Can a foreign citizen get a mortgage to buy in the UK?

Image of London.
Tuesday January 10, 2023

There is an urban myth that US citizens can’t get a mortgage in the UK in order to buy London property, but that is exactly it – a myth. There are no restrictions with foreign nationals buying property in the UK, as foreigners and non-residents can get a mortgage in the UK subject to lenders’ proof of residency criteria.

However, there are a few differences between buying property in the UK compared to the US process. In America, the standard process is that buyers will work very closely with the agents throughout the whole process where the agent will find relevant properties and show them around that fit within their budget and criteria. Whereas in the UK the buyer will often find the properties themselves from looking at online property websites, following which they’ll contact the agent directly to arrange a viewing. For American investors who have limited knowledge of the UK property market, it could be quite an inconvenience to them, however there are property investment managers who can help buyers throughout this process by sourcing properties and supporting them through the legal process with things such as stamp duty and land registry fees.

There are a number of lenders who won’t consider lending to US citizens, mainly because of the 2010 Foreign Account Tax Compliance Act, which requires US citizens to report on their non-U.S. financial assets on an annual basis to the IRS. This requires a lot of additional paperwork and therefore puts some lenders off due to the  workload required to underwrite, but also the skills required by the underwriter to do that.

However, Large Mortgage Loans has already facilitated a large number of mortgages in the UK to US investors who have bought on UK soil and therefore has strong relationships with the decision-makers at most of the lending institutions who will lend to US buyers.

In fact, interest from US buyers wanting to buy in the UK has increased over 40%* since June as the strong dollar rate provides a great discount on UK property purchases. The recent fall in the pound is currently 17.5% against the US dollar, year to date, making the UK property market very attractive for buyers purchasing in US dollars, as London is considered a ‘safe haven’ for investors.

Compared to 2014, when sterling was equivalent to $1.71, and property prices in London were 13% higher, the discounts available today to US buyers equal around 40-45%. A property listed in the desirable Knightsbridge district for example for £5 million would have cost $8.6 million eight years ago compared to $4 million today.

English property ownership laws are also probably one of the most robust in the world, and even when international markets are feeling a little unstable, following the recent global pandemic, London prices remain confident which makes buying across the pond even more attractive.

Whilst nothing is guaranteed, it is expected that you can make a profit of around 50% on London’s prime real estate. The average house price index in a number of London’s most desirable boroughs have reported an average increase of 57.4% in value over the decade to January 2020. In fact, the average London property in 2012 was £292,000 compared to £667,000 10 years later.

However, it’s not just London where US investors are looking. Many US buyers are looking for a period property, with acres of land in a good condition and so Scotland provides US investors with a very attractive option, especially as many US citizens enjoy their golf. With over 580 golf courses, and over 140 malt and grain distilleries, Scotland is definitely becoming a popular choice.

If you are looking at buying a property in the UK either for investment purposes or even as a second home, call one of our specialist team of advisers to see how we can help.

*Source: Sherry FitzGerald an affiliate of Christie’s International Real Estate

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