There are three types of borrowers who come under the broad heading of foreign investors – ex-pats, non-UK residents and foreign nationals.
When seeking a mortgage for a buy-to-let property, the main problem for foreign investors is the risk they present to lenders. To assess this, lenders have requirements outside their usual criteria that need to be met.
• Ex-pats These are UK passport holders who have left Britain to live abroad but buy property to let in the UK either as an investment or to keep some roots in their home country.
Ex-pats pose a greater risk to lenders than people resident in the UK as lenders are unable to carry out credit checks. Not all lenders will lend in the ex-pat market and those that do often reduce the LTV to 70%, although some offer up to 85%.
The application process for ex-pats is not much different from that for UK residents. Provided applicants can prove employment and a permanent address in their country of residence, lenders’ usual criteria apply.
• Non-UK residents For foreign-born applicants who are resident in the UK, lenders insist that they have been resident in the UK for two or three years and paid UK tax during that time. Lenders carry out credit checks and applicants are expected to meet the same credit scores as people who have been UK residents for their whole lives.
Lenders normally require evidence that applicants have no plans to leave the UK and require them to have a permanent right to reside or two to three years remaining on their visas.
• Foreign nationalsApplications are increasingly being made by foreign nationals. It is this category of foreign investor that poses the highest risk for lenders as they can’t carry out credit checks and foreign national investors often have no ties to the UK. Far fewer lenders lend in the foreign national market and those that do place more restrictions on borrowing. Most lenders offer maximum LTVs of between 65% and 75% and cases tend to be treated as full status.
Other stipulations include restrictions on the countries of residence which are acceptable. For example, political hotspots may be excluded.