Getting a Mortgage in The UK as a Foreigner

It’s easy to see the appeal of both moving to or investing in the UK; stable market, strong demand, and a beautiful country. But if you’re trying to get a UK mortgage as a foreign citizen, things get a little more complicated. Your foreigner status will attract more scrutiny, and you will have to jump through more hoops than UK candidates. 

However, it is definitely not impossible, it will just require a bit more prepwork. Our blog will guide you through the process of getting a UK mortgage from start to finish. By the time you’re finished reading, nothing will get by you; you’ll be thinking like a seasoned investor.

Do I Qualify For a UK Mortgage as a Foreigner?

You need to keep in mind that every mortgage lender is different, and not all are going to have the same criteria. However, there are some common factors that UK lenders tend to assess when deciding if you’re a desirable candidate for a loan. Here are some traits that will exponentially drive up your eligibility.

Your Main Source of Income Doesn’t Come from Overseas

The lender wants to verify your income’s authenticity, stability, and legitimacy, and this is difficult to do with all the different international financial regulations. Exchange rate fluctuations are another added risk. It’s not really a dealbreaker, but having your business registered in the UK means more transparency and makes you less of a liability for the lender. 

If your income does come from overseas, make sure that you’ve prepared detailed documentation; income statements, tax returns, employment contracts. It’s also a good idea to work with an international mortgage broker. They can connect you with lenders willing to loan to international clients, and will also help strengthen your application overall. 

You Have a Traceable Credit History

Lenders rely heavily on credit reports to assess your financial responsibility and determine the risk of lending to you. Without a UK credit history, they have no track record to evaluate, which might make them hesitant to approve your application.

If you're new to the UK, you can start building your credit score by opening a UK bank account. This will give you some sort of a financial footprint.

You’re Settled in One Place

Mortgage lending is all about estimating risks. Someone who frequently changes jobs and lives all around the world could raise red flags, since there’s no guarantee that they won’t simply hop on a plane and relocate again. 

To demonstrate that you’re not a literal flight risk, you can provide proof of long-term residence in the UK. Utility bills, rental agreements, or employment records all show that you’ve taken root in your UK community.

You Won’t Be Retiring Soon 

Mortgages are paid within a specific timeframe and if you’re nearing retirement, that can mean a chance in your financial circumstance. The lenders might be worried about your future ability to keep up with the payment schedule. 

If you plan to retire in the next 15 years, make sure you can demonstrate a solid financial plan for maintaining your mortgage repayments. This can mean any retirement savings, pension plans or other sources of post-retirement income you might have

The 7 Steps to Getting a UK Mortgage

If everything’s copacetic and you feel like you’ve got a good shot at securing a mortgage, it’s time for you to see what the process will actually look like. It’s nothing too complicated, but it does come with some extra costs.

1. Get Your Finances in Order 

Lenders will assess your financial stability and it’s likely that you’ll face additional scrutiny as a foreigner. You should be proactive about making your finances well-organized. 

Firstly, you want to set some money aside for a deposit. When it comes to foreign buyers, most UK lenders ask for 25%. Remember: the bigger the amount you put down, the better the mortgage rates you’re likely to get. 

Next, focus on reducing your debt. This means your car loans, credit card payments, child support, overdrafts, or any other financial commitments you may have. Few things can scare a lender away quite like a dodgy debt-to-income ratio. 

Finally, prepare all necessary financial documents. Gather proof of income, bank statements, tax returns, and any other financial records. You might need to translate these documents into English or have them notarized.

2. Find the Property to Your Needs and Tastes

The UK offers a diverse range of environments, from bustling cities to serene countryside. You can choose between cities like London, Manchester, and Birmingham, which offer exciting lifestyles as well as job opportunities, or coastal towns such as Brighton, Bournemouth, or Cornwall if you prefer the seaside. The UK is also famous for its scenic countryside, which most Britons actually prefer to the city life. 

Also think about the type of property that fits your needs. The UK has a variety of property types, such as: 

• Terraced houses

• Semi-detached houses 

• Detached houses 

• Flats/apartments

• Maisonettes

• Cottages

• Period properties (Victorian, Georgian, Edwardian)

A way you can simplify your property search is by working with a reputable real estate agency. This is especially useful if you’re buying as an investment since a real estate agency can help you research areas with strong rental demand or potential for property growth value. 

3. Secure a Mortgage Agreement in Principle (AIP)

An Agreement in Principle (AIP) is a conditional offer from a lender indicating how much they might lend you. Securing it is beneficial because it provides clarity on your budget, helping you understand how much you can afford. It also strengths your negotiation power since it shows sellers you’re a serious buyer. 

4. Hire a Solicitor

This step ensures that there are no hidden problems that could affect your ownership. The solicitor will conduct legal searches to check for any issues with the property, such as liens, disputes, or planning restrictions. 

They will also draft and review contracts to ensure the terms are fair and protect your interests, and also handle the exchange of money securely between parties. Make sure to hire a professional experienced in international transactions. 

5. Arrange for a Survey

A survey assesses the condition of the property and can reveal any structural issues that might not be apparent during a viewing. This can save you money in the long run by uncovering problems that might require costly repairs.

There are different types of surveys to consider:

• A Condition Report: a basic survey suitable for new or conventional properties, providing a general overview without detailed advice.

• The Homebuyer Report: more detailed and is suitable for standard properties in reasonable condition.

• A Building Survey: detailed advice on defects, repairs, and maintenance options

6. Complete Your Mortgage Application and Exchange Contracts

You might be nearing the end of the process, but don’t put your feet up just yet. Make sure that all the documents you’re submitting to the lender are accurate and up-to-date. Once your application is approved, the lender will issue a formal mortgage offer. 

With the mortgage offer in hand, you can move forward to exchange contracts. At this stage, you'll typically need to pay a deposit, usually around 10% of the property's price at the time of exchange. 

This step signifies a legal commitment. Both buyer and seller are now legally obligated to complete the transaction.

7. Stamp Duty

Stamp Duty Land Tax (SDLT) is a tax on property purchases in England and Northern Ireland. The amount you owe will depend on the value of the property you’re buying. Since April 2021, non-UK residents are required to pay an additional 2% SDLT surcharge, so it's important to factor this into your budget.

Your solicitor will calculate the exact amount of SDLT you need to pay and ensure it's submitted to HM Revenue and Customs (HMRC) within 14 days of completion. It’s important to be punctual with this payment to avoid any penalties or legal issues. 

What Kind of Mortgage Can I Get as a Non-UK Citizen?

Even as a non-UK citizen, you still have access to various types of mortgages in the UK. Below is an overview of each mortgage type to help you make an informed decision.

Fixed-Rate Mortgages

Fixed-rate mortgages offer an interest rate that remains constant for a predetermined period, typically ranging from 2 to 10 years. This means your monthly repayments stay the same during the fixed term, providing stability and making budgeting easier. You're also protected against any rises in market interest rates during this period.

Tracker Mortgages

Tracker mortgages have interest rates that follow a specific benchmark—usually the Bank of England base rate-plus a set percentage. For example, if the base rate is 0.5% and your mortgage tracks at +1%, your interest rate would be 1.5%. This means your repayments can decrease if the base rate goes down

Standard Variable Rate Mortgages (SVR)

An SVR mortgage has an interest rate set by the lender, which can change at their discretion. It's not directly tied to the Bank of England base rate but is often influenced by it. This type of mortgage allows you to overpay or switch mortgages without penalties. 

FAQ

What kind of visas are accepted by mortgage lenders in the UK?

Mortgage lenders in the UK typically accept applicants holding visas that allow them to live and work in the country for an extended period. These usually include Tier 1 (Investor), Tier 2 (Skilled Worker), and Tier 5 (Temporary Worker) visas, as well as Spouse or Partner visas and Indefinite Leave to Remain (ILR).

Can I get a mortgage in the UK without a credit history?

It can be challenging. However, some lenders may consider your international credit history or accept alternative evidence of creditworthiness, like employment records and bank statements. 

Is it better to get a mortgage or a loan as a foreigner?

For purchasing property, a mortgage is generally more suitable than a personal loan, especially for substantial amounts. However, if you already own property, in the UK or abroad, a home equity loan might be an alternative financing option. It lets you borrow against the equity you’ve built up in your existing property.

Conclusion: Let Kredium Get You the Perfect Mortgage Offer

Getting a mortgage as a foreigner in the UK is no walk in the park, but it’s definitely doable, if you’re armed with the right knowledge and if you’ve enlisted the right help.

A reputable mortgage broker like Kredium can help you find lenders willing to accommodate your specific situation. Get in touch with Kredium today to enjoy our comprehensive real estate services and get notified about the best mortgage offers.

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