It’s all well and good deciding to start a new life in another country, but if you can’t get a mortgage and don’t have the funds to purchase an apartment or house outright, then you face a lifetime of renting and the uncertainty that comes with it. However, as a foreign national, it’s certainly not possible to own your home and get yourself on the property ladder.
Owning a home in the UK, US, Australia, or the United Arab Emirates is achievable, but it comes with some extra work. Naturally, the hardest part is obtaining a mortgage, which can depend on your residency status, length of time in the country and your income levels.
To give you a helping hand, we’ve put together some things to think about before applying for a mortgage, but be warned that what we outline below can’t be achieved overnight…
Perhaps the most obvious hurdle to overcome when looking to purchase a property as an expat is saving for a deposit. The average house price in the UK is £233,000, $231,000 in the United States, and AED2.46 million ($670,000) in the United Arab Emirates. Of course, there are many factors to take into consideration, such as the size and location of your desired property, but it’s recommended that you save between 20-30% of the asking price.
Though many banks and lenders around the world offer up to 95% of the value of a property in some of their mortgage products (some still offer 100% mortgages), these tend to be more expensive and have tighter restrictions. So, the higher your deposit, the less you’ll need to borrow, the less of a risk you’ll be to banks, and the more likely you are to be accepted.
Whether you’re considering moving to another country in the years to come or you’re already there and renting, set aside as much as you can per month towards a house deposit. This will mean compromising on luxuries, like an expensive car or holidays, but the pay-off will be worthwhile when you’re able to secure a reasonable mortgage for your dream home abroad.
If you’re planning on holding onto your property at home (whether for family or to rent out and generate an income), consider taking equity out of that home to pay towards your new expat mortgage, but take into account the added monthly expenditure of two mortgages.
See also: How expats can invest in UK property
The sooner you have legal residency in your new country, the better. Most banks and lenders require mortgage applicants to have a legal and financial association with their country, and so applying for permanent residency and jumping through the legal hoops sooner rather than later will leave you in the best possible position to secure a mortgage.
Remember that if you’re planning to apply for a mortgage with a friend or partner, they too will need to be a resident of your new country. Legalities vary from country to country but applying for immigrant status, residency, or a permit to live permanently will help your case.
As soon as you’re legally a resident in your new country, put down your roots financially. Open a bank account, put yourself on the electoral roll (or similar if not in the UK), register an address (whether you’re staying with friends or renting) and apply for a credit card.
Now you’re living as an expat, you’ll need to prove to banks that you’re earning enough to repay your mortgage on time and in full. Whether you’ve moved to another country for work or you’re planning to freelance or run your own business, make sure you are generating a regular income and keep a record. Self-employed workers should hire a local accountant to keep on top of their finances and pay taxes on time, and employees should hold onto their paychecks and tax letters which will come in handy when submitting a mortgage application.
Things become a little trickier when you’re earning income from abroad, for example, if you have moved to Dubai but are renting out your old property in the UK. Again, a local tax advisor or accountant will steer you in the right direction and ensure your income is legally recognised in your new country so banks know you’re capable of making repayments.
Banks and lenders will look at your credit score whenever you apply for financial products, whether opening a bank account or applying for a credit card. So the sooner you establish your credit score in your country of residence, the sooner you’ll be approved for a mortgage.
If you’re building a credit score from scratch, you might need to apply for a secured credit card that is backed by a cash deposit you make upfront. These cards are available around the world and are designed to help you build your credit enough to qualify for an unsecured card. Shop around for the best deal and don’t pay over the odds, even if you’re desperate.
You can also apply for a credit-builder loan or a secured loan, use a co-signer or ask a friend or family member to add you as an authorised user to their credit card. Some services will put bills you’re already paying (rent, utilities) for on your credit score to help build a positive history of on-time payments, though not every financial institution takes these into account.
The key here is to take your time and avoid making any unnecessary financial risks. If you know you want to apply for a mortgage in six months’ time, don’t buy a car on finance today.
Next up, start building a relationship with a bank.
Shop around for the best mortgage deals based on your circumstances, find a provider who you’d like to use, and “woo” them by opening a bank account and proving your eligibility before you submit a mortgage application in a few months’ time.
Ensure your salary is paid into your account and that you pay bills on time, and consider taking out a credit card with the same financial institution and repaying in full every month.
The more good deeds you do, the easier it’ll be to prove you’re low-risk and the more likely your mortgage application will be approved. Some banks even offer exclusive discounts and deals for their existing customers, so it pays to put in the effort before you ask for your loan.
If you’re in a position to buy and don’t want to wait to be eligible for mortgages, you might want to consider working with a specialist expatriate lender. Be warned that such lenders may not be as tightly regulated as local banks and institutions, and they’ll likely charge a higher product fee and interest rate than they would to their local customers, so do some maths and decide whether you’re prepared to pay more for the convenience of buying now.
Expat lenders will look at your employment status, income (both before you moved and after) and affordability to offer mortgage terms. Some will be strict and automatically approve or reject an application based on risks, whilst others will be more flexible and consider your individual circumstances and credit history before they issue a mortgage in principle.
See also: How to find a good lawyer in the UAE
If in doubt, speak to a specialist broker and check their recommendations against advice from local lenders, and remember that overseas mortgage brokers are not covered under institutes like the Financial Conduct Authority, so you won’t be compensated if you’re given poor advice and face financial hardship as a result. Use your own judgment when applying for finance and don’t be rushed or pressured into a financial product you’re not suitable for.
There you have it - everything you need to think about before you apply for a mortgage as an expat. For more tips and tricks on living your best expat life, subscribe to the MSE blog.
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