As a reputable UK developer, focused on providing high spec properties across the UK, we offer more than just premium developments to a global audience. Our complete end-to-end service ensures a totally streamlined property purchase and ownership experience - whether that be for end use or for investment.
A key part of this is assisting international buyers with overseas mortgages. To explain more about the process of getting an overseas mortgage for UK property, we spoke to Richard from Oriel Finance, our preferred mortgage partner, to share with us some of the key points you should be aware of.
Can overseas buyers get a lending for a property in the UK? If so, what are the requirements to be eligible for a mortgage?
The mortgage market for overseas clients has developed significantly in recent years. We have access to a number of lenders who can offer residential and investment mortgages to clients. The variety of lenders allows us to access borrowing with clients whose income is as low as £25,000 per year equivalent, which can be derived from salary, self-employed income, rental income or pension.
There are more pragmatic lenders who may mitigate the need for any income, but this will be dependent on the wider situation of the client. In terms of maximum age, we have lenders who are either comfortable offering up to the client’s retirement age, or at times even as high as age 85.
Rates for residential clients are typically ranging from 1.49% - 3.99%. Buy to let rates tend to price higher from circa 2.60% - 4.19%. The key element will always be the client’s situation, and our aim is to ensure we get the best possible option for them.
Typically, what are the lender’s interest rates for overseas buyers, and how much are they willing to lend?
Each lender has their specific nuances, but the majority of UK banks are comfortable offering borrowing up to 75% loan-to-value. Some lenders will consider offering up to 80%, but often the products at this level will attract a higher rate. When considering the residential mortgage route, lenders offer typically up to five times income in their affordability calculation.
Investment mortgages are typically defined by the rental income generated from a property and considering the higher yields offered on your schemes we tend to find the rental calculation route will typically allow us to achieve 75% fairly comfortably.
What are the required legal documents you need to process a client’s mortgage application?
The typical documents required for a mortgage will include ID and proof of address, six months’ worth of bank statements evidencing income, expenditure and deposit funds, and income evidence.
Some lenders do require clients to provide a TransUnion credit report but most within the market are comfortable working on statements to evidence clients outstanding debts, this includes credit card statements, loan statements and mortgage statements.
Most lenders accept all documents in PDF format so there is no need to typically see original copies.
How long does it take to get the mortgage offer? How many lenders does Oriel Finance work with?
In terms of mortgage offer, assuming we work with a client who provides all documentation as required, we can achieve mortgage offers for overseas residents in circa three working weeks.
Inevitably, some lenders can prove timelier and, as part of our advice process, we will always consider the client’s given timeframe before recommending a lender.
Some buyers choose to purchase property using a company. If this is the case, does the mortgage have to be guaranteed by all the directors of that company?
Whilst some lenders do require all directors to provide a personal guarantee we do have access to lenders who will allow any director who holds less than 20% shareholding to not provide a guarantee.
This can be beneficial especially when clients include their children in the ownership structure of the SPV.
When there is more than one purchaser, for example a couple, can the mortgage be in just one of the purchaser’s names if they both want to be on the legal title?
There are lenders who can consider this route, but it is far less common in the UK for clients based overseas. Typically, if the clients are to be on the legal title they are required to be on the mortgage. Conversely, we do have lenders who are comfortable offering joint mortgages but only one applicant on the title.
This can allow a client to utilise a family member to support their application in terms of affordability but remain outside of the ownership providing potential stamp duty reductions.
At the moment is there a particular product you have that you recommend to overseas buyers? And do lenders usually offer better rates on a capital repayment or interest-only mortgage?
We have seen a lot of overseas investors taking five-year fixed rate mortgages purely because they provide long-term comfort around the given monthly payment. Our lenders tend to offer their products on the same terms regardless of the repayment method.
Therefore, interest-only does not incur a higher rate with the majority of banks who do offer this facility type. There are few lenders who will only offer interest and principle mortgages, but if a client confirms they prefer an interest only method we will of course ensure we look to banks who can achieve this for them.
Does a borrower have to open a UK bank account to get a mortgage or make mortgage repayments? If so, would you be able to assist them with opening a UK bank account? If not, what suggestions do you have?
Virtually all lenders will require clients to hold a UK bank account to make their payments. Some lenders will support clients in opening the account as part of the mortgage application.
If the lender does not offer a bank account, we as a business can also introduce any applicants to banks that can support them on this. Typically, we can help a client open a bank account in a matter of days.
If a purchaser received a bonus or came in to some extra money and wanted to make an over payment to their mortgage, is that possible?
Most lenders allow for overpayments dependent on the product. If a client is on a fixed rate, for instance, it is typically common across the market to be able to overpay by up to 10% of the outstanding balance without incurring a penalty.
If we consider a variable rate, often these products have full flexibility on overpayments and the client therefore can make a payment at any time without incurring an exit penalty
When do you recommend buyers begin their mortgage application?
We are always keen to speak to a client as early as possible to provide them comfort around their ability to borrow. If we are in contact with a client six months prior to completion, this gives us ample time to find a solution, prepare the documentation and achieve an offer.
The offers in the international space tend to be achieved within three to four weeks, and remain valid for six months thereafter. This ensures we have the mortgage prepared with ample time to completion and enables the client’s solicitor to finalise their conveyancing without any time pressure.
The other benefit of applying early is that a client will be able to proceed with a full range of lenders as we can consider the banks who may take longer to achieve approval.
If you would like to learn more about investing in UK property, whether domestically or from overseas, please contact our team today by clicking here >> [LINK]
