The purpose of this post is not to explain the home buying process, as many blogs do this already. I want to merely highlight considerations you should take trying to purchase property as an expat, and take you through my experience from that lens.
Understand the Process
Read through this entirety of MoneySavingExpert’s Guide for a fairly thorough overview of the entire process. Do this before you even start to view flats, as it will help you identify what to look for (the good and bad) in even the viewing process, especially as this will be different from viewing mostly new build properties in North America.
Prepare for your Mortgage
Unless you’re walking around with a bag of cash, you’ll likely need to obtain a mortgage. As an expat, it will be a bit more difficult to get a mortgage, and the rates may be less ideal, but there are ways to navigate this.
1. Mortgage Rate Thresholds
There are mortgage thresholds for different rates depending on your LTV (Loan to Value). Your loan to value is the ratio of your loan size relative to the value of your property. If you’re requesting a mortgage of 400k on a 500k property, then your LTV is 80% (400k loan divided by 500k value). Basically, the tipping point for most mortgages is 85%. If you only need 85% of the value of your property or less, you can get a better rate. From the 5-15% range, it should be the same, but speak to your mortgage broker about what the thresholds would be for the particular lender. There are also likely restrictions on what your max LTV ratio is, as an expat. Expect to have to contribute at least a 10% deposit.
It’s worth noting here that I ultimately ended up going to a fee-free mortgage broker (London & Country) and not a bank, because it was way more efficient to get the brokers to trawl through different products on my behalf, rather than have me apply individually to banks. Also, you may have a harder time getting big banks to lend to you, and brokers will be able to find products suitable for expats who may have only a “fair” credit score (i.e. limited credit history).
2. Remaining Visa Duration
You’ll need a certain amount of time left on your visa (if you don’t have ILR). I believe the threshold is somewhere between 2-3 years left on your visa to qualify for any mortgage, but this will vary depending on the lender.
3. Documentation – Proof of Identity + Deposit Funds
You’ll need a lot of documentation. So far, I had to mail in my actual passport and my biometrics card (since it was foreign), to have them verify the document, instead of just the copy sufficing for proof of identity. For proof of deposit, I’ve had to provide:
- the last 2 months of payslips
- a payslip documenting my last bonus
- the last month’s bank statement (and if you’ve recently transferred in money to your main UK bank account for the deposit, you’ll have to prove the source of the deposit, so I’ve been requested to provide the next item)
- 1 month of foreign bank statements relating to deposit funds
If you’re going to go and download your statements, you’re better off downloading 6 months’ worth of everything (potentially UK credit card statements as well), because you may be asked for further documentation after you provide these initial documents. This whole process is to ensure that you are who you say you are, that you have the funds you say that you have to buy the property, and that the funds you have are coming from a legitimate source (i.e. income / savings and not money laundering).
If you haven’t transferred your funds yet and need to fund your deposit from accounts abroad, consider using a service like TransferWise or HiFX to maximise the exchange rate on your significant sums of money transferred, as bank rates are not ideal. You’ll have to pay a wire fee from North America with every bank for an international money transfer anyway, but it’s the conversion rate that will end up making a couple hundred or thousands of dollars in difference. Keep in mind that international wires also take a few business days, so factor this into the urgency of your transaction.
5. Government Schemes
If you plan on buying a property in London for £450k or under in London (the threshold is lower elsewhere in the UK), and you aren’t planning on doing this in the next 3 months, you can benefit from the Help to Buy ISA as a resident in the UK. Effectively, the government will give you a 25% bonus on your savings up to a maximum of £3k towards your purchase of a home. You can contribute £1,200 into this account on your first month, and an additional £200 every month thereafter. Even if you end up getting a 25% bonus on £2k in savings, think about that as £500 that could help pay for solicitors’ fees. You can also put more than one government bonus towards the home you are buying, so this could be double the bonus if you’re buying property with someone.
When you’re about to close on the transaction, you’ll need to close this account, provide the closing letter to your solicitor, deposit the funds from the Help to Buy account into your main deposit account, fill in this form, and provide the form to your solicitor.
6. Credit Score
As an expat who hasn’t lived in the UK for more than two years, there are important things that will help you make a difference in your credit score. Get your credit score report from Experian. There’s a free 30 day trial, and then it might be worthwhile keeping tabs on your credit score for the duration of your house hunting, as you can see the factors that influence your credit worthiness leading up to a mortgage application.
In general, the two (and a half) things that you can do as an expat to help prepare you for a good credit score are registering to vote in the borough in which you live, and a. having credit cards and/or overdraft, and b. having credit cards that are paid off every month.
7. Comparables / Negotiation
Just like in investments, it’s always good to do your due diligence on comparables; look at what the price per square foot is on similar properties in your neighbourhood, and even your street, the same building, or your own property. Data is a bit sparse, but by cross referencing a couple of different sources, you’ll be able to form some educated judgments on this. I built a spreadsheet (as one does) documenting properties in my neighbourhood with the same number of rooms, selling price, the year it was sold, the square footage (estate agencies will usually have a photo which indicate the square footage on the floor plan), and noting any cosmetic or qualitative notes that would affect price per square foot. It helped me form a picture for what might be a good bidding price. Negotiations may be more manoeuvrable in a post-Brexit world, but of course, demand will still fluctuate even between neighbourhoods.
- For selling prices by address with some property attributes, see the government Land Registry
- For sale prices by address and trends by neighbourhoods, see Net House Prices
- For sale prices, previous rental prices, and sales / lettings listings with photos and descriptions, see Zoopla Property History Searches(helpful for square footage and qualitative look at properties)
- For an alternate source quite similar to Zoopla in terms of data available, see Rightmove Property
8. Post-Mortgage Proof of Funds
Once you’ve received your mortgage offer, your solicitor will ask for proof of funds to fund the transaction. Note that they will ask for proof of funds not just for the deposit – they want to know that you’ve got the deposit, enough for stamp duty, and for any remaining fees; ask your solicitor what is the amount you have to prove. I’ve provided a sample of the accompanying form here.
The purpose of this step in the process is to make sure that the funds you’re using to make the purchase are not from fraudulent sources. You’ll be asked to provide the last 3 months’ worth of statements from all of the accounts you’re using to fund the transaction. Expect any big transfers of money to be scrutinised and back up documentation to be expected. For example, one of my Canadian GICs (government bond) came to maturity and the funds were deposited into my account. However, because it was a GIC and not an account, there was no statement available for the 3 months prior to maturity. I had to request a special bank letter detailing what the GIC product was and confirming that it was deposited into my savings account following maturity. The process to obtain this bank letter via mail and have my mother scan and send the document to me obviously took a week. This is a more nuanced example of the types of paperwork that can slow down the process, so be prepared for this early on in the process.
If your parents are helping you out as part of the deposit, they may need to sign a form to state that the funds are a gift and that they have no claims against your assets. Speak to your solicitor about this form if you know up front that you will receive parental contribution (as you will be asked where the money came from if it shows up as a fresh deposit in your bank statements). In general, just remember that this proof process can slow you down since you may need to request special documents from outside of the country. Just keep this in mind if you’re trying to expedite the process.
I didn’t find any other steps of my home buying journey affected by the fact that I was an expat. And of course, just a disclaimer as an ending note – every property search is unique. I am merely sharing what I encountered in my own journey if any of it can be helpful to you. Good luck.