Considering mortgage options with uncertainty about place of residence in the long term

kevitamin

Hi all, the following might be quite in depth and niche questions so any insight from people with experience in consent to let and remortgaging/ product switches while living abroad will be really appreciated. I will start by saying that this is all hypothetical for the time being but me and my fiancé are getting ready to buy our first property in the new year and have already started viewing flats in the area we’re interested in. We just want to consider as many possibilities as we can before committing to the biggest purchase of our lives and I hope this is understandable even if these might seem like problems to worry about many years down the line.

To help you understand our background - we are both EU citizens and have pre-settled status which will become settled status in autumn 2024. As far as mortgages are concerned, we are considered the same as any other permanent UK resident. We both work in large international corporations with lots of potential for overseas moves and we both have families back in the EU. Our intention is to stay in the UK for the foreseeable future, however, it is highly likely that within the next 40 years our plans will change (crazy, I know) due to professional or personal reasons. Therefore, we need to think about what will happen to the flat and our mortgage if we come to leave the UK for both short and long periods of time. If we were to leave the UK we would ideally request a CTL and rent out the property staying on a fixed rate residential mortgage for as long as possible. The uncertain bit is what comes after the CTL or the fixed rate expires and we have to choose a new product.

We have done our fair share of research both online and speaking to brokers but have exhausted all sources of information without finding definitive answers to questions on CTL and remortgaging/ product switches while living abroad. The few brokers we’ve talked to had no clue about these topics and weren’t very helpful. All other bases are pretty much covered and it’s only these few questions remaining. I almost never post in forums which shows just how desperate the situation is. We will obviously check these points with the lender and broker when we come to it but it’s better know what to expect now than after arranging the mortgage.

So here go the questions you’ve been waiting for:

1. We’re aware of the challenges that come with remortgaging as an expat such as being restricted to very few lenders and subpar mortgage products. Is a product switch with the same lender while living abroad any different from a product switch while resident in the UK? Can the lender refuse a product switch just because of an overseas residence status and force you on the SVR?

2. If we’re in a position where we need to change lenders while living abroad, how long would we need to come back and live in the UK for to be considered residents for remortgaging purposes and avoid the whole expat mortgage situation? Would it be the standard 3 or 6 months of continuous residence and employment in the UK like for new mortgages?

3. What happens if a lender refuses to renew a CTL? Are you forced to repay the mortgage or find a new lender if you don’t want to sell the property? Assuming you can’t afford to just leave it empty or move back in.

4. Lenders have a minimum time requirement of having the mortgage before being able to apply for a CTL, usually 6 months. Does the same apply to product switches or would you be able to request a CTL right after switching to a new fixed rate?

5. From what we have read, it seems quite common for people letting out their property on a CTL to be forced to change their mortgage to a BTL product once the fixed term expires. However, the details of this are very murky. What happens if the lender doesn’t offer BTL mortgages or you don’t fulfil their BTL criteria like LTV and rent income compared to mortgage payments? Would they force you on the SVR or just let you choose another residential mortgage rate?

I appreciate a lot of this might be lender and even situation specific. If it helps, we plan on going with NatWest as judging by people’s experiences and their mortgage criteria they seem to be the most friendly towards CTL. It wouldn’t bother us to stay with one lender for the whole mortgage term and be missing out on a 0.1% better rate elsewhere - we would much rather have peace of mind than save £10 on our monthly payment. Again, this is all hypothetical for the time being but we want to avoid the risk of being stuck with a property that we can’t rent out or have to pay twice the interest rate on as much as possible.

I have preemptively answered some of your potential questions or comments to save you from wasting your time typing them:

• Why don’t you just sell the property if you move abroad? Even if we end up being away from the UK for several years, we do see ourselves coming back and living in the property again. We want to have somewhere to go back to and have an asset that can hopefully maintain its value in real terms in the long run.

• Why don’t you just rent for the time being if you think it’s likely you’ll move away soon? The above is all just a thought exercise and it’s just as likely that we might stay in the UK for the long term. Moreover, we’ve had enough of landlords and living in a Victorian studio with windows as old as black-and-white television and as insulating as cardboard. We think we deserve a decent place and can get a modern 2 bed flat with the same commute paying a mortgage not much higher than our current rent.

• Are you aware of all the challenges and tax implications that come with being an overseas landlord? Yes, we are. Saying that we’ll regret buying a flat or that we won’t make any money on the rent won’t change our opinion. Though answering the above questions might!

• Why don’t you just get a BTL mortgage if you move abroad? A couple of reasons - first, we might not qualify for one, second, we might be abroad by the time we come to that and being restricted to expat products that come with extortionate fees and significantly higher interest rates sounds like something we’d prefer to avoid by all means possible.

• You are just trying to bend the rules and take advantage of the system, get out of our country and stop ruining our housing market! First of all, we don’t even have a mortgage yet and all of this might not happen. We may end up living in the property ourselves, we are just planning ahead and considering our options before making such a significant financial commitment.

I apologise for such a long read and thank you if you’ve made it this far! I wanted to provide all the relevant background information and explain our not the most standard situation. I would really appreciate if you could answer at least a single question by indicating the number of the question you’re replying to. Any insight or relevant experience will be greatly valued as we really don’t know where else to look for this information. If you happen to be a broker and know the answers to these questions just let me know and we will happily become your clients!

Emmia

I think if you buy the property, and leave the UK for what would be potentially several years you should sell.

CTL/ BTL turns you into a landlord with all that entails in terms of cost, paperwork, risks of the flat being trashed, rental payment voids etc.(can you afford to cover the mortgage for many months with no rent coming in?)

When you rent the flat out it would no longer be your home (it's a business/investment). How would you feel if your lovingly decorated flat was trashed?

If you moved back to the UK there is also no guarantee the flat would be empty for you to move into.

Crucially the flat may not be suitable when you return for other reasons - the location might be wrong, you may have children by then...

Edit: I realise this doesn't answer your questions point by point, but your post struck me as being a bit of a romantic/rose tinted view of the situation.

Newbie_John

Buy and then ask in 40 years (or whenever you'll be deciding to move).. the law/world will change a lot by then.
I've seen people doing such thing and having a friend/company managing the property for them - not sure about tax/mortgage implication - but definitely possible.