Buy-to-Let Watch Episode 11 | Expert Mortgage Brokers

Buy-to-Let Watch Episode 11

Buy-to-Let Watch Episode 11 | The Rise of Expat and Foreign Investor Buy-to-let Mortgages In The UK

 

According to HMRC data, overseas buyers accounted for 1.4% of UK property transactions in the year ending March 2023. While this may seem small, it represents a 20% increase from the previous year.

The UK continues to face a housing shortage, leading to high rental demand and attractive rental yields. The UK’s established legal system and transparent property market attract overseas Buy-to-Let investors seeking stability compared to volatile markets elsewhere. 

A weaker pound can also make UK property more affordable for overseas investors if their home currency is stronger.

It’s perhaps no surprise that more lenders are entering this market, including Molo and UTB, which have just launched their Expat offerings. 

A UK expat holds UK citizenship or is a recognised British National but resides or works in a country outside the United Kingdom, essentially living or being employed somewhere other than their home nation.

Molo has also launched an offering for Non-Resident (Foreign National) applicants. A Foreign National does not hold UK citizenship and is a citizen of another country. 

Buy-to-let for either of these types of applicants is often classed as ‘complex’, and the distribution of the products available by some lenders may be restricted to certain advisers or companies with the knowledge and experience to provide the advice.  

For example, advisers need to have a deeper understanding of the Sanctions regime as the adviser could face significant legal ramifications by advising individuals or companies subject to sanctions. 

Ensuring adherence to Money Laundering regulations can also prove more complex when your customer is not located in the UK. 

Purchasing a Buy-to-let via a Limited Company is pretty commonplace for UK property investors, and these companies are usually UK-based companies. The overseas investors, particularly foreign nationals rather than Expats, will wish to purchase the property via an offshore company or have an offshore company own the UK company. 

Liz Syms
Liz Syms, CEO of Connect for Intermediaries

Start Simple

For advisers looking to venture into this buy-to-let, I would suggest getting to grips with Expats first, as there are fewer complications around areas such as language and identification. Some additional points to be aware of are:

  • Understand any advice restrictions or regulations for the company your client resides in. Just because buy-to-let is not regulated in the UK does not mean the country the client resides in has no regulations regarding the advice given.
  • Ensure the firm or Network you belong to does not restrict you from offering this type of mortgage.
  • Use additional identity verification tools and hold virtual meetings rather than phone meetings.
  • When discussing ongoing affordability, examine income sources and stability and consider exchange rate fluctuations and potential tax implications.
  • If possible, evaluate credit history in the UK and the client’s home country.
  • Put together your panel of providers, remembering you may not be able to access all of them directly until you have built up some experience.

I suggest getting to grips with expats first

In addition, invest some time to understand the differences in criteria. The offerings may differ from the lender’s standard Buy to Let offering. The deposit requirements may be higher, there may be restrictions around income or credit, and the rates may differ.

Expats may also have requirements such as an existing Buy-to-Let in the UK, time since they left the UK or UK bank account requirements. Many lenders also have stricter requirements around the solicitor that can be used for the transaction.

Skipton International is a popular Expat lender with loans up to 75% LTV and competitive 5-year fixed interest rates. Molos’ new rates are slightly higher but offer a range of rate offerings, including shorter-term fixed rates and trackers. They also have a lower minimum loan compared to Skipton. UTB’s new offering is very competitive in terms of rate, suiting clients earning over £50000 and with a UK property already. 

More specialist lenders like Shawbrook and HTB have Expat offerings for complex property types such as mixed-use.  Connect for Intermediaries

This type of advice can undoubtedly be lucrative for advisers who take the time to understand the complexities. Alternatively, consider partnering with advisers or packagers you can refer clients to so you can still benefit from helping these clients. 

This concludes our article “Buy-to-Let Watch Episode 11 | The Rise of Expat and Foreign Investor Buy-to-let Mortgages In The UK. Stay “Connect” until next time.

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