Skilled foreign workers who have settled in the UK on a relevant visa might assume that they cannot buy property here, but this is often not the case.
Overseas workers may want to buy property in the UK for short-term purposes, such as living in the UK, or for long-term investment purposes.
Lenders are usually prepared to offer mortgages to skilled foreign workers who meet the loan criteria; however, there are additional risks due to uncertainty, such as whether a foreign national will remain in the UK for the entire term of the mortgage.
The main difference between a foreign citizen mortgage and a standard mortgage is the application criteria, which will be discussed later in this guide.
However, if approved, the mortgage is like any other standard mortgage in that the choice between fixed and variable interest rates, and the process will follow the standard application process.
There will be the usual fees payable, including:
- Mortgage formalization expenses.
- Real estate valuation fees.
- Legal fees.
What is a foreign mortgage?
If you are not a UK citizen, it is still possible to get a mortgage on UK property. A foreign home mortgage is available to applicants who meet the following requirements:
- You are not a UK resident or do not have permanent UK residency.
- Born outside the EU, but with an indefinite residence permit or permanent residence.
Factors that impact a foreign mortgage application
When evaluating your foreign domestic mortgage application, lenders will consider the following factors when determining your suitability:
- Remaining time on your visa to remain in the UK.
- The type of visa you hold.
- How long have you been in the UK.
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How to Get a UK Foreign National Mortgage
If you are just thinking about applying for a mortgage as a foreigner living in the UK, important first steps to take that will make your application much more attractive to lenders include:
- Open a UK bank account.
- Get a permanent job in the UK.
If these steps aren't possible, some lenders may accept mortgages paid with foreign income, so it's not the end of the road.
We also have foreign mortgage brokers who can help you find the best lenders and products for your specific circumstances.contact us todayfor a free, no-obligation chat.
Visa classes and how they affect loans
When applying for a foreign national mortgage, the type of visa you hold is an important consideration for lenders.
Here are the top three types of visas and what they can mean for your mortgage application:
These visas are for people who are married and living with their spouse in the UK, as well as children and parents.
This visa allows you to work and stay indefinitely, and there is also the option to apply together with your spouse, which can improve the success rate of your application.
Tier 1 or Tier 2 work visas (now called skilled worker visas)
The possibility of obtaining a mortgage on any of the visa types will depend on the time remaining on your visa. Most lenders will require foreign nationals to have at least 12 to 24 months left on their visa.
read all aboutSkilled Worker Visa Mortgages.
Skilled foreign workers with an EU passport are currently considered by lenders to be UK nationals and will therefore generally be able to apply for a standard mortgage in the normal way, provided they have lived in the UK for at least 6 months.
The usual affordability and credit checks will be required during the application process, so as long as the EU passport holder meets these requirements, there should be no reason why high street lenders should not consider taking loans with competitive rates and terms.
However, this could change depending on the outcome of Brexit.
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What visa is needed to get a UK mortgage?
Qualified overseas visa holders with a Tier 1 or Tier 2 category visa can usually be accepted for UK mortgages, based on usual affordability and required credit checks.
However, a Tier 5 foreigner would be considered a temporary worker and therefore would not normally receive a mortgage.
A spouse visa is granted to people who are married to UK citizens and are generally treated the same as Tier 1 or Tier 2 visa holders.
In addition to the usual verification process, lenders considering a mortgage application from a Tier 1 or Tier 2 visa holder will also be interested in two other factors:
- How long the applicant has lived in the UK.
- The period of time remaining on the visa.
Lenders normally require a skilled foreign worker to have resided in the UK for two to three years, depending on their criteria.
This deadline is set so that an applicant has the opportunity to build a UK credit file, including credit and employment history. Also, lenders expect foreign applicants to have a permanent UK job as well as a UK bank account.
Lenders generally require applicants to have a minimum of 6 months remaining on their Tier 2 visa, although they will generally take into account the circumstances of the likelihood of visa renewal due to continued UK employment.
If an applicant has less time left on their visa, a larger initial deposit may be advantageous for the application.
Other elements can help with the application process, for example if the reason for moving to the UK is to work for the same multinational employer, income can be tracked longer, reassuring the lender.
Like Kenneth Clarke, fromSidepost.com.austates that "it is important to provide complete documentation when moving abroad, including your tax returns and annual profit and loss statements."
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Foreign nationals with low credit scores
If a mortgage applicant has minimal UK credit history or a poor credit score, it may be more difficult to get a mortgage, but usually not impossible. In this scenario, the interest rate offered and other terms applied are likely to be less desirable or competitive because of the risks involved for the lender.
A credit history can build up over time and therefore the duration of a foreign worker's residence in the UK is a key factor.
The credit score system not only looks at an individual's affordability, but records of regular payments towards consumer credit agreements on everyday expenses such as cell phones or utility bills.
If a negative mark is applied to a credit history, such as a county court judgment, loan default, or IVA, it can make it difficult to obtain a mortgage.
In such situations, when a foreigner has a low credit score for various reasons, it may be worth seeking independent financial advice to explore all available options for securing a mortgage and obtaining the most competitive rates.
Self-employment adds complexity to any mortgage application, even for UK residents, so if the applicant is also a foreign national, it would be worth seeking independent financial advice to explore the options available.
Foreign nationals may want to consider the following when looking to buy property in the UK:
- The location of the property acquired for investment would be fundamental. For example, lenders may favor buying investment properties within cities over homes in cities, for example, without major transport connections or university campuses.
- If foreigners are using overseas funds for a deposit, additional checks may be made and therefore may cause delays in the mortgage completion process. The origin of the funds must be traceable to allow the mortgage application to be approved.
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Summary of Mortgages for Foreigners
Certain categories of foreign nationals can obtain a mortgage in the UK, provided they meet the general lending criteria, as well as any specific criteria relating to foreign nationals set by individual lenders.
Depending on personal circumstances and the credit history of the mortgage application, independent financial advice may be required to find specialist lenders and compare interest rates and terms offered.
Call us today at01925 906 210ocontact us. One of our consultants can discuss all of your options with you.
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