UK Expat Holiday Let Mortgages

With the popularity of UK holidays showing no signs of dwindling, you might wish to invest in a holiday let property, even if you’re not currently living in the country. The good news is that expat holiday let mortgages are available to UK nationals who are living or working overseas, and, in this guide, we’ll discuss the best way to get one!

What is an expat holiday let mortgage?

If you’re a UK national living or working abroad, you could qualify for an expat holiday let mortgage. This would allow you to invest in a property and operate it as a furnished holiday let; should you meet all of the mortgage lender’s criteria, of course!

Aside from the potential financial gains, owning a holiday let can be particularly appealing to expats because they offer a base for visits to the UK. So long as the expat owner doesn’t abuse the occupancy rules set by HMRC, they can benefit from staying in their own holiday let property – meaning the ultimate convenience and minimum travel costs!

What is a UK expat?

Within this article, we will be discussing specifically UK expat mortgages, and so for clarity:

An expat is: a UK citizen who lives and/or works, outside of the UK either permanently or for an extended period of time. For example, a British engineer working for an oil company in the Middle East.

An expat is not: a foreign national. That would be someone who doesn’t have British nationality in the first place, for example a French citizen working in London for a finance company.

Are you eligible for a UK expat holiday let mortgage?

Which countries are allowed?

First things first: although you’re still classed as a UK national, the country in which you live is important. While mortgage lenders will accept applications from expats, you’ll find that some lenders will reject cases from certain countries. This all comes down to the lender’s perception of the risk involved.

The first issue is finance, where the money for the mortgage deposit is in a different currency or a foreign bank account. Mortgage lenders are extremely vigilant about fraud, money laundering and so on; even in the simplest of situations, lenders will require proof of deposit and where it came from, as well as proof of income. When different currencies and overseas transactions are involved, it’s easier for people to cheat the system, which in turn makes lenders more wary of accepting those mortgage applications.

The second issue is the risk that the country itself poses. If you’re working in a country prone to warfare, corruption, political instability or human rights issues, for example, the mortgage lender might view you as too high risk an applicant. Imagine that they lend £200,000 to an expat who six months down the line finds out that the currency they earn in is severely negatively impacted by a falling exchange rate due to some global scandal: the person’s ability to pay their monthly mortgage payments would no doubt be affected.

While the situation will differ depending on the mortgage lender, it should be noted that some countries are not members of the Financial Action Task Force (FATF) and as such, expats living in these countries would typically find it more difficult to get a holiday let mortgage.

Typical lending criteria for expats

Mortgage lenders will generally want expats to meet the following conditions:

• You’re a provable UK citizen and can provide evidence that you live and/or work abroad, in an approved country.
• You still have a working UK bank account.
• You used to own, or currently own, a UK property. Sometimes you will also be asked to provide your address history.
• You have a minimum employed income of around £35,000 and aren’t self-employed or retired.
• You have a good credit history in both the UK and your country of residence.

It should be noted that if you’re applying as a couple, mortgage lenders will require at least one of the applicants to be a UK national, but not always both.

Other lending criteria

As well as the specific expat requirements, mortgage lenders will also expect you to meet more general criteria that holiday let properties demand. These include:

• The right property: mortgage lenders will want proof that the property provides enough security against their loan. They want to see a sturdy property that’s of standard construction and in good condition – no dilapidated houses with damp problems or trendy wooden lodges.
• Interest cover ratio (ICR): mortgage lenders will undertake an ICR: a rental-focussed affordability calculation to test how much money the applicant can borrow. The ICR will be based on the holiday let’s projected gross rental income, which must therefore prove to be sufficient.
• A suitable deposit: you will need a substantial deposit to secure a holiday let mortgage, generally larger than with a residential mortgage. Mortgage lenders will also want proof of where the deposit came from.

How can we help?

Holiday let mortgage applications will always benefit from the help of an expert broker such as HCM, and expat mortgages are no different! To see whether you’re eligible for a mortgage or to speak to an expert, contact us here.