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Living abroad doesn’t stop you investing in UK property. Plenty of British expats buy a rental flat back home, or keep their old house and let it out while they work overseas. The difference is in the mortgage. An expat buy to let mortgage is a specialist product, fewer lenders offer it, and the paperwork looks different from a standard application.
This guide covers who lenders will consider, what deposit and rates to expect, and the tax rules that catch out landlords who live outside the UK. If you’re weighing up a purchase from abroad, it should help you go into the process knowing what lenders will ask.
What is an expat buy to let mortgage?
An expat buy to let mortgage is a loan to buy or refinance a UK rental property when the borrower lives outside the UK. It works like any buy to let mortgage. The lender looks mainly at the rent the property will earn, and the loan is secured on that property.
What changes is the risk the lender sees. You earn your income in another country, often in another currency, and the lender can’t check your credit history as easily. Many high street lenders simply won’t lend to anyone living overseas. The ones that do tend to ask for a larger deposit and price the loan a little higher.
Most expat lending is on an interest only basis, as with most UK buy to let mortgages. Repayment options exist, but they’re less common.
Getting a buy to let mortgage while living abroad
The process follows the same steps as a UK application, with more checks along the way.
You’ll usually need to provide:
- a valid passport and proof of your overseas address
- proof of income, such as recent payslips and an employment contract, or accounts if you’re self-employed
- bank statements, often for the last three to six months
- details of the property and the expected rent, which the lender’s surveyor will confirm
- evidence of where your deposit came from
Documents in a language other than English will normally need a certified translation. Lenders also look closely at the source of your deposit, so it helps to keep a clear paper trail if the money has moved between countries.
A UK credit footprint makes life easier. If you still have a UK bank account, a credit card or an address history here, keep them open. Some lenders will lend without one, but your choice shrinks.
Timing can also be slower. Signing documents, getting certifications and arranging funds from abroad all take longer than they would in the UK, so build in some slack if you’re buying against a deadline.
Letting out your own home after moving abroad
Not every expat is buying a new property. If you already own a home in the UK with a residential mortgage and you’re moving overseas, you can’t simply let it out. You need either your lender’s consent to let, which is usually a temporary arrangement, or a switch to a buy to let mortgage. Speak to your lender before the tenants move in, as letting without permission can breach your mortgage terms.
Who lenders will consider
Lenders split overseas borrowers into a few groups, and the group you fall into shapes your options.
British expats
UK nationals working abroad have the widest choice. Lenders are generally more comfortable where the borrower has a UK passport, a UK credit history and a clear reason for being overseas, such as a fixed-term employment contract. Where you live matters too. Some lenders limit the countries they’ll accept, and residents of countries under UN sanctions are generally turned away.
Foreign nationals
Non-UK nationals can also get a buy to let mortgage, whether they live in the UK or abroad. The criteria tend to be tighter, and some lenders want to see a link to the UK, such as residency status or UK income. Other lenders accept non-UK nationals living abroad on much the same basis as British expats, so it pays to know which is which before you apply.
Limited companies
Many overseas landlords buy through a UK limited company, often a special purpose vehicle (SPV) set up only to hold property. Company buy to let lending is common in the UK and some lenders accept directors who live abroad. Whether a company makes sense depends on your tax position in both countries, so take advice from an accountant before you set one up.
Deposits, LTVs and rates
Expect to put down more than a UK-based landlord would.
- Deposit: usually at least 25% of the purchase price, and more with some lenders.
- Loan to value: commonly up to 75%, with lower limits for some countries of residence or property types.
- Minimum income: some lenders ask for at least £25,000 a year or the equivalent, while others rely mainly on the rent.
Rental cover
As with any buy to let mortgage, the lender will check the rent covers the mortgage payment by a set margin, tested at a notional interest rate. The rent needs to clear that test for the loan size you want. If it falls short, you’ll need a bigger deposit or a cheaper property. Many lenders want the rent to be 125% to 145% of the monthly payment, worked out at a stress rate that is often higher than the rate you’ll actually pay.
Expat buy to let mortgage rates
Rates for expats are usually a little higher than for UK residents, because fewer lenders compete for the business and the lender carries more risk. The gap varies a lot between lenders and depends on your deposit, your income and the country you live in. Product fees can also be higher, so compare the total cost over the fixed period rather than the headline rate alone.
Because the market changes often, the best way to see what you’d pay is to ask a broker to run your details against current products.
Currency and exchange rate risk
If you earn in euros, dollars or dirhams and your mortgage is in pounds, a swing in the exchange rate changes what the loan costs you. The rent usually covers the payment, so day to day this matters less than on a residential mortgage. It matters more if the property sits empty, if you top up a shortfall from your own income, or when you send your deposit over in the first place. Some lenders accept income in a wide range of currencies and some only take a few.
When the rent falls short
Where the rent doesn’t quite pass the lender’s test, some lenders let you top up the shortfall with your personal income. This is known as top slicing. It can make the difference on a higher value property, but not every lender allows it for expats, and those that do may only count income in certain currencies.
The property itself
Lenders look at the property as closely as they look at you. Most expat buy to let lenders want:
- a standard house or flat let on an assured shorthold tenancy
- a valid Energy Performance Certificate rated E or above, as the law requires for most rented homes in England and Wales
- a property you won’t live in yourself or let to close family, as that falls under different products
Houses in multiple occupation, student lets, holiday lets and flats above shops are harder to place and often need a specialist lender. If the property is unusual in any way, raise it early so the right lender is chosen from the start.
Planning how you’ll repay
Most expat buy to let mortgages are interest only, so the loan itself is still owed at the end of the term. Lenders will ask how you plan to repay it, usually by selling the property or from other savings or investments. Have a clear answer ready, as it forms part of the application.
Tax for expat landlords
Two taxes matter most when you own UK rental property from abroad: income tax on the rent, and stamp duty when you buy.
The Non-Resident Landlord Scheme
HMRC treats you as a non-resident landlord if you live outside the UK for more than six months of the year. Under the Non-Resident Landlord Scheme, your letting agent must deduct basic rate income tax from your rent and pay it to HMRC each quarter. If you don’t use an agent and your tenant pays more than £100 a week, the tenant has to do this instead.
The tax is worked out on the rent after allowable expenses, not the full amount. You can apply to HMRC to receive your rent with no tax deducted, as long as your UK tax affairs are up to date. Either way, you’ll normally still need to file a UK Self Assessment tax return for your rental income each year.
The scheme deals with UK tax only. The country you live in may also tax your UK rent, so check how the two systems interact.
Stamp duty for non-UK residents
If you’re buying in England or Northern Ireland, two extra charges can apply on top of the standard stamp duty rates.
The first is the higher rate for additional properties, which adds 5% to every band. It applies if you’ll own more than one residential property worth £40,000 or more once you complete, and HMRC counts property anywhere in the world. So if you own a home where you live now, a UK buy to let will usually attract the higher rate.
The second is the 2% surcharge for non-UK residents. You’re generally treated as non-resident for this purpose if you’ve spent fewer than 183 days in the UK in the 12 months before you buy. The surcharge adds a further 2% to every band.
Here’s how that works on a £250,000 buy to let bought by a non-resident who already owns another home:
| Portion of price | Rate | Tax |
|---|---|---|
| First £125,000 | 7% (0% + 5% + 2%) | £8,750 |
| Next £125,000 | 9% (2% + 5% + 2%) | £11,250 |
| Total | £20,000 |
A UK resident buying the same property as an additional home would pay £15,000, so the surcharge adds £5,000 in this example. Scotland and Wales have their own property taxes with different rules.
How Clever Lending helps
Because expat lending sits with a smaller group of lenders, each with its own rules on countries, currencies and income, a broker who knows that market can save you a lot of time. We look at your circumstances, find the lenders that will accept them, and handle the application from start to finish, which matters when you’re managing it from another time zone.
If you’re thinking about buying or refinancing a UK rental property from abroad, take a look at our buy to let mortgages page or get in touch for a chat about your plans. If you need to move quickly on a purchase, for example at auction, our bridging finance can cover the gap until a longer-term expat buy to let mortgage is in place.
Frequently asked questions
What is the Non-Resident Landlord Scheme?
It’s HMRC’s system for collecting tax on rent paid to landlords who live outside the UK for more than six months of the year. Your letting agent, or your tenant if they pay more than £100 a week and there’s no agent, deducts basic rate tax from the rent and pays it to HMRC. You can apply to receive rent without deductions if your UK tax affairs are in order.
How does stamp duty work for non UK residents?
In England and Northern Ireland, non-UK residents pay a 2% surcharge on top of the normal residential rates. If the purchase is an additional property, the 5% higher rate applies too, so a non-resident landlord can pay 7% more than the standard rate in every band.
What is an expat mortgage?
An expat mortgage is a UK mortgage for someone who lives and works abroad. It can be residential, for a home you plan to live in when you return, or buy to let, for a property you rent out. Fewer lenders offer them, and they usually ask for a bigger deposit than a standard mortgage.
What are expat buy to let mortgage rates?
They’re usually slightly higher than rates for UK-based landlords, as fewer lenders offer them and the lender takes on more risk. Your deposit, income, currency and country of residence all affect the rate you’re offered, so the quickest way to get a real figure is to speak to a broker.