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Mortgage for Foreign Nationals
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Mortgage for Foreign Nationals
Richard Campo talks us through mortgages for foreign nationals and what’s required.
The content contained within was correct at the time of publication but is subject to change 07/09/2023.
Mortgage for Foreign Nationals
Richard Campo talks us through mortgages for foreign nationals and what’s required.
What are the requirements for foreign nationals to qualify for a mortgage in the UK?
What we’re looking at today specifically is if you’re not from the UK originally but you’re buying in the UK. So you don’t have a UK passport and you want to buy a property here.
In terms of mortgage criteria, the main rule is that you need a larger deposit. Most UK banks want a 25% deposit, but the rest of it is pretty much the same.
It’s an area we work in a lot. I did some research recently out of curiosity and found that nearly half our clients aren’t from the UK originally. So this is a well-trodden path.
It’s often not as bad as you think. With visas, some lenders have requirements around your time in the UK – either you need to have been in the country for three years, or have three years left on your visa. Even then, there are no solid rules – for clients with high incomes lenders can make exceptions.
What types of visas or residency status are typically accepted for a mortgage application?
Basically it’s any valid visa that allows you to work. We can’t use student visas, and that does come up sometimes. People study here, then they get a job and want to get a property but they don’t renew the visa – you will need a work visa to get a mortgage.
There’s a grey area around investor visas because some lenders can take a view, but as a simple takeaway rule, you just need a valid visa that allows you to work in the UK. There are so many different types, and also post Brexit these things change quite a bit as well.
Do specific nationalities face more challenges when applying for a mortgage in the UK?
Yes – and again this changes in time, so I won’t mention any nationalities to avoid offending anyone. But if you look on the Home Office website, there’s a list of sanctioned countries.
Let’s say, if a country went to war with another country and we’re not happy with it, that country might end up on the sanction list. But these things change, so that’s the list that we go by at any given time.
If you’re from a sanctioned country, it doesn’t mean you can’t get a mortgage. It just means that you’re probably going to have to go through a bit of extra due diligence.
This leads onto a whole other area around how your residency works with tax rules. It’s really important where you’re paying tax. We get this often with high net worth individuals who are UK residents, but domiciled somewhere else.
If you have money in offshore jurisdictions like the British Virgin islands, Jersey, Guernsey, that might still flag up a challenge. Even if you have a UK passport but your wealth is elsewhere that might still rear its head.
We also find that cases with two nations can cause issues. One is Australia, for some reason, they won’t sign a money laundering declaration; and the other is the US – where the IRS has global jurisdiction over all US nationals. Banks don’t like that because theoretically the IRS could repossess a UK property on their behalf.
But none of these things are showstoppers, at all. That’s the point I want to make – they’re not major problems. There are banks that will help you, but these are some high risk touchpoints. Even if you do fall into that territory, as long as your application is sound we generally don’t have too many issues.
What documentation is needed to prove income and affordability for a mortgage for a Foreign National?
It’s all the usual stuff. To get a mortgage, it’s all about proving affordability, so we need to evidence your income. If you’re employed, that’s nice and simple. It’s generally payslips or proof of bonus. If you’re self-employed, it’ll be your accounts and tax records.
We will go through your bank statements and get your ID as well. You also need to prove your residency status in the UK is valid. We’ve moved away from traditional visas as such, and now a lot of banks ask for a share code which proves you’re valid to be in the UK.
What changed visas is the BRP cards – the biometric residency permit – these are really useful to get as well.
Other than proving residency in the UK the rest of the process is the same. For more detail, listen to our podcasts on First Time Buyers and Home Movers, because the details are the same.
Do foreign nationals need to have a UK bank account to apply for a mortgage?
Yes – all banks require a UK bank account to take mortgage payments from. You don’t need that at the point of application, but you absolutely will need it by the time the mortgage comes into effect.
It can take a good few weeks or months to get a mortgage set up these days. So if you are fairly new into the UK and haven’t got a bank account, you need to go through that process. We can often help with that.
Most banks will have current accounts, other than in the private banking area. If you don’t have an account we can get one set up before mortgage completion.
Can foreign nationals take advantage of government schemes or incentives when getting a mortgage?
Yes, it’s really simple as long as you’re a UK resident paying UK tax. You’re eligible for any of those usual schemes that run. Help to Buy closed recently but there are still things like Shared Ownership and other government incentives, although these are waning in time.
As a UK resident and taxpayer you should generally qualify.
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How does the process of obtaining a mortgage as a foreign national differ from that of a UK citizen?
I touched on the visa details so I won’t go back over that. The process does tend to be a bit more manual, particularly if you’ve not been in the UK for a huge amount of time. That’s because it can take a good two or three years to build up a credit footprint.
It takes time to build up a bank account, your utilities, phone contracts and all that detail that goes onto your credit file. It might be that you fail credit scoring – but in fact we often find that while a client can’t get a credit card, they get a mortgage. The reason is because a mortgage is fully underwritten.
That’s the only difference in terms of the process. We might have to get a few more documents but generally that doesn’t cause too much of an issue.
Are there any restrictions or limitations on the amount of money a foreign national can borrow for a mortgage?
No. There are some misconceptions around this. But once you tick a bank’s criteria boxes, you will have access to all their relevant products.
For example, a standard high-street lender might need you to have three years left on a visa. If you tick that box, you get all the usual lending options – the same loan amounts, all the products. There’s no difference whatsoever.
Certain banks do have criteria around a minimum income, but that applies to everyone. It doesn’t disrupt things as long as we can get you through the door in the first place.
Do foreign nationals face higher interest rates or different mortgage terms compared to UK citizens?
Just to completely contradict myself, yes and no. It’s all about getting you through the door of the major high street banks. If we can’t do that, there are lenders who have specialist products that will suit foreign nationals. Those are priced a little bit more expensively.
It’s very rare that this comes up but it is an option, particularly for people who are very new to the UK. I’d say 99% of the time we can place people with the main banks, but in exceptional circumstances that is a path you can go down.
What steps can a foreign national take to increase their chances of being approved for a mortgage in the UK?
The big one is the bank account, but if you’ve been in the UK for a while, you’ll tend to already have one.
I would just say it’s good to start the process early. Things can change in time and there might be more documentation to get together. It may be that for whatever quirky reasons you can’t do what you want to.
For example, you might need a bigger deposit, or the bank we use has a tight policy around how much they will lend. So talk to a broker as early as possible. Talk through your situation and we can get an Agreement in Principle in place. That says how much you can borrow, so you know what your property budget’s going to be. Then you can go house hunting, knowing you can get the finance in place.
If you do it the other way around, it can be very stressful. You could wind up going with a bank with not the best terms. Talk to us as early as you can. We can shape the search and make sure you don’t have any nasty surprises down the track.
Are there any specific lenders or mortgage products that cater to foreign nationals?
No, but it does change in time. Banks’ risk appetite changes constantly and that’s something that people don’t fully appreciate. I would never say there’s a specific lender that’s good in this area as it changes.
Some are good, some aren’t – some do it, some won’t. We’ll always secure you the best terms from the lenders available in the market right now. I don’t really care who the lender is, as long as we can get you the best terms we can and achieve your goals.
Your home may be repossessed if you do not keep up with your mortgage repayments.
The content contained within was correct at the time of publication but is subject to change 07/09/2023.