If you’re looking to buy an investment property in the UK and have the financial clout to buy it with cash, then congratulations! Alternatively, like the majority of foreign buyers, you may need to borrow some money after putting down as much of a deposit as you can afford. If this is the case, then it’s worthwhile setting time aside to examine the UK mortgage finance market in as much detail as you can – certainly the products you believe may suit your own situation best.
A mortgage broker can not only help guide you towards what mortgage makes sense, but can also help set it up for you. He or she is usually independent, so isn’t obliged to work in any bank or lender’s particular favour – unlike a bank or building society, who will only recommend their own mortgage products, regardless of whether that works best for you or not. In most cases, it makes more financial sense to go with a specialist lender (private bank which has a particular interest in overseas buyers of UK property) rather than a High Street institution.
UK mortgages – what’s available
Money is available with interest as either a fixed or variable rate. For fixed rates, this is always for a certain length of time (the standard periods being for two years or five years). Variable rates are indefinite and go up or down depending on the market i.e. they are based on the Bank of England (BoE) base rate or the Standard Variable Rate (SVR). A Tracker mortgage is one which changes in line with the SVR or BoE rates.
Special deals are available for particular sectors e.g. the government is trying to attract first-time buyers back to the market, so have introduced a number of financial help schemes for them, such as a 95 per cent mortgage via Help to Buy. Bear in mind though, that as a foreign investor you may be charged a higher mortgage rate than an individual based here in the UK. Also, if you fail to make payments on your mortgage for a number of months, then the lender can sell the property in order to recoup their loan (together with any legal and admin costs).
Necessary paperwork for a UK mortgage
The type of paperwork you’ll need in order to get a mortgage is official documents which confirm your identity. This includes a passport, bank statements and other financial documents, such as proof of incoming finance. If accepted, you’ll be offered a Mortgage in Principle (a piece of paper to satisfy a seller that a lender has agreed to financing you). You’ll then have to hand over details of the property survey, so that the lender can verify the property is indeed worth what you’re prepared to pay for it. You’ll then have solicitor’s fees, stamp duty costs and the broker to pay.
Ways to buy a UK property
It’s possible to invest in the UK property market via an individual and using your own name on the mortgage papers. This means your family will be subject to 40 per cent inheritance tax on your death (although there are ways to mitigate this). You can also invest in UK property via a Trust. If you sell the property as a Trust, you’ll be liable for 28 per cent Capital Gains Tax on any profits. Buying a property via a Corporation is also possible (although since 2017 Inheritance Tax has been due, this method is usually no longer recommended for Overseas buyers).
Author
Chris Kirkwood
