Some 5.5 million British nationals now call an overseas country home, making one in 10 of the United Kingdom (UK) population an expat. Whether you're moving to Canada or considering expat life in Germany, you might not necessarily want to sever permanent ties with the UK. Many non-resident UK nationals still want to provide a UK home for their family, while savvy investors might want to capitalise on the steady growth of the UK housing market where property prices rose by an average of 9.8% from 2020 to 2021.

The obstacle that many expats face is UK lenders who are reluctant to offer mortgages to anyone who is not a permanent resident. Particularly since the 2008 financial crisis, the perceived risk is higher. It is possible, nevertheless. One solution for getting a UK mortgage is to use a specialist expat mortgage broker. These lenders offer niche expertise in mortgages for UK nationals living overseas who want to buy property, as well as for foreign nationals who want to enjoy expat life in the UK.

Planning on buying property overseas? Avoid hefty markups on exchange rates when buying and selling overseas real estate with CurrencyFair's low-margin FX rates.

What is an expat mortgage?

Expat mortgages differ from standard lending arrangements in two key areas:

• The checks and eligibility requirements tend to be stricter. Following the introduction of the European Mortgage Credit Directive in 2016, many UK banks stopped lending to expats altogether. Those that do offer mortgages for expats and non-residents typically apply closer scrutiny to buyers based overseas.

• The terms and rates are less competitive. You'll need a bigger deposit (at least 25%) and may have to settle for a maximum loan term of 25 years.

In other aspects, expat mortgages are similar to those available to UK residents. You'll find non-resident mortgages that also allow you to borrow up to six times your income and you may be able to secure a loan-to-value rate of 95%. The flip side is that you will also be expected to provide at least three years' credit history, which can be a significant challenge without the help of an expat mortgage broker that specialises in performing credit checks overseas. Most lenders will also want to see a UK bank account and UK address, even if it is a parental or family address used for correspondence only.

Other challenges to consider are currency fluctuations, an unstable overseas job market since the pandemic, and a bureaucratic labyrinth to negotiate since Brexit.

What types of expat mortgages are available in the UK?

Expats can access the same mortgages available to permanent residents, with the caveat that terms and eligibility requirements will reflect the elevated risk in the eyes of the lender.

Residential mortgages. These are popular among expats who are working abroad but who want to provide a permanent home for family members, as well as expat families planning to return to the UK. As far as lenders are concerned, family matters. They will be looking for evidence that the home will be occupied by a close relative. Residential mortgages for expats are available on a repayment and interest-only basis through specialist lenders.

Buy to let. Particularly if you're moving to an overseas destination where local salaries are lower than in the UK, income from a buy-to-let investment can help steady the ship and secure your long-term financial future. These are nearly always offered on an interest-only basis, and you should expect a lower loan-to-value ratio (usually no more than 60%).

Self-build. Securing funds for a new development is arguably the biggest challenge, but there are specialist lenders who can help. With self-build mortgages, the loan is released in stages as opposed to a lump sum and the loan to value ratio is usually no more than 70%.

Where to start your search for an expat mortgage

A handful of lenders and brokers focus almost exclusively on expat mortgages in the UK. There isn't one single independent source for ranking lenders but some of the recurring names that will appear on any search include:

• Skipton International. Part of Skipton Building Society, it's the UK's fourth-largest building society.

• Liquid Expat. Liquid has arranged billions of pounds' worth of mortgages for UK expats in the last decade.

• HSBC Expat. One of the few big high street banks that still operated in the expat and non-resident mortgage lending market.

• Charcol. An independent mortgage broker in the UK with over 45 years of experience in arranging specialist mortgages, with a 4.85/5 customer service rating based on testimonials to date.

How to prepare for an expat mortgage application

Streamline the application process and remove any unnecessary frustration by building as thorough and detailed a dossier as possible. That means gathering proof of overseas and UK earnings going back at least three years, along with UK bank statements and UK credit reports. If you're self-employed, you can overcome some of the characteristic resistance among brokers by showing accounts that have been independently audited. Note that due to stricter anti-money laundering regulations, you might have to elaborate on the source of revenue for the deposit too.

A note on mortgages for foreign nationals buying in the UK

For overseas nationals living the expat life within the UK, there are no significant barriers to buying UK property (residential or investment) that are not already covered above. In your particular case, however, the challenge is to verify overseas income, particularly if it represents the main source of income. You will also need a full credit history. The difficulty of securing a mortgage as a foreign national increases considerably if you plan to retire within 15 years. Bear in mind also that the process for obtaining permanent residency is considerably more convoluted since Brexit.

Tax implications of owning UK property as an expat

Since owning property in the UK represents “permanent ties” in the eyes of Her Majesty's Revenue & Customs (HMRC), expats should be careful to stay on top of self-assessment reporting, even if no longer resident in the UK. Even expats must pay stamp duty, and any income from UK property is taxable in the UK unless you apply for non-resident landlord status. The personal allowance for the 2021-2022 tax year was £12,570. Leaving the UK and disposing of assets no longer exempts expats from capital gains tax (CGT). Prior to 2016, expats could avoid CGT if they were non-resident for a minimum of five years.

As with any major investment, it's easy to be distracted by the six-figure numbers and miss out on the savings that seemingly slip under the radar. Currency exchange rates are a prime example and CurrencyFair can be up to eight times cheaper than the big banks when it comes to transferring funds from abroad.

Planning on buying property overseas? Avoid hefty markups on exchange rates when buying and selling overseas real estate with CurrencyFair's low-margin FX rates.

This information is correct as of February 2022. This information is not to be relied on in making a decision with regard to an investment. We strongly recommend that you obtain independent financial advice before making any form of investment or significant financial transaction. This article is purely for general information purposes. Photo by Towfiqu barbhuiya on Unsplash.