Due to the regulation of lending practices introduced to prevent a crash similar to 2008, banks are now restricted on their lending. Many expats, when looking to secure a mortgage on a UK property, are intimidated by this regulation. Especially when coupled with the added difficulties of buying from abroad. Every country will throw up its own unique challenges when it comes to buying property in the UK. One of the countries that is most complex is Australia. As a result of an inter-government treaty, expats living in Australia and looking to buy in the UK will find a vastly reduced pool of lenders. However, though securing a UK mortgage as an expat in Australia may seem difficult, it is not impossible. In the following, we will outline the numerous considerations for expats in Australia looking to secure a UK mortgage.
What Currency Are You Paid In?
The first thing to consider is the currency you’re paid in. The likelihood is, working in Australia, you will be paid in Australian Dollars. Because your purchase will be in sterling, the approach that your lender takes to underwriting is important. The most common practice for lenders is to use an average exchange rate, instead of the current rate, when underwriting. They will then discount the relative income calculation by some set percentage.
Residential or Buy-To-Let?
The second thing to consider is whether your mortgage is for a residential or buy-to-let property. Residential mortgages will require a smaller deposit, whilst buy-to-let mortgages will require a much larger deposit. Some lenders for residential mortgages will allow you to borrow up to 95% of the purchase price. However, this is rare and lenders that allow for this will be hard to come by. As a general rule, 20% should be considered the starting point. For a buy-to-let mortgage, 25% is the lowest that will be required. However, many will require a larger deposit than this.
What Type of Property?
The third thing to consider is the property you’re looking to purchase. If you’re looking to buy a new-build property, you will typically be required to pay a larger deposit. Depending on the area of the country you are looking to buy in, your borrowing options will also differ. Your borrowing and mortgage options are similarly limited if you’re looking to buy a property as a residence for a family member, for example, a student home for your child studying in the UK. Lastly, if you’re looking for a property to let as a holiday home, it might be considered to be a ‘House in Multiple Occupation’. This could result in your mortgage application being rejected as lenders will be dubious about how this property could be managed from abroad.
Earnings and Borrowing.
The fourth thing to consider is how much you’re earning and how much this will allow you to borrow. Most lenders will prefer to deal with expats earning the equivalent of 40-50,000 GBP or more. For those that are self-employed, the typical requirement is 3 years of audited accounts. Depending on your lender, the amount you are able to borrow will differ. For residential mortgages, the general rule is that you’re allowed to borrow 4.5 times your income. For most buy-to-let mortgages, lenders ask that the rent cover the mortgage by 125% of a payment at the rate of 5.5%. Some lenders will offer exceptions to this. But, obviously, this requires more time and effort on the part of the borrower in finding a lender that is willing to do so.
Application processes can be gruelling for many expats. Especially if you are trying to balance your professional and personal life at the same time. Application processes can be complicated, typically on paper, with numerous checks on all manner of things including income, identity, proof of deposit, etc. Typically, additional documents will also be requested. And the quality of this documentation will be counted towards the success of your application.
All of this can dissuade expats living in Australia from trying to buy property in the UK. It’s more trouble than it’s worth, you might think. Between highly restrictive regulation and wildly varying lending practices and requirements between different lenders, the marketplace can seem too complicated for many. However, by using a mortgage broker, many of these stresses can be alleviated. An expert mortgage broker knows how to make the process run smoothly and has established relationships with all of the necessary parties. They have access to unique deals from specialist lenders; they can take care of much of the necessary communication and liaise between solicitors, estate agents and lenders. So, the cost of a mortgage broker shouldn’t be seen as prohibitive for prospective buyers. Instead, it should be viewed as an investment that will later pay dividends, in both time, lack of stress and, often, financially.
Liquid Expat Mortgages is the No.1 Expat Mortgage broker. We have a team of experienced and regulated mortgage consultants, dedicated to helping expats find the very best mortgage deal. We work with over 50 lenders to deliver the best product for your needs. For complete Expat Mortgage Support, contact Liquid Expat Mortgages and see how Liquid Expat Mortgages can help you. Just call us 24/7 on +44 (0)161 871 1216 or visit www.liquidexpatmortgages.com.