HOW TO GET A MORTGAGE IN THE UK
If you have plans to settle in the UK and are considering buying your own property, this guide, in which we gathered the types of mortgages and the necessary steps to get a loan in the UK, is perfect for you.
Can immigrants get a mortgage in the UK?
Yes, they can. Foreigners, resident or not, can legally buy property in the UK. You can also apply for a mortgage as an immigrant, in that case but banks will set their own terms for the mortgage. As a foreign investor, you may be offered less favourable terms or higher interest rates than British citizens, or at worst they may refuse to issue a mortgage. The most important reason for this is that a newcomer to the country does not have a credit history or has a low credit score. The longer you stay in the UK and the more you earn, the more people are willing to give you a loan. In general, you can get a mortgage 4.5 times your annual income, for example, if you have an annual income of £50,000, it is possible to get a loan of around £200,000- £225,000. The down payment amount requested by the banks is between 10% and 20%.
In addition, the term of the mortgage is usually between 25-30 years, as the maximum expiration target is 67-70 years, sometimes it can be up to 35 years depending on the age situation.
How can I get a mortgage in the UK as a foreigner?
Getting a mortgage in the UK isn’t very difficult or complicated, but you do go through a series of checks to make sure you can afford the loan. Financing will depend on your terms, but since the UK mortgage market is very competitive, it is useful to consult with multiple banks and see different offers.
Should I apply to a bank or a mortgage broker for a mortgage?
You can arrange a mortgage directly with the bank of your choice. However, if you’re unsure of what is best for you, it may be a good idea to seek expert advice from a qualified mortgage broker at the expense of a little more.
The reason for this is; although the bank and broker you choose will check whether they offer is suitable for you, the bank is not obliged to make any other suggestions to you beyond that. If you don’t know about the UK mortgage market, a wrong choice can cost you dearly.
The broker, on the other hand, is responsible for working in your interests and explaining in detail why they are recommending a particular product for you. You can also make a formal complaint if you are not satisfied with their service. The broker commission can start from free (due to bank commissions) and go up to £1,000.
What types of mortgages are available in the UK?
The first thing you need to decide is whether you want a fixed rate or a variable rate product. Fixed rate mortgages guarantee that the same interest rate will be charged throughout the term of the agreement, which is usually up to five years. A floating rate mortgage can cost depending on how interest rates change.
There are also products that can only be used by buyers in certain situations. For instance, first-time home buyers may have different opportunities than other buyers such as “Help to Buy: Equity Loan” (Please see the bonus section at the end).
Since different banks will offer different products and it is not possible to access all loan options when it comes to mortgages, it is useful to seek expert advice from a financial advisor or mortgage broker who can explain the options available to you.
The exact documents you need will depend on the bank you are applying to, but the following documents can provide a general framework for you:
- Copies of your personal identification documents (passport etc)
- Proof of your legal residence in the UK (BRP)
- Documentation proving that you are eligible for the loan (usually a credit check, bank statements, your salary papers, P60 statement or a letter from your employer)
- Documents proving your repayment ability of the mortgage (this could be invoices or bank statements showing that you can meet the monthly payments)
- Decide if you want to use a broker to explore your UK mortgage options
- Choose a bank with a mortgage that fits your needs
- Submit the requested documents and get a quote
- When the bank allocates a mortgage limit, it gives you a document that will be valid for 3 months. With this document, contact the real estate agent or landlords and carry out the purchasing process.
- Choose a local lawyer to assist with the legal aspects of the purchase
- Pay your deposit and agree on completion date to secure sale
- Complete other transactions required by your bank
- After these processes are completed, you can complete the sale. You will take ownership of the property and be responsible for additional taxes such as mortgage payments and stamp duty.
When buying a mortgage in the UK, you will incur costs such as administrative fees and legal costs. Of course, all costs will vary depending on your circumstances, but in any case, when you add the fees below together it can be said to be a costly operation:
- Mortgage reservation fee, holding offer for a certain period of time: up to £250
- Editing fee: up to £2000
- Property valuation fee: £150 – £1,500
- Broker fee: around £500
What are the major banks that provide mortgages to foreigners in the UK?
All major UK banks offer mortgage products, but not all may have a service available to foreigners or non-residents. Ultimately, since the decision about who is eligible to take out a mortgage is made by the institution, it is strongly recommended that you check with the local bank branch you are interested in about which products may be suitable for you, or you can speak to a broker.
You can try getting a local mortgage with one of the following banks:
- HSBC is a global banking brand based in the UK offering a private mortgage service for foreigners.
- Barclays offers a special service to non-resident investors looking to buy a UK resident property.
- NatWest can offer mortgage services to the citizens of some countries.
BONUS: Help to Buy: Equity Loan!
The government’s “Help to Buy scheme” offers an equity loan where the government lends first-time buyers in England money to buy a newly built home. Here are the main requirements:
- You must be over 18 years old,
- The loan must be used to buy your main residence,
- It cannot be used to buy a second home or a buy-to-let property,
- You need a deposit of at least 5% of the purchase price.
If you meet these requirements, you can borrow 20% (40% in London) of the purchase price. This amount is interest-free for five years.
How to apply
You need to apply through the Help to Buy agent in the area where you want to buy your home.