Investing in the UK property market is a no-brainer, especially if you’re an expat looking to stay long term. It makes sense given that UK house prices continue to rise despite falling inflation and mortgage rates.
However, for foreign expats in the UK or British expats overseas, getting on the property ladder is easier said than done. Getting a mortgage or property loan is not a straightforward process. This guide will show you how plus alternative investment options for expats in the UK real estate market.
Key steps for expats to get on the property ladder in the UK
1) Secure a mortgage in principle
This initial step involves a lender assessing your finances and providing an estimate of how much they might lend you. They might consider your place of birth, current residence, age, occupation and income (including spouse's). Most lenders offer up to 70% of the property purchase price for expats.
2) Prepare a substantial deposit
Expat mortgage lenders typically require a larger deposit, usually a minimum of 30%. Budget roughly 8% of the purchase price for extra expenses, such as stamp duty, solicitor fees, lender fees, and valuation costs.
3) Determine your budget
Once you have a Mortgage in Principle and understand the deposit requirements, you can determine your budget. This will help narrow down your property search to realistic options.
4) Property selection
Research thoroughly and consider factors such as:
Location and local amenities
Property condition and potential for value increase
Rental demand (if considering buy-to-let)
5) Make an offer and complete legal processes
Once you've found a suitable property, make an offer and engage a solicitor to handle the legal aspects of the purchase. They will liaise between you, the seller, and the lender throughout the process.
What you need to know about expat mortgages
Expat mortgages are specialised products designed for non-UK nationals or British citizens living abroad. There are two main types:
Buy-to-Let Mortgages: For properties intended to be rented out to tenants.
Residential Mortgages: Standard mortgages for properties you plan to live in.
These mortgages often come with higher interest rates and stricter lending criteria compared to standard UK mortgages.
Alternative ways for expats to invest in UK real estate
Buying UK property as an expat is no easy walk in the park. Thankfully, there are alternative ways to invest in the UK real estate market:
Property loan notes
These are short to medium-term debt instruments secured against UK property developments. Great for expats, they offer fixed returns over a set period, typically 2-5 years.
Property investment bonds
Similar to loan notes, these bonds are issued by property companies to raise capital for developments. They often offer higher returns but come with increased risk.
UK property investment funds
These funds pool money from investors to purchase a diverse portfolio of properties. They provide exposure to the UK property market without the need for direct ownership.
Real Estate Investment Trusts (REITs)
REITs are companies that own and operate income-producing real estate. They offer a way to invest in large-scale, diversified property portfolios.
How we can help
Getting on the UK property market as an expat can be complex, but International Wealth Ventures is here to help every step of the way. Our expert team offers guidance for expats on a wide variety of areas, from property investment to tax advice.