Searching for your dream home in the UK is easy, but what about buying it? Getting a mortgage in the UK if you’re in another country, or if you’re not a UK citizen, can come with some additional challenges. So here’s what you need to know about navigating the UK mortgage market, and what you can expect as you work towards purchasing a property. 

Who can get a mortgage in the UK? 

To get a mortgage in the UK, you have to prove who you are, and show that you can keep up with your monthly mortgage payments. This means you have to: 

  • Be over 18
  • Hold a valid passport or driving licence
  • Have a steady household income
  • Have a credit score good enough that lenders will let you borrow the money you need

Sounds simple, right? But what does this mean for non-residents and non-citizens?

Proving your identity

Proving your personal details as an expat or a non-UK national is still a relatively simple process, although you might have to pay for a legal translation of your documents. As well as providing your passport as photo ID, you may also have to gather any residency documents, like your visa or proof of indefinite leave to remain.

Proving your income

The bigger challenge is proving your income and credit score without a UK bank account.

You might be able to find a lender who will accept personal bank statements from another country, but your credit history needs to be built up in the UK. 

Keeping a UK bank account open (and using it) while you live abroad can help. Otherwise, you might find yourself locked out of the best mortgage deals until lenders can get a more accurate picture of your credit score. 

Proving your address

To get a mortgage, you have to show where you live. The typical way to do that in the UK is with a council tax bill, a utility bill, or a credit card statement. You’ll usually have to prove your last 2–3 years of address history too. If you’ve only recently moved to the UK, you might not have those documents. This can be another stumbling block on the road to getting a UK mortgage.

Your age

If you want to buy a property in the UK for retirement, it’s worth taking the extra time to research mortgage brokers who lend to people over 55.

As you get closer to retirement, lenders see more risk in letting you borrow a large sum. They’ll want evidence that your pension will cover your mortgage payments, and you might have to jump through additional hoops like putting down a larger deposit or accepting a shorter mortgage term (such as 15 years instead of the more usual 25).

These seem like significant barriers to getting a mortgage in the UK, and it does become a much more achievable goal if you’ve been living in the country for 2-3 years first. 

But remember, you don’t have to go it alone. Contacting a mortgage advisor or going through a mortgage broker (like Habito) can help you find deals that suit your situation. 

So if you’re ready to start applying, here’s what to know about the mortgage process in the UK.

The mortgage process in the UK: some FAQs

What kinds of mortgages are available in the UK?

There are several types of mortgages in the UK – for standard residential properties, second homes, buy-to-let and commercial properties. You can read about the different types of mortgages in more detail here. But here’s a quick overview:

  • Interest only mortgages: With this type of mortgage, you only pay the interest on your loan, and then pay the lump sum at the end of your mortgage term.

Much more common are:

  • Repayment mortgages: Where you steadily pay back your mortgage loan in monthly instalments.

Then there are different kinds of repayment mortgages:

  • Fixed rate mortgages: Where your interest rate stays the same for a set number of years – 2, 5, or 10 years or even for your entire mortgage term with the Habito One mortgage. 
  • Variable rate mortgages: Where your interest rate matches your lender’s standard rate (a standard variable rate mortgage), the Bank of England base rate (a tracker mortgage) or varies, but is capped at a certain level (a capped rate mortgage).
  • Flexible mortgages: This type lets you overpay or underpay your mortgage in the months you need to without attracting hefty additional fees.
  • Offset mortgages: Here, you use your savings to offset some of your mortgage loan, so reducing the amount of interest you pay each month.

Although there’s a lot of variety in interest rates across the mortgage market, the usual interest rate in the UK is somewhere between 1.3 and 2.6%.

What size of deposit can you expect to pay in the UK? 

If you’re buying a property in the UK, you’ll have to pay at least a 5% deposit. 10% is more common. 

House prices in the UK are on the up, and the average is around £265,668, which would probably mean at least a £26,600 deposit. It’s also worth remembering that the best mortgage deals with the lowest interest rates start to open up if you can put down as much as 30%.

What additional taxes apply in the UK? 

Stamp Duty Land Tax 

This is a tax you pay after you buy your new home. It varies based on the property’s value, whether you’re a first time buyer or whether it’s your second home. In England, the rates vary from 0% (if the property is valued at less than £125,000, or £300,000 for your first home) to 12% on the value of the property over £1.5 million. The bands for additional properties are 3% higher.

Capital Gains Tax 

You have to pay capital gains tax on the profit you make from selling a previous property. The amount you have to pay varies based on your income tax bracket. You’ll also have a personal allowance that is taken into account.

Additional taxes on buy-to-let properties 

If you’re buying a UK property to rent to someone else, you’ll also have to pay tax on the income you make from renting it out.

The mortgage process in the UK

If this is your first time buying property in the UK, this is what your journey will probably look like:

  • First, you’ll get your deposit together, collect the documents to prove your identity, income, and credit score, and make sure you have enough left over for the other house-buying fees down the line.
  • Then, you’ll talk to mortgage lenders or brokers to find out what you can borrow and get a mortgage in principle (MIP) – this is a certificate showing what you can borrow. It shows estate agents and sellers that you’re serious about buying, and in a position to do it.
  • Once that’s in place, you’ll make an offer on a property and (hopefully) have it accepted.
  • Then it’s time to make your formal mortgage application and provide all the documents your lender needs.
  • You’ll also go through conveyancing – the legal side of things – where the local authority and solicitor carry out checks on the property to make sure there aren’t any issues that could sting you (and cause your lender to lose money) later.
  • When that’s taken care of, you’ll exchange contracts with the seller and pay for the house.
  • Finally, you’ll wait for ‘completion day’, when the house becomes yours and you get the keys.

If everything goes to plan, the process can take about 3 months. But it might be more realistic to plan for 6 months, in case you come up against any delays or problems.

Using a mortgage broker

Especially if you live outside the UK, it’s a great idea to use a mortgage broker to help you navigate the house-buying process. That’s an expert, regulated advisor, trained to offer you advice about the best mortgage for you. At Habito, we can answer your questions about every stage and help you find the best deal for your mortgage.