property

Considerations on Buying Property in the UK as an Expat

/ Stephanie / 1 Comment

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).

4. Funding

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.

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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.

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So You Want to Live and Work in the UK: Finding a Flat, Part 1

/ Stephanie / 3 Comments

For the previous posts in this series, please see So You Want to Live and Work in the UK: Finding Work on Tier 5, So You Want to Live and Work in the UK: The Visa and So You Want to Live and Work in the UK: Circular Finances.

Hopefully, you’ve now managed to wrangle yourself a bank account or have access to a place to store your funds so you’re able to put down a deposit down to let a flat. Assuming that this is the case, you can now begin the arduous process of finding a place to live. There are quite a few considerations when flat hunting. I’m splitting this into a two-part blog series to take you through the elements to consider. This post will focus on finding the right neighbourhood and property for you, and the second post will focus on dealing with letting agents and making an offer.

I highly recommend that you have a look at the property listings available on the market and use the pictures and information on the sites to form your preferences. You will likely not be making offers on flats in this information gathering phase, but you will be developing a list of requirements for a flat in your desired budget range. Some of the popular sites where most agencies post their properties (in order of most useful to less useful) include Zoopla, Rightmove, Spareroom, Gumtree, and OnTheMarket. You can also check out the websites for the bigger lettings agencies to see postings on their sites (Foxtons, Knight Frank, Hamptons, and Winkworth). Keep in mind that oftentimes a flat will be posted as available, but by the time you call to arrange a viewing, the flat will have already been let – that’s how fast the real estate market moves in London, which is why it’s more helpful to use these websites as research. Additionally, there are loads of smaller lettings agencies within each neighbourhood, so do not view my above list of lettings agencies as exhaustive.

When I was looking for a flat with my flatmate, there were generally seven factors that played into us being able to find a property that was a good fit for us. These considerations helped us narrow down the properties / neighbourhoods for which we wanted to view flats, and helped speed up the vetting process so that we weren’t wasting our time viewing flats that weren’t going to be a good fit. It also helped to manage our expectations for what would be reasonable requirements given our budget and the neighbourhoods in which we wanted to live.

Lettings prices are generally represented as per calendar month (pcm) or per week (pw). Note that pw pricing isn’t as simple as multiplying by 4 to get to a monthly rate: you will need to multiply by 52 weeks and then divide by 12 months to get to a monthly rate. Prices are primarily driven by the following seven factors:

  1. Supply and demand for a particular neighbourhood
    Generally, the worst time to look for a property to let is during August as this is when students descend upon the city; while there is increased supply as old students move out, the influx of new students provide fairly fierce demand, even in neighbourhoods that don’t border major universities and schools in London. Moving in mid to late September or October will make it an easier process to find a flat. Additionally, some neighbourhoods are simply popular with certain communities thereby driving up the rental prices; for example, many Australian expats choose to live in Clapham, and so Clapham is quite expensive in spite of the fact that it isn’t in Central London.
  2. Transport links / distance to London city centre
    Another consideration is the proximity of your property to Central London. Two things you need to understand: London is very large in area and London is a city comprised of boroughs. If you understand these two facts, there really is no notion of “downtown” as there is in North America. Central London is primarily where a lot of major government offices are concentrated, where property prices are highest, and where there is generally a high population density / high entertainment density. However, within each of the boroughs in London, there are enough shops, amenities, and interesting things to do such that you would never have to leave your borough to survive / not be bored on the weekend. So while being close to Central London means you will be close to an area that is quite lively, it is a completely personal choice as to whether this is important. The other important aspect of this is a property’s proximity to transport links (tube, rail, bus routes). Because London is so big, it can take two hours or more to travel from the east end to the west end. Consider the places that you will need to go most frequently (work, school, fun, etc) and make sure that you’re selecting a borough that will be a decent commute; otherwise, you’ll end up wasting time and money (see cost of monthly travel cards) if you live far from where you work / study / play.
  3. Condition of property (new, period conversion / refurb, old)
    Generally, new or period conversion / refurbished properties will cost more than properties that have not been renovated. If you see wooden floors, retrofitted / modern appliances, exposed brick kitchen walls, modern windows, and new faucets or newly tiled bathroom floors, these are all indications that the property has been renovated to some extent, and you’ll likely be paying a higher rent vs. properties that have carpet or older fittings.
  4. Type of property (council flats / estates, maisonettes, flats)
    Council flats / estates are essentially government housing that are now privately owned due to a buy back scheme. They are often cheaper rents as the properties may still be in dodgier neighbourhoods, or less safe bits of a borough, and some of the council flats within a council block or estate may still be publicly owned. Read more here. Maisonettes are two level flats with internal stairs. For more information about the definition of a flat, read here.
  5. Size of property and number of rooms / living space
    Often, living rooms get converted into bedrooms in some properties. Rent will usually be cheaper in these cases since there is no longer any shared living space, other than the kitchen. The needs of multiple flatmates will have be factored in when searching for a property as well. Some two bedroom flats, for example, are one massively sized master bedroom and a small double or even a single room. If your flatmates aren’t willing to split the rent according to the amount of space, it can cause headaches and disagreements. Equally, it can sometimes be difficult to find two equally sized double bedrooms if you’re looking for an equitable rent split, so do keep this in mind when viewing properties. Another consideration is the number of bathrooms; some flats have one bedroom with an ensuite bathroom which typically means that the letter of that room would pay more rent. You will typically pay more for a property overall if there are more bathrooms.
  6. Basement / ground floor flats vs. above ground flats
    Basement and ground floor flats are generally cheaper than above ground flats (2nd floor and up). The main reason is that basement flats typically don’t have good views and the sunlight is somewhat limited, though there are usually windows. Ground floor flats can sometimes be perceived as “more dangerous”, depending on the neighbourhood, as ground floor flats are more accessible at street level. Sometimes, ground floor flat windows have bars over them for safety reasons, and so ground floor flats may command lower rent.
  7. Other fees / costs
    On top of the monthly rent you’ll have to pay, you will also have to factor in one-time costs such as lettings agency fees (including inventory fees, reference / guarantor checks, and agency fee), as well as monthly recurring expenses including utilities (water, gas, heat, and electricity) and council tax. For one-time costs, make sure you clarify with the agent what the total fees will be, and then determine what it will cost per person, if you are renting with others. For the monthly recurring expenses, it is usually a good question to ask the agent if the rent price includes any utilities, and how much the non-inclusive utilities typically cost per month. For council tax, use the council tax band tool to look up the council tax band, and go to the respective council’s website to look up how much council tax is owed within the council tax band. For example, for the City of Westminster, these are the council tax rates across different bands. Then you can calculate how much you’ll need to factor in per month for council tax. Adding on these other fees / costs will give you an accurate total cost of rental.

People often ask me which neighbourhood or borough they should live in. Unfortunately, I give them the answer that it really depends. Even if you ask me which neighbourhood or borough is the safest, the answer is relative. Even in the safest neighbourhoods, there may be pockets or certain streets that are not as safe. The best way to see which neighbourhood or borough is right for you is to spend some time walking around the neighbourhood and getting a feel for the atmosphere. When you consider that visceral experience with the factors I’ve mentioned above, you’ll likely have a better idea of your perfect area. Good luck with your flat hunt!

If you have any flat hunting experiences or tips to share, please leave them in the comments below.