The UK property market holds immense appeal for British expats, offering a stable investment and a tangible connection to home.
Finding the right mortgage as an expat can be challenging given the unique financial and legal considerations involved.
Working with experienced lenders who specialise in expat holiday let mortgages can be immensely beneficial. They understand the complexities and can guide you through the process, ensuring you meet all the requirements and maximise your investment returns.
Don’t let these hurdles deter you.
At Drake Mortgages, we specialise in expat holiday let mortgages.
We have extensive experience working with expats, a deep understanding of the market, and established relationships with lenders who welcome expat borrowers. We’re here to support you every step of the way, ensuring a smooth and successful mortgage journey.
Holiday let mortgages
The Expat Holiday Let Mortgage Landscape
The UK holiday let market presents a unique opportunity for British expats seeking both a sound investment and a personal connection to their homeland.
However, securing a mortgage for a holiday let property when you live overseas comes with its own set of challenges.
This specialised area of the UK property market, known as the expat holiday let mortgage market, caters specifically to the needs of expats like you.
Traditional lenders may be hesitant to lend to borrowers residing outside the UK due to the perceived risks involved. They often impose stricter criteria and may require additional documentation from expat applicants.
But don’t be discouraged.
The appeal of owning a UK holiday home remains strong for many expats. It’s not solely about the potential for rental income; it’s about maintaining ties to the UK, creating a haven for family visits, and investing in a piece of your British heritage.
This is where our expertise as specialist brokers becomes invaluable.
We understand the intricacies of the expat holiday let mortgage market and can guide you through the process, ensuring you have access to the most suitable mortgage options for your individual circumstances.
What is a Holiday Let Mortgage?
A holiday let mortgage is a specialised loan designed for properties that are rented out to holidaymakers on a short-term basis. Unlike traditional buy-to-let mortgages for long-term rentals, holiday let mortgages take into account the unique aspects of this type of investment.
Key differences include:
- Rental Assessment: Instead of relying on a simple income multiple, lenders assess affordability based on the projected rental income the property could generate. This involves detailed calculations based on factors like location, property size, amenities, and seasonal demand.
- Higher Rates: Holiday let mortgage interest rates tend to be slightly higher than those for standard buy-to-let or residential mortgages. This reflects the perceived higher risk associated with the seasonal nature of holiday rentals and the potential for income fluctuations.
- Property Requirements: Lenders may have specific criteria for holiday let properties, such as requiring them to be fully furnished.
How is the Mortgage Amount Calculated?
The amount you can borrow for a holiday let mortgage isn’t based on your income. Lenders consider the potential rental income the property could generate. This typically involves:
- Rental Projections: You’ll need to provide evidence of the potential rental income, often through comparable property data or rental forecasts from holiday letting agencies.
- Income Stress Test: Lenders will stress test the rental projections to ensure they can cover the mortgage payments even if rental income fluctuates.
- Personal Income: Your personal income is still considered, but it often plays a secondary role to the projected rental income. Lenders may require a minimum income level, but it’s typically lower than for standard buy-to-let mortgages.
Read more: What is a Holiday Let Mortgage?
What is an Expat?
As a British expat living overseas, you’re part of a growing community who maintain strong ties to the UK. Whether you’re working abroad, enjoying retirement in a sunnier climate, or simply seeking a change of scenery, you understand the unique financial and lifestyle considerations that come with living outside your native country.
One way many expats choose to stay connected to the UK is through property ownership.
The UK property market, particularly the holiday let market, offers a stable and potentially lucrative investment opportunity. It’s a way to have a home base for visits, generate income through short-term rentals, and even build a legacy for the future.
While the term “expat” (short for expatriate) simply means someone living outside their native country, it’s important to distinguish between expats and foreign nationals.
As a Brit living overseas with a UK passport, you’re an expat, not a foreign national who resides and works in the UK. This distinction is important when considering financial matters like mortgages.
Reasons to Choose Holiday Let Over Buy to Let
If you’re an expat considering investing in UK property, you might be weighing the benefits of holiday lets versus traditional buy-to-let properties. Here’s why a holiday let could be the more advantageous choice:
The Rise of the Staycation
The UK continues to experience high demand for domestic holidays, with more people opting to holiday within the country. Factors like the rising cost of living, concerns about international travel, and a renewed appreciation for local destinations have all contributed to this trend. This surge in staycations presents a lucrative opportunity for holiday let investors.
Profitability
While a long-term let can seem simpler with less day-to-day management required, holiday lets have the potential to provide a greater return on investment. The income from a week’s holiday let can be up to four times the income from a long-term rental if the location and management are right.
Tax Benefits
Holiday let properties have become more appealing for UK expats because of the tax benefits associated with furnished holiday letting. As the FHL benefits will be abolished from April 2025, expats are looking towards limited company holiday let mortgages, using an SPV.
Flexibility to Use the House as a Base for Yourself
One of the most appealing aspects of owning a holiday let for expats is the ability to use it as a personal retreat when visiting the UK. It provides a convenient base for yourself, family, and friends, making those trips back home even more enjoyable.
Choosing between a holiday let and a buy-to-let property is a significant decision. We’re here to help you weigh your options, understand the financial implications, and find the best fit for your investment goals.
The Role of Specialist Brokers
Getting a mortgage for a holiday home in the UK can be tricky if you live abroad. That’s where we come in. We are experts in helping British expats who live overseas get expat mortgages for holiday homes in the UK.
We know the ins and outs of the UK mortgage market, especially for expats. We have strong relationships with lenders who are happy to work with expats.
We don’t just find you a lender. We make the whole process easier, saving you time and worry. We know who to talk to at each bank and how to make your application look its best.
We have been helping expats since 2006. We’re confident we can help you get the money you need to buy your dream holiday home in the UK.
Why Expat Mortgage Brokers are Essential
Most banks on the high street aren’t set up to help people living abroad get mortgages for holiday homes. It’s harder for them to check your credit if you don’t live in the UK, and this makes it riskier for them to lend to you.
That’s where we come in. We have years of experience helping British people who live abroad get expat mortgages. We know which lenders are happy to work with expats and understand the special things to consider when you live overseas.
Having an expert on your side can make all the difference in getting your mortgage approved.
Holiday Let Mortgage Criteria for Expats
Most lenders prefer borrowers based and working in the UK. If you’re living overseas, earning foreign income or are self-employed as an expat, things can get tricky.
However, there are many specialist lenders willing to meet expat demand for this type of mortgage.
Here are some of the criteria most lenders will require:
- Your primary income should come from your trade or employment, not from the holiday rental.
- A minimum provable income of £35,000pa (foreign income is accepted)
- An active UK bank account
- Good credit history
- Maximum Loan to Value (LTV) 75% (depending on loan size and your circumstances)
- Expat mortgages to buy a holiday home are available to individuals, partnerships, trusts, limited trading companies and SPV companies (At least one applicant needs to be a UK citizen)
If you’re unsure whether you meet the criteria or have questions about the process, don’t hesitate to get in touch. We’re happy to help!
Country of residence
When applying for a holiday let mortgage as an expat, it’s important to understand that lenders will carefully consider your country of residence.
Approved Countries:
Most lenders have a list of approved countries from which they accept expat applicants. These are typically countries with stable political systems, robust economies, and strong financial regulations.
If you reside in one of these countries, your mortgage application may be smoother, and you may have access to more competitive rates and terms.
Country Risk and Your Application:
The lender will assess the country risk associated with your place of residence. Higher risk countries may have political instability, economic volatility, or weaker financial regulations.
If you are living in a higher-risk country, the lender might be more cautious and may offer you a mortgage with a higher interest rate or stricter terms. In some cases, they may not lend to you at all.
Sanctioned Countries:
If you live in a country under UK sanctions, you won’t be able to get a holiday let mortgage from a UK lender.
FATF and Your Mortgage
Lenders must also comply with Financial Action Task Force (FATF) guidelines, meaning they’ll perform thorough checks on your application, especially if you’re an expat.
Be prepared to provide documentation verifying your identity, income source, and the intended use of the property. This helps ensure the legitimacy of your investment and keeps the financial system safe.
Rest assured, this is standard practice for all mortgage applications, not just holiday lets.
Improving Your Chances of Securing an Expat Mortgage
Here are some tips:
Prove Your Employment Situation and Income
Lenders want reassurance that you have a steady income.
If you’re employed, gather your employment documents. If you’re self-employed, be ready to show your tax returns or business financial statements.
Assess Your Credit Worthiness
This can be tricky for expats, as you may not have much of a UK credit profile.
However, you can still demonstrate your creditworthiness by showing a history of responsible financial behaviour in your current country of residence. This could include a history of timely bill payments, or a lack of outstanding debts.
Work with an Experienced Broker
An experienced and specialist mortgage broker can guide you through the process and provide advice on how best to present your case to a lender.
They can help you navigate the complexities of the expat mortgage market and improve your chances of securing the right mortgage.
Standard and Non-Standard Lending Criteria
When it comes to mortgages, there are ‘standard’ and ‘non-standard’ lending criteria. Let’s break these down:
Standard Lending for Expats
Standard lending typically involves lower risk cases. Here are some of the criteria for standard lending:
- Mortgage for purchase & re-mortgage with a maximum loan of £750,000.
- Maximum term of 25 years.
- Repayment types can be capital & interest or interest only.
- Maximum Loan to Value (LTV) is 75%.
- Property location must be in England & Wales only.
- The property must be on its own title (no holiday parks) and have no occupancy or planning restrictions.
- Single dwellings only, so no annexes or multiple units
- Standard construction only
- The applicant must be a UK national and employed by a reputable employer.
Non-Standard Lending for Expats
Non-standard lending caters to higher risk cases. Here are some of the criteria for non-standard lending:
- Mortgage for purchase & re-mortgage with a maximum loan amount of £15,000,000.
- Maximum term of 30 years.
- Repayment types can be capital & interest or interest only.
- Maximum LTV is 75%
- Property location must be in England & Wales only.
- Unrestricted single and Multi Units acceptable * No holiday parks
- The applicant can be a UK national or a Special Purpose Vehicle (SPV) Limited Company.
- Applicants may be employed, self-employed or portfolio landlords.
Understanding these criteria can help you assess your eligibility and prepare your application accordingly.
Holiday let mortgages
Getting a mortgage
Specialist brokers like ourselves have close ties with lenders who are willing to work with expats, and we can guide you through the application process from start to finish.
We’ll help you understand the specific criteria that lenders look for and advise you on how to present your case in the best possible light.
We even have solutions for Limited Company Holiday Let Mortgages.
Remember, every lender is different, and what works for one might not work for another.
That’s why it’s essential to work with an experienced broker who understands the market and can tailor their approach to your specific circumstances.
For British expats, owning a holiday home in the UK can be a fulfilling investment, offering both financial gains and a personal connection to your home country. With careful planning, a clear understanding of the lending criteria, and the support of a specialist broker, you can make this dream a reality.
To start a conversation please call us on 020 8301 7930.