considered on a case-by-case basis and this may be the result of local market conditions and regulations around origins of deposit, for example.”

The physical distance between the owner and their property can also make the process a little more complex.

Mr Clampin adds: “Obviously, all applicants should do the ‘groundwork’ to look at local rental market needs and demands, licencing requirements and understand the demands for management of a property from a distance. 

“So, the consideration around how and who will manage any issues on a day-to-day basis is paramount.”

Broker benefits

Mr Nyirenda says the main obstacles tend to be in the logistics of getting a mortgage approved while not resident in the UK. 

“The lender, solicitor and broker need to ensure they have adequately carried out all the usual due diligence, including proof of ID and residence, proof of income, employment and expenditure,” he confirms. 

“This usually needs to be done with original documentation, although there are some ways to assist this process which a good broker will be able to run through.”

This is why it is important for UK expats to do their homework to find a mortgage broker who specialises in this area of the market.

“The use of a good broker in this market is invaluable,” he agrees. 

“They should be able to identify the lenders that will be available based on the borrower’s specific situation, circumstances and preferences. 

“A good broker should also have direct access to the lenders that operate in this space, which means they will be aware of all the criteria, due diligence requirements and the best way to achieve a successful application.”

eleanor.duncan@ft.com