Buy To Let for Ex-Pat

tank666

Hi,

My wife and I are moving to Japan permanently by the end of the year and are therefore looking to let our flat.

We are having trouble finding companies that offer buy to let for ex pats at a good rate. Our flat is worth approx £170,000 to £175,000. We would need around £130,000. We believe we can get at least £700 per month rental income. (It's a 2 double bedroom flat in Bournemouth with off-road parking and a large garden.

So far we have an illustration from TMW but there is an arrangement fee of £2000 and a non-refundable application fee of £340. This is for a 5 year fixed rate at 6.09%. However we would need rental income of £750 per month and are not sure if the valuation would be enough. We dont want to lose £340 because the valuation comes in too low.

Any advice would be much appreciated.

Thank you

J

MortgageMamma

Well if you are applying for your mortgage now, technically you are not an ex pat so why look at an ex pat mortgage?

Natwest are quite good at this sort of thing I believe but I don't really get involved in buy to lets. There is another mortgage broker on this site who specialises in buy to lets and has done for donkeys years. I've sent him an email with a link to this thread and hopefully he will reply on the boards and help you out.

Good luck with the relocation.

MM

beingjdc

I'm sure you've thought this through, but this looks like a big money-loser to me, if you're moving permanently I'd suggest you think about just selling up.

Mortgage costs: £130k at 6.09% = £660 a month.
Income: £700 a month (your estimate)
Management costs (you'll need full if you're abroad?) c. £70 a month
Foregone interest on your 40k equity in NS&I index-linked bonds or similar: Around £200 a month
Net loss: £230 a month - even not allowing for times when you have no tenants, which can be around a month a year, depending where.

tank666

beingjdc wrote: »

I'm sure you've thought this through, but this looks like a big money-loser to me, if you're moving permanently I'd suggest you think about just selling up.

Mortgage costs: £130k at 6.09% = £660 a month.
Income: £700 a month (your estimate)
Management costs (you'll need full if you're abroad?) c. £70 a month
Foregone interest on your 40k equity in NS&I index-linked bonds or similar: Around £200 a month
Net loss: £230 a month - even not allowing for times when you have no tenants, which can be around a month a year, depending where.

thank you very much for the advice. we will be leaving asap after flat is let out so that is why we were looking for an ex-pat mortgage. I suppose we could apply for a normal buy to let mortgage but surely we would have to convert once we leave shortly after anyway? We were hoping my brother could manage the flat for us. Do you mean we must have a maintenance company, is there no alternative? So basically you mean if we sold up and then invested the money wisely we would be better off? Surely the way property prices are rising (I know they could go down of course) we would better off trying to keep it???
Thank you again.

beingjdc

tank666 wrote: »

thank you very much for the advice. we will be leaving asap after flat is let out so that is why we were looking for an ex-pat mortgage. I suppose we could apply for a normal buy to let mortgage but surely we would have to convert once we leave shortly after anyway? We were hoping my brother could manage the flat for us. Do you mean we must have a maintenance company, is there no alternative? So basically you mean if we sold up and then invested the money wisely we would be better off? Surely the way property prices are rising (I know they could go down of course) we would better off trying to keep it???
Thank you again.

What I really meant was that from abroad you'd want a 'full service' letting agency, but I guess if your brother is happy doing it for you, that's less of a problem (again though, it's foregone money for someone, as he could otherwise spend his time doing it for someone who paid!)

I'm saying that cashflow-wise, you would be better off selling up and investing the money wisely. However it's true that you will be better off overall if you hold on and house prices keep going up. You'll have to decide for yourself whether you think that's likely

EdInvestor

tank666 wrote: »

thank you very much for the advice. we will be leaving asap after flat is let out so that is why we were looking for an ex-pat mortgage. I suppose we could apply for a normal buy to let mortgage but surely we would have to convert once we leave shortly after anyway?

There's actually AFAIK no such thing as an "expat mortgage".Normally what happens is that if you have a standard owner occupied mortgage and get posted abroad, and want to let the property while away, the lender will either charge you a fee to OK this change while allowing you to keep your existing mortgage or will put your interest rate temporarily up to the BTL level. (Some lenders will just let you do it for free.:)) When approaching your lender to ask its policy on this, do not say you are leaving "permanently" -the very fact you are retaining your UK property indicates that you may well come back anyway.

We were hoping my brother could manage the flat for us.

If he's local and has any experience, then fine.If not local you might be better to use an agent if you can find a decent one, as he's effectively in the same situation as you are.

So basically you mean if we sold up and then invested the money wisely we would be better off? Surely the way property prices are rising (I know they could go down of course) we would better off trying to keep it?

Of course no one can tell you how markets will behave. But if you think there is a chance you will return and you won't make a loss if you let it on repaying the mortgage , it may be wise to do this.The reason is that when the UK property market does get excited, it tends to take off like a rocket.An expat who is not paying attention can easily find himself priced out in a dramatic and rapid fashion, necessitating a real struggle to buy back in again later.

mightymouse

MortgageMamma wrote: »

Well if you are applying for your mortgage now, technically you are not an ex pat so why look at an ex pat mortgage?
MM

I agree with above, I might have missed it but have you got a mortgage at the moment as you could ask them for permission to rent out.

For non domicile non uk tax payer resident abroad there might be an 'Expat Mortage' but why go down that route..

The problems would really start if your tenant stopped paying the rent, can your brother deal with that.

tank666

Hi, thank you again to everyone for their advice. We are still looking around at the best rate we can get before deciding whether to proceed. We have certainly taken on board everyone's comments.

We may well not be able to do it anyway as are finding it difficult to find a mortgage with a good enough rate to make this financially viable. I have used sites like Charcoal and their mortgage calculator which only came up with one for Godiva Mortgages at 6.09% (tracker.)

Regarding our current mortgage company we are with Platform who are refusing to offer us a new product? I was told this was company policy. We haven't missed any payments or had any difficulties so were quite surprised at this. We are currently on their SVR.

Do you think the Godiva Mortgage or The Mortgage Works (both 6.09%) are about as good as we can anticipate? If so we may well take people's advice and sell up.

Thank you again.

EdInvestor

Have you explained the position to Platform? As mentioned, with many lenders it is not necessary to take out a new mortgage if you are letting out a n owner occupied property due to an overseas posting.

HelpWhereIcan

EdInvestor wrote:

There's actually AFAIK no such thing as an "expat mortgage".

This depends on what you believe an expat mortgage to be.

The instance you describe of a lender granting permission to let while the owner works abroad is the 'traditional' way it was done, but relies on the owner beig expected to return to the UK within a certain period of time - normally 2 - 5 years.

That is the way it was done before the Buy to Let market grew to it's current level.

You would find that most lenders would have a problem with doing this for the OP as they are emigrating permanantly rather than for a year or two.
I would always advise honesty as the best policy and best not to withold the facts from the lender.

There are indeed specialist Buy to Let products aimed at expats (offshore products) and lenders who will not agree to lend to expats at all. Then there is the middle ground where lenders will consider a mortgage to expats to one extent or another depending on certain criteria being met, possibly at revised rates and/or through a specialist offshore arm.

It is a specialist area and one that would normally need advice from a number sources including legal and taxation specialists - what is the story with Inheritance Tax etc.

There will be more lenders than just TMW and Godiva, but to know who would be best would involve knowing more such as:

1. Will you be keeping a UK bank account?
2. Will you be paying UK tax?
3. will you be working for a UK based company?
4. If not will it be a Japanese government agency.
6. Will you be paid in £ or Yen?
7. How long will you keep the property?

Both lenders are fairly competitive, but you may be able to get a better deal.
If you have not already consulted a specialist, do so now and save yourself a lot of time now and possibly thousands of pounds over the term of your mortgage.
__________________

EdInvestor

HelpWhereIcan wrote: »

The instance you describe of a lender granting permission to let while the owner works abroad is the 'traditional' way it was done, but relies on the owner beig expected to return to the UK within a certain period of time - normally 2 - 5 years.That is the way it was done before the Buy to Let market grew to it's current level.

Indeed so. These days I am told that some lenders will require people posted abroad to switch over to a BTL mortgage. Some borrowers may want any to go I/O (whether BTL or not) anyway. Some lkenders are still happy to do the traditional thing.

You would find that most lenders would have a problem with doing this for the OP as they are emigrating permanantly rather than for a year or two.

The OP says that, but he's going to Japan and it's actually very difficult (if not impossible) to emigrate to Japan,which does not welcome foreign immigrants even if they are married to locals.So things might not quite work out the way he thinks. Not so much withholding facts, as keeping options open. Which is of course what he's doing by keeping the property.:)

There are indeed specialist Buy to Let products aimed at expats (offshore products).

Yes, but these are aimed at people who are expats at the time they buy AFAIK, not applicable to this couple.

It is a specialist area and one that would normally need advice from a number sources including legal and taxation specialists - what is the story with Inheritance Tax etc.

Guy is only letting out a property : the main thing he needs to know about is the Non Resident landlords scheme, so he doesn't get done for tax on his rental income.