The mortgage application process is generally straightforward for any potential borrower. They contact a broker who puts in the application to a lender and the result is returned after a period of time. Straightforward? Well fairly so for applicants from the UK, but consider how an immigrant goes about applying for a mortgage when they don’t have a credit history in the UK and have been unable to get a bank account or credit card because of their residency issues.
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A solution was offered recently with the introduction of the ‘buy-to-live’ mortgage from Natwest Offshore, which was targeted at buyers from abroad into the UK market. With the number of wealthy investors buying into the UK market often finding a shortage of respective packages, Natwest Offshore has introduced the product to allow international investors to apply for a structured loan to purchase property.
Available with a loan-to-value from 90 per cent to 80 per cent, offering capital interest from £400,000 up to £750,000, there is a Base Rate tracker at 1.5 per cent and fixed rates for two, three and five years. The two-year fix has a rate of 6.24 per cent, the three-year is at 6.34 per cent and the five-year is at 6.44 per cent. The arrangement fee is 0.5 per cent.
Challenges
So what sort of challenges does this group of applicants face when seeking out a mortgage? Is it difficult to make an application with such problems faced? Immigration specialist Victoria Sharkey, managing partner of Medivisas UK, identified the problems that immigrants to the UK faced. Primarily dealing with high earning migrants such as doctors, lawyers and IT professionals who are coming to the UK to work on long or short-term visas and often earning salaries upwards of £50,000, she is well aware of the desire for a mortgage package by migrants.
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Sharkey said: “The first problem is with credit ratings, as migrants could have been earning anything up to £100-£200,000 abroad and had a great credit rating at home where they owned property, however they come to the UK and they have to start from scratch. These people have problems even getting a bank account as it is not possible to transfer a credit rating from overseas into the UK, so intermediaries will say that there are no packages for applicants with no credit rating. I do know of instances where applicants have called more than 10 brokers before they can get an answer.”
In response to the question of credit, Bill Shimmins, head of intermediary and specialist lending unit for Natwest International, said: “It is a challenge and some people do find it difficult. What we would look for, from an American, for example, is an IRS return and bank statements and if necessary, a bank reference to check their credit history in the country where they have come from. Sometimes it can be more awkward when English is not the first language so you have to get the details translated but we can solve the differences quite simply.
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“It is difficult to do a credit search for an international applicant but there are other ways to satisfy ourselves that the applicant is suitable as high earners will use an accountant so their finances are very transparent.
“From less-developed countries it can be more challenging, but if they use a reputable accountancy then there are less problems. If the applicant is working for a multi-national corporation then an employer’s letter is suitable.”
Stumbling block
As one of the biggest dilemmas facing all applicants, credit can often be a stumbling block – hence the rise of adverse mortgage packages and 100 per cent offers. So the UK mortgage market is used to encountering, and overcoming, stumbling blocks. Sharkey said she understood why lenders were reluctant to loan to immigrants, but the nature of the overseas buyer is to own their own home and not ‘flush money away’ renting.
She said: “Another problem is that someone can come here and marry a UK national and get a two-year visa, but lenders will reckon that they will not stay, and unless they have a permanent visa – officially known as ‘indefinite leave to remain’ – they will struggle to get the deal they want, however an application for naturalisation can take up to five years. If someone is earning around £70,000 a year they don’t want to stay renting, so it is a very difficult scenario.”
Demand
There is a demand for such a product in the market according to Shimmins, who claimed that there were people who have a residence in London but wanted an offshore mortgage for tax reasons, while still being able to house themselves and their family where they choose.
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Sharkey claimed that the product should be well received and that brokers should be confident of borrowers keeping up with repayments due to them being high earners. She said: “This will be welcomed as a very positive thing by many clients. I expect a lot of enquiries will be made.”
Whether this solves the dilemma has to be seen, but Shimmins has claimed that there has been interest from brokers. Whether other lenders will follow suit is undetermined, but it is a positive step to see one lender move into the sector.
