Expats are right to think carefully about their British property investments. It’s fair to want to know how cash can be reined in for current or future buy-to-let properties.
Thankfully there are routes for investors to pursue, each of which can help ease financial pressures on your portfolio. These are the most prominent cost-saving tricks for any expat to make use of:
Save for a bigger deposit
With more UK lenders now offering 95% Loan to Value ratio mortgage deals, some lenders are even making these available to expats who meet certain criteria*. However, this can be a dangerous trap, since availability and affordability aren’t always synonymous. You may opt for a bargain deposit, but the interest rates are often higher than those offered to investors willing to submit larger savings.
You’ll be looking at up to a 2%* rate difference when the deposit is raised from 5% to 10% of the purchase value. Over time, this can save thousands of pounds – well worth the added, upfront investment cost.
Consider longer fixed rate mortgage deals
Most homebuyers agree to a two-year fixed rate mortgage deal that eventually turns into a Standard Variable Rate (SVR) deal. Once on an SVR, the lender can decide to increase or drop the rate at their discretion. Currently, rates tend to sit between 4-5% of the loan amount.
This only applies to the two-year fixed rate mortgage deal. By opting for a five-year fixed rate mortgage deal, investors can pay more in the initial period – perhaps 1% more – but this also means that you can hold off looking for a new deal (once the SVR comes into effect) for longer. On the whole, repayments are likely to be more affordable.
Look closer at associated fees
There are also fewer charges for the arrangement of a five-year fixed rate deal, as opposed to a two-year one. Lenders tend to promote their two-year fixed rate products, with often lower rates, as the best idea. But this isn’t always the case. Always review the fees associated with the product as any savings made in the short term can be lost against any completion fees.
Furthermore, it can be a good decision to pay the mortgage off earlier than you’re meant to. This is generally advisable when interest rates on savings – for instance, a cash ISA – are lower than the interest tied to the mortgage product. Paying an extra £50 a month can boost their eventual cost-effectiveness.
Yet banks can penalise you for doing so, so it’s always worth confirming if that’s the case with your expat mortgage before you start repaying above their limit. An ERC (Early Repayment Charge) can make the decision superfluous. Liquid Expat can find you a fixed rate deal that carries no ERCs.
With over 45 specialist mortgage lenders in our network, we’re more than ready to assist with your UK property investment, sourcing an expat mortgage option you can trust for years to come. Buy-to-let is a fertile ground for expat borrowers. To make the most from this landscape, speak with our team or head to our dedicated mortgage page.
*subject to status