I recently helped an expat client complete a buy to let remortgage on his London Bridge flat. This client had moved to the US with his partner in late 2015 to take up a new employment opportunity at a multi-national company. My client was looking for a £300,000 remortgage on the London property, which was worth £600,000.
On the face of it, this appeared quite a straightforward case. Typically, the maximum loan on a buy to let is driven by a rental calculation – lenders normally require anticipated rent to cover the mortgage payment as well as general running costs. In the international lending space, however, the majority of lenders apply an overall affordability assessment. With my client’s partner not able to work in the US, overcoming the assessment became more challenging.
My client had already approached his existing lender, however, the bank was unable to offer assistance following the March 2016 Mortgage Credit Directive (MCD). This introduced new criteria affecting borrowers applying for foreign income mortgages, as well as introducing tougher rental ‘stress tests’ for expats.
Despite this case offering a low, attractive loan to value, post MCD there is more scrutiny on currency fluctuations, with few lenders continuing their foreign income lending propositions. Equally, those still available have generally applied ‘haircuts’ to foreign income, meaning my client required a combination of earned income and rental income to fit with a lender’s affordability criteria.
My client had the intention to return to the UK at a later date, so flexibility was a key element to this particular remortgage, ensuring my client could avoid potentially punitive penalties to the remortgage upon returning to the London property within the product term – should things not work out for him in the US.
Fortunately, there are still lenders who will accept mortgage applications where a strong case is presented appropriately, albeit with more stringent criteria. On this occasion, I was able to approach a lender with whom I already had an excellent relationship with, who was happy to take a view on the strengths of my client’s case.
I managed to secure an exceptional 5 year fixed rate at 2.33%. This was a great result for my client, providing a long term fix, which allowed for more time in the US, easing the stress of having to find another deal sooner.