Property funding for foreign residents

But this steady growth has meant that property prices in the UK are inevitably high, particularly in the London area.

Buying property in the UK therefore often involves long-term finance, such as a mortgage - a loan secured on the property itself. In the current, low-interest financial environment, a mortgage can be a cost-effective way to acquire property of all kinds. If you are looking to buy a property outright, yields from rental income can be high, while property prices tend to rise, offering both income and capital growth.

What kinds of property can you buy?

• Residential property - a home to live in for all or part of the year
• Residential property as an investment - a home that you may let out to tenants
• Commercial property for a business - if you run an international business, buy property such as warehousing to use as part of your business may be a sound investment
• Commercial property as an investment - you can buy commercial property, from an individual shop or unit to a complete trading or industrial estate

As a foreign citizen, you can easily buy property in the UK, even if you do not currently live in the UK. There is almost without exception no restriction on the property you can acquire. However, you may be at some disadvantage when it comes to tax. The tax rules have become more complicated over recent years and, for the most part, less beneficial so buying as a non-resident may mean a range of additional tax charges. 

Many of these tax changes which have been relatively recently introduced affect not just non-UK residents, but also foreign-domiciled UK residents, known as ‘resident non-doms’, or RNDs, as well as citizens of other countries.

The rules apply to both residential and commercial property and affect both direct ownership and ownership through a company, partnership, trust or other entity. It’s important to understand the new rules and their implications for your portfolio strategies.

It may also be important to understand that buying property in the UK as a foreigner is easier if you are a cash buyer. If you need to apply for a mortgage or additional borrowing, it may be difficult to apply for such funding as many lenders will have a blanket ban on lending to non-residents. However, a small number of UK specialist lenders will offer bespoke mortgages and short-term finance designed specifically for non-UK citizens who are buying or refinancing UK property.

At Rangewell we can help you find the lenders you need.

The challenge

Lenders want to be sure they will be repaid and see foreign applicants as presenting an additional risk, so your credit history is key, as opposed to where you were born and where you currently live.

To be considered for a UK mortgage, lenders will want to see that you’re allowed to be in the UK and earn money and that you have a good credit history in the UK before they agree to give you a mortgage. You should make every effort to build up a good credit score. This will mean opening a bank account, setting up some direct debits and making sure you pay your bills on time. 

If you’ve only recently moved to the UK, you might find it takes a while before you can be considered for a mortgage.

Other requirements

• A deposit - You may need to provide at least 25% of the total purchase price of the property as a deposit which is used towards the purchase. It demonstrates to the lender that you are committed to the purchase of the property and will not simply walk away from it if your plans change. The deposit actually remains invested in the property.
• A source for your funds - The funds for your mortgage must be traceable to a legitimate source in order to make a successful application, which avoids the possibility of money laundering.
• Your employment status - If you are employed by a multinational organisation, it will be easy to prove your income. However, you will need a reference from an international accountant if you own your own business or are self-employed.
• Net worth and net assets - Holding cash and shares, rather than property, as part of your net worth will allow you to access a wider range of lenders.
• Size of borrowing - If you are not a UK resident, or if the majority of your income is generated internationally, you may need to borrow a large sum to secure a mortgage, perhaps over £1 million. Placing Assets Under Management (AUM) with the lender may give you access to a wider choice of lenders.

If you’re an EU citizen you should be able to get a mortgage if you have:

• lived in the UK for at least 3 years
• a UK bank account
• a permanent job in the UK

If you were born outside the EU and have permanent residency or indefinite leave to remain lenders will want evidence that you have:

• lived in the UK for at least 2 years
• a permanent job in the UK
• a UK bank account
• a sizeable deposit (as much as 25%)

If you don’t have permanent residency you might still be able to apply for a mortgage if you have:

• A Tier 2 work visa
• A Family visa
• A UK Ancestry visa
• A Residence card

If you cannot meet these criteria, it may still be possible to arrange funding to buy property, but you may need to consider a secured loan rather than a mortgage.

The lending process

The exact paperwork you'll need will depend on your chosen lender but you can expect to be asked for :

• Copies of your personal identification documents or passport
• Proof of legal residence in the UK
• Documents to prove you're creditworthy, such as a credit check, bank statements, proof of your wages, your P60 benefits statement or a letter from your employer
• Documents to prove the affordability of the mortgage such as household cash flow statements, utility bills or bank statements which confirm that you can afford the monthly payments.

Once you have an offer accepted on a property, you’ll have to hand over more paperwork, such as a property valuation and survey, to prove it’s priced fairly.

Remortgaging

If you already own property in the UK, you may wish to look at the possibilities of remortgaging. This can have two important benefits:

• It can reduce the cost of your repayments. By taking out a new mortgage loan, and using it to pay off your existing funding you can frequently take advantage of a lower interest rate thanks to a reduced LTV (loan to value) or from market reductions in rates.
• It can free up funds for additional investments. By taking out a mortgage on a property that you already own, you can release a large amount of cash which you can use elsewhere, for business purposes or to acquire additional property. It is not usually necessary to have paid off your initial mortgage to release funds in this way.

How Rangewell can help 

If you are a foreign national or a UK citizen currently living abroad you are looking to invest for the first time, expand your portfolio of properties in the UK or remortgage an existing one, we can talk you through the various options that might be available to you. 

Buying any business with property involves high costs, and it is important to have expert help to get the kind of funding that is right for your plans.

Rates are crucial. Even a fraction of a percentage point can make a substantial difference to what you will actually repay each month, and understanding fees and penalty charges are also vital to avoid extra expenses. 

Borrowing can be made more challenging still by the fact that there are many different lenders who may be prepared to offer funding to you. Each has their own approach to interest rates and fee arrangements, and comparing them all may require expert knowledge in order to fully understand what is really being offered.

At Rangewell, we work with lenders across the market - and we can call on the expert knowledge you need. It means we can ensure that you have the most appropriate financial solutions when you are considering a business purchase. Our knowledge can not only help you secure the funding you need - but it can save you a great deal of cash too.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.