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Expat Mortgage for UK property - has anyone done this?

Expat Mortgage for UK property - has anyone done this?

Old May 14th 2013, 2:41 am
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Default Expat Mortgage for UK property - has anyone done this?

According to reports, house prices are set to risr by 25% over the next 5 years in the UK. With this in mind I'm considering trying to get a buy to let property over there.

Has anyone done this from the U.S.? If so can you recommend anyone to speak to in terms of brokering the loan and what to look out for.

I went to HSBC in the UK who I bank with there but they want my U.S. wages paid into my HSBC account there and for me to have been a previous landlord and I've never done a buy to let so can't go down that road.

Any suggestions/help would be great.
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Old May 14th 2013, 3:02 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

The British economy looks weak, with a high likelihood the pound could slide significantly against the US dollar. Even if house prices in the UK were set to rise by 25% (which I doubt), investing in American houses and then selling up (more than five) years from now and using the proceeds to buy pounds would likely be at least as profitable, and a lot easier to finance and manage.
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Old May 14th 2013, 4:56 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

Thanks for your reply..it's hard to say what will happen in the future - we can try and make assumptions but for me I'd like to try and get a foothold in the UK market and open up more options.
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Old May 14th 2013, 8:18 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

I looked into this recently; albeit slightly different in that I already own a couple of properties and wanted an equity release loan to fund a US house purchase.

I went via John Charcol and was surprised that there wasn't much lender appetite (neither property has any outstanding mortgage and both have been let for years). The best offer I had was in the 4% range for around GBP 120k on a capital repayment basis.

Didn't seem attractive given 5-year money here in the US can be had at around 2.3%.
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Old May 15th 2013, 2:21 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

I am finding this also - I've tried reaching out through personal contacts and there just doesn't seem to be the interest in facilitating these kinds of mortgages as if they don't want the business..I understand what you are saying re investing in the U.S. market, lower interest rate etc but U am really interested in getting into the UK market.
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Old May 15th 2013, 4:52 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

Not being funny or anything, but given what the banks have been through the last few years, it's not really surprising that they're not falling over themselves to lend money to an overseas investor with no letting experience and no uk income apart from a potential future rental stream, is it?

How about tackling it from the other side....do you have any "spare" borrowing capacity (income/equity) this side of the pond ... take out a cheap USD loan to finance your UK property? Far from ideal for so many reasons, but may be the only way round it.

Ps...I realize you like the look of the uk property market for whatever reason, but being a long distance landlord can be a king sized pita ..... I've been steadily ditching my UK stuff for that reason and that reason alone....in my experience margins in the uk have been better than here (west Houston) but not sufficiently better to justify the increased hassle.
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Old May 15th 2013, 5:19 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by Yorkieabroad View Post

How about tackling it from the other side....do you have any "spare" borrowing capacity (income/equity) this side of the pond ... take out a cheap USD loan to finance your UK property? Far from ideal for so many reasons, but may be the only way round it.
Is that doable? Do you think a US bank would entertain a mortgage for an overseas property?? I have enough for a 25% deposit and the rental income would cover the mortgage payment so it would need to be a buy to let as I already have a U.S. mortgage here but not enough "spare" additional income for a U.S. bank to allow me to have an additional mortgage. I could run it by my bank here tomorrow - it's got to be worth a try..
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Old May 15th 2013, 11:19 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by bromleygirl View Post
Is that doable? Do you think a US bank would entertain a mortgage for an overseas property?? I have enough for a 25% deposit and the rental income would cover the mortgage payment so it would need to be a buy to let as I already have a U.S. mortgage here but not enough "spare" additional income for a U.S. bank to allow me to have an additional mortgage. I could run it by my bank here tomorrow - it's got to be worth a try..
That wasn't actually what I meant, but you could give it a try - the worst that can happen is say no, which i suspect they will. What I meant was to effectively take an equity release loan on your property here if there was enough equity in it over any existing mortgage, but from your answer above, that doesn't look like an option.
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Old May 15th 2013, 11:57 am
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by Yorkieabroad View Post
That wasn't actually what I meant, but you could give it a try - the worst that can happen is say no, which i suspect they will. .....
I'll guarantee they'll say no. US banks have no established process to take a lien on a house in the UK, their mortgage processing departments don't have the right documentation nor any experience with British real estate law. There is ZERO chance a US bank would give you a loan to buy an investment property in the UK.

Also, further to Yorkie's suggestion, be extremely cautious about borrowing USD to buy a house for GBP in the UK. If the pound falls against the dollar, you would have to find more pounds to make each loan payment. If your loan payment is $100 and exchange rate is $1.50/£1 you'll need to send about £67 to pay the $100. If the pound falls to $1.40/£1, you'll need about £71, which could easily happen; at $1.20/£1 you'll need about £83. If the pound collapses to dollar parity you'll need £100!

Last edited by Pulaski; May 15th 2013 at 12:09 pm.
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Old May 15th 2013, 1:12 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by Yorkieabroad View Post
That wasn't actually what I meant, but you could give it a try - the worst that can happen is say no, which i suspect they will. What I meant was to effectively take an equity release loan on your property here if there was enough equity in it over any existing mortgage, but from your answer above, that doesn't look like an option.
Thank you Yorkie, I see what you are saying..I do have a good amount of equity in the U.S. but if I were to release it, my mortgage payments would substantially go up so no not an option.
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Old May 15th 2013, 2:10 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

In that case, if obtaining finance isn't an option, which is looking likely, how about looking at different areas. You are working on 25% down - where is that? If its in the South East, you may be able to buy something outright in a cheaper part of the country and avoid the need to finance at all. Puts a different spin on the economics, but also likely moves you into a different demographic that may be more difficult to manage. Given that you're not worried about being a long distance landlord from a few thousand miles away, maybe the difference between buying in say the south east vs the north east may not phase you? The main problem then becomes gaining enough knowledge of an area to make an informed purchase.

Back in the late 90's there were a few companies selling off "investment properties" to buyers who wanted a quick easy buck without doing the research or the legwork. They promised the earth - cheap entry, full turnkey package, full renovation included, guaranteed tenants, guaranteed returns, property management and so on. Needless to say, most of them turned out to be scams selling condemnable streethouses in dodgy areas of Manchester and Birmingham that no sensible investor would touch with a bargepole.

Buying in an unfamiliar area is definitely not something I would recommend, but if you do decide to do it, one place to start might be with genuine Housing Associations - check out where they need properties, and see if you can get them to underwrite a purchase. I did that with an outfit back in the 90's and ended up with them renting the same properties for over 10 years. They still rent them, but I sold out to my sister a long time back, when I realized I didn't want to be a long distance landlord with overseas hard assets. They are good payers, take care of all repairs themselves, give an annual inflation rent rise etc etc. Last I spoke to my sister, they were screaming out for more properties as the changes in the DHSS rent allowances kicked in. Yes, you're at the very cheap end of the market, but you are somewhat insulated from it by the HA, and the returns can be surprisingly good. Especially when there is no mortgage to pay.
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Old May 15th 2013, 2:13 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by Pulaski View Post

Also, further to Yorkie's suggestion, be extremely cautious about borrowing USD to buy a house for GBP in the UK. If the pound falls against the dollar, you would have to find more pounds to make each loan payment. If your loan payment is $100 and exchange rate is $1.50/£1 you'll need to send about £67 to pay the $100. If the pound falls to $1.40/£1, you'll need about £71, which could easily happen; at $1.20/£1 you'll need about £83. If the pound collapses to dollar parity you'll need £100!
Its a similar argument to floating rate mortgages....anything that is not "fixed" is always going to be lurking there waiting to bite you in the behind.....probably about the same time the Damp Proof Course fails, the water tank bursts, the tenant takes it out on the property and then buggers off with 3 months in arrears!!
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Old May 15th 2013, 2:22 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by Yorkieabroad View Post
Its a similar argument to floating rate mortgages....anything that is not "fixed" is always going to be lurking there waiting to bite you in the behind.....probably about the same time the Damp Proof Course fails, the water tank bursts, the tenant takes it out on the property and then buggers off with 3 months in arrears!!
Agreed, but if you don't think about it, it can be an ugly shock when a thin profit margin turns into a loss because of a move in the exchange rate. If interest rates move against you sometimes refinancing can help, if you have a bad tenant you can kick them out and get a new one, but there is almost nothing you can do if the exchange rates move against you. A rolling hedge of FX options is a possible solution but is another expense to fund from your rental profits, or out of your pocket, however given the lot size for FX options ($100,000 lots, if I remember correctly), implementing a hedge of the appropriate size is likely not possible.

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Old May 15th 2013, 2:28 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

Originally Posted by Pulaski View Post
Agreed, but if you don't think about it, it can be an ugly shock when a thin profit margin turns into a loss because of a move in the exchange rate. If interest rates move against you sometimes refinancing can help, if you have a bad tenant you can kick them out and get a new one, but there is almost nothing you can do if the exchange rates move against you.
Agreed. When I moved money across to the UK to buy a house the exchange rate was $1.97 for £1.
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Old May 15th 2013, 2:36 pm
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Default Re: Expat Mortgage for UK property - has anyone done this?

That's true. In my mind it was covered in my catch all "Far from ideal for so many reasons, but may be the only way round it".

There's no way I would be buying overseas as an investment - holiday home-OK, investment-no. Been there, done that, got the scars. True, made some decent money on the way, but don't need the hassle now! Exchange rate risk is just one of the added difficulties of the process - albeit a pretty critical one!

Back in the good old days of working for a living, we used to get a once a year bite at fixing the exchange rates for our salaries and bonuses. It was a bit of a lottery, so we adopted the "Bet against the Boss" strategy.....he had a perfect track record - of getting it wrong, (which was pretty scary for the head of a trading organization ) so we waited till he'd announced his election, then took the opposite position. Used to drive him mad
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