Mortgages.scot

I get quite a few questions from non-residents about the difficulty of obtaining a mortgage in the UK. That is from those living outside of the UK. Why is it so difficult? Rather than address these questions individually I thought it would be easier to address the points in a single article.

Why is it difficult for non-residents to get a mortgage?

Simply put, the majority of lenders don’t have experienced people and established processes to deal with applications from non-residents, especially where income is not UK based or in GBP. There can be a few reasons for this.

Local knowledge

One example is if you are resident in the USA and being paid in USD. In reviewing the application the lender must understand how you get paid, tax calculations and so on. This gets more complicated if you are self-employed in understanding US tax returns.

Now add another 10 or more countries to the above. The need to have people that are sufficiently experienced is a significant commitment. One that most lenders are unwilling or unable to support non-residents.

Being able to identify discrepancies and verify information often relying on documents that have been translated can be challenging.

Credit history

For most lenders, obtaining credit data outside of the UK is difficult. It is either not available, unreliable or very costly. That makes it difficult to fully verify and understand a clients background.

It makes no difference where someone lives, the affordability process needs to be followed for everyone that applies for a mortgage.

Foreign Currency

Lenders need to take foreign currency fluctuations into account. For example, a client gets paid in USD and the mortgage payment will be £1,000 per month or $1,387 at current rates.

What if the value of the USD falls 5% against the Pound? The mortgage payment will remain the same at £1,000 but the amount of USD a client will need to exchange in order to pay that £1,000 increases by 5% to $1,456.

The USD income does not change it simply means that more of their income is required for no other reason than currency fluctuations.

My experience is that lenders will deal with that using a currency haircut. So if you earnt $100,000, a 10% haircut may be applied to that for currency fluctuations. So only $90,000 would be used as available income. That allows a 10% movement in the USD against GBP.

Other currencies that are considered less stable than USD or EUR may be subject to much higher haircuts. I have seen some currencies have a 50% haircut applied and others would simply not be considered at all.

Capital Controls

In some countries, capital controls exist to manage to flow of money out of the country. Some may limit the maximum amount that can be transferred out and that may not be enough in certain cases to meet lenders requirements.

Limitations & Requirements

Those lenders that do offer mortgages to international clients will have restrictions in place due to the common elements above. Each may then have additional restrictions. In summary, you will find that they:

• Only specific currencies will be allowed for income purposes.
• Foreign currency haircuts will reduce the actual amount of income that can be used.
• Country of residence will be restricted and likely exclude those with capital controls.
• All foreign documents may have to be independently translated (this is costly).
• Enhanced verification due to not being able to credit search may mean more documents required and it will take more time and effort to get to a decision point.

I find it more costly for lenders to process and those costs may be passed to you.

To be clear, there are a number of lenders in the UK that do offer mortgages to international customers. Some are better than others at it. I suggest looking for a broker that has the experience and therefore knowledge of who is best to approach.

Any questions on this or other information required, drop me an email.

I covered international income on my affordability assessment guide, see here.

As noted earlier there are few mortgage lenders in the market that provide lending to international clients. Barclays has an international banking option you could consider as a starting point.