"I AM LIVING ABROAD AND PLAN TO RETURN TO THE UK. WILL I BE ABLE TO GET A MORTGAGE?" BY DANIEL MCLARDY (Edinburgh)
So you've had your time abroad, conquered other parts of the globe in the pursuit of career or business goals, or have simply enjoyed a "change of scenery" for a while. But the call home to the UK is too strong and you've made the decision to return home to the fine weather and, more truthfully, those friends and family you hold dear. You want to hit the ground running when you return, and purchase a home with a mortgage. This shouldn't be a problem, right? You're a UK citizen, have a right to buy property in your native country, and will gain employment when you return. But, alas, as with most things life it's not quite this simple.
Yes, 100% it is frustrating to have to deal with the uncertainty of whether you'll be able to obtain mortgage finance when you return but allow me to explain why, quite reasonably, lenders deem returnees a higher credit risk:
LENDERS RELY HEAVILY ON DATA TO ASSESS A BORROWER'S CREDIT CONDUCT - THEY CAN'T ASSESS WHAT DOESN'T EXIST
Time abroad equates to time outside of the UK financial system, and this will be reflected in a person's credit bureau data, which will typically show little financial and credit activity given the returnee hasn't been in the country. In turn, if a lender doesn't have the data to objectively assess recent financial conduct, it follows that they will see the borrower as an elevated risk. Indeed, you may have a credit footprint where you have live abroad, but generally UK lenders utilise domestic data only.
IF A RETURNEE HAS AN ESTABLISHED HOME ABROAD, THEY COULD GO BACK
Obviously It is easier to return to a place you know and have established links with than starting afresh, and lenders treat this risk accordingly given that non-payment of a mortgage debt isn't actually a criminal offence. Thus, it's on the lenders to manage this risk themselves, supported by deep experience of delinquent loans from those who have absconded. If at this point you are thinking "that's ridiculous, surely people don't think of moving abroad to run away from their debts" a simple look at internet forums will avail the extent of the problem!
FALSE REPATRIATION CLAIMS
Unfortunately in a repatriation situation lenders must be mindful of the risk of scheme abuse fraud. There have been cases where UK expatriates have falsely declared repatriation in an attempt to obtain standard residential mortgage finance that wouldn't otherwise be possible. In contrast, expatriate mortgage finance is a niche market with higher costs of borrowing and strict criteria that makes it more difficult to obtain. For this reason, false representation can be appealing to a minority of dishonest people who wish to own UK property assets while living abroad.
A REPATRIATED BORROWER MAY RETAIN DEBTS AND LIABLITIES ABROAD
If you've lived in a foreign country it is needless to say that you made your life there, and as such utilised the financial system as you would do in the UK. This could involve owning a home with a mortgage, personal loans and other commitments such as tax liabilities and the costs associated with property ownership. Of course, UK lenders are aware of this significant risk and adjust their lending policies to mitigate the possibility of liabilities abroad being undisclosed or not fully accounted for. In essence, it doesn't matter where in the world a mortgage applicant's debts are - debt is debt and as such it can impact mortgage affordability.
SO HOW DO LENDERS DEAL WITH THESE REPATRIATION RISKS?
MINIMUM RETURN PERIOD
Many lenders have a minimum return period and wish to see a UK residency history ranging from 6 months to 3 years, sometimes in combination with an employment stipulation. For example, a lender's criteria may be "applicants must have lived and worked in the UK for the past 12 months and be able to evidence as such". Interestingly, at the time I write this, there are a minority of lenders who have no minimum UK residency period, so long as the applicants are resident in the UK at the point the mortgage is applied for. However, this doesn't necessarily solve all repatriation issues, as these same lenders have a "subject to credit score" provision that borrowers are less likely to pass with no recent presence in the UK.
Minimum residency duration criteria is tricky, and we find with repatriation applicants that lender access is significantly restricted where they wish to purchase a property immediately. However, hopefully this information will help you plan your return, and understand that you must at least be resident at a UK address before a standard residential mortgage application can be applied for. Please don't be under the misapprehension that you can apply for a mortgage before the plane has landed!
"SUBJECT TO CREDIT SCORE"
Simply put, lenders use credit bureau data to find out who you are and how you have behaved with money. In the same way alarm bells would ring if a new love interest had large gaps in their romantic history, the same applies to lenders and their wish to know the history of your credit conduct. If the gaps in data are too large, you could be ghosted!
This is probably the part where you'll think I am being deliberately unhelpful, but it's difficult for the mortgage adviser community to know what a "minimum credit score" looks like for a repatriation applicant, because lenders have complex multifactoral algorithms they can't (and don't want to) explain. However, what we do know is that a blank credit report is never helpful, and it makes sense to retain accounts and relationships with financial services providers (if permitted by them) while you are away. Through this you will at least retain a level of financial visibility to the credit referencing agencies you can work with when returning to the UK. The biggest challenge we see are returnees who closed all their bank accounts when emigrated, thus effectively extinguishing their existence in the UK financial system.
EMPLOYMENT HISTORY
It should be no surprise that, given it is usually a mortgage holder's earned income that meets a monthly mortgage payment, many lenders are interested in an applicant's employment history. Over recent years the lender community has relaxed minimum employment history criteria significantly, but it's not unusual for a lender to require 6 months of unbroken employment history within the UK. Employment history isn't necessarily the most challenging criteria aspect for a UK returnee, but it does have the potential to further restrict lender options.
WE CAN HELP YOU
Repatriation mortgage situations are something we are accustomed to dealing with, particularly given Edinburgh is an attractive world city UK citizens have a desire to return to once they've fulfilled their overseas ambitions. We help our clients understand their current situation and possible lending options, and where necessary give advice on the steps required to increase lender access and the chances of a successful outcome.
GET IN TOUCH WITH DAN
Please feel free to get in touch with me. I'm happy to have a chat with zero-obligation to giver you an idea of the possibilities.
WE FEATURE ARTICLES TO ENRICH THE CONTENT AND INTEREST IN OUR WEBSITE. THE ABOVE, AND ARTICLES/POSTS LIKE IT, DO NOT CONSTITUTE ADVICE, AND THE ACCURACY OF ANY INFORMATION WITHIN IS NOT GUARANTEED
