If we put Brexit to one side for the moment, there are many expats originally from the UK looking to acquire property in their former homeland. The value of sterling has fallen since the 2016 referendum on the EU and even though it has made a short-term recovery, the real spending power of the euro and dollar has increased significantly. However, how hard is it to obtain an expat mortgage?
Strict criteria
There are a number of challenges to take into consideration when looking at expat mortgages. These include:-
• Proof of income
• Using assets as security
• Credit history
• Identification and address
It may seem very strange to include the four issues above as potential “challenges” to those looking to obtain expat mortgages. In the UK for example, it is very easy to provide proof of income, use assets as security and provide a credit history, identification and address. However, in some countries around the world it is not so easy.
Proof of income
If you are employed by an international company, with a footprint in the UK, this is probably the Holy Grail for lenders and borrowers. You will likely be paid in sterling, have a good track record and be able to prove your income. The situation can be different if you have your own company, you are self-employed or you are paid in a foreign currency.
Using assets as security
There may be legal issues when using global assets as collateral for an expat mortgage and these can significantly weaken an application. For example, in Italy it can take up to 7 years to obtain vacant possession of a rental property and that is going through the courts. So, in this scenario it is difficult to see how this type of asset could be used as collateral.
Credit history
In many ways creating your own credit history in the UK is something you can begin well before you make an expat mortgage application. For many expats, in the far-flung countries of the world, there may not be a credit history system and even if there is, it may not be as accurate as its UK counterpart. So, without a credit history there is no way that a traditional mortgage company could calculate the relevant risks.
Identification and address
Some countries in the world will not have electoral rolls and it can be difficult to confirm identification and address. If you are unable to prove “your existence” then again it can be difficult for traditional banks to calculate the risk of approving an expat mortgage.
Private banks
Many expat mortgages will go through private banks because they are able to appreciate the wider picture with regards to global assets and global income streams. Indeed some private banks, where there is appropriate security, will only require minimal identification documents. However, this does not mean that private banks will take excessive risks but only that they will appreciate the risks and reflect this in an expat mortgage terms and conditions.
The expat mortgage market is growing
Immigration was a major issue during the EU referendum and while much focus was placed upon European citizens working in the UK, there are many UK expats living the length and breadth of the globe. While some will build a new life and never return to the UK, others will look to return in their later years. As a consequence, we have seen a significant increase in the expat mortgage market and this trend is set to continue for some time to come.
Fairly simple vanilla expat mortgages will likely still be available from traditional high street banks but for more complex scenarios, many will be forced to go down the private banking route.