Banks offering US citizens a mortgage on UK property

Strict visa regulations and concerns made it difficult for many Americans citizens to obtain mortgages on properties in the UK. Helen Burggraf watches the banks put the pieces together

Americans living in London are no different from other Londoners in one respect: it doesn’t take long for them to start talking about property and their experiences of buying, selling and owning.

However, the complications for American expats looking to buy property are so great that few financial institutions involved in the sale of residential properties in the UK wish to have US citizens as clients. Even Citibank, the American institution with international offices, does not offer mortgages to Americans for properties in the United Kingdom.

The fact that the US dollar has been at its highest level against the British pound for at least 12 months – which makes UK real estate more attractive – has yet to trigger a noticeable rush from mortgage providers for s ‘attack the market.

UK-based institutions that welcome American expats, such as Investec Private Bank and Coutts, often cater to high net worth clients, typically American bankers who are in London to oversee a company’s European operations, and have been doing so since years. .

An exception is Metro Bank. The FTSE 250-listed institution has been willing to accept American expats as clients since it started offering mortgages in 2011, according to the bank’s mortgage distribution director Charles Morley.

Metro Bank will provide US expatriates with mortgages for UK properties if they meet various criteria, such as a minimum income of £ 75,000; the right to reside permanently in the United Kingdom; and, for UK citizens who do not have dual UK and US nationality, proof of sponsorship, for example by an employer. The lender doesn’t find “huge demand” for them, a representative said.

Disincentives for foreigners
Some date the start of the difficulties faced by foreigners seeking mortgages to buy UK property to 2008, when certain tax incentives for offshore mortgages were abolished.

But the complexities for Americans were then compounded, experts say, by the introduction of the US Foreign Account Tax Compliance Act, enacted by President Obama in 2010; then by the 2015 EU directive on mortgage credit. The MCD was created to ensure that the granting of cross-border mortgages is regulated more consistently than before, but the result, professionals say, is that loans to non-UK citizens who wish to buy property in the UK have now become extremely complicated.

Under the MCD, even mortgages taken out in pounds sterling are considered “foreign currency mortgages” if the individual is paid or holds assets in another currency. The problem is, these mortgages come with a series of additional requirements.
“If an individual has indefinite leave, most lenders will seek a loan,” says Nicholas Morrey, technical director of products at John Charcol. “Foreign nationals without a residence permit but paid in pounds sterling may also be taken into account.

“But when you have foreign nationals, including US citizens, without an indefinite residence permit, who are paid in a currency other than sterling, it becomes much more difficult.

“In the case of foreign nationals here with work permits (including US citizens) it comes down to the individual lender’s policy towards these applicants … and some of them will just say, ‘we don’t. not at all ” . “

Residence issues
Added to these factors are fears that those who take out a mortgage will leave the country and not come back until they have paid it off.

Trinity Financial’s director of products and communications Aaron Strutt said American expatriates with visas may find themselves with a narrow window of opportunity to get a mortgage with relative ease in the UK. They must be here long enough to have a track record that lenders will accept, but not so long that their visa is about to expire.

On top of that, there can be inheritance tax issues – another reason any American looking to buy UK property should plan to get expert tax advice on these matters promptly, by more than consulting an experienced mortgage broker.

US market size
The number of Americans residing in the UK who take out mortgages on UK property each year is unknown, as is the number of mortgages currently held by these people. The United States is well known for not saying how many Americans it officially thinks there are in each country.

Earlier this year, the Office for National Statistics estimated the number of US citizens (as opposed to those born in the US) residing in the UK during the year ending June 2017 as “from l ‘order of 121,000 to 157,000 ”. Another ONS estimate put the number of US-born immigrants residing in the UK in 2013 at 197,000. An unknown number of those people are believed to be children and youth who are unlikely to yet be living in the UK. search for accommodation.

The number of so-called “accidental Americans” residing in Britain is also unknown. These are individuals who do not consider themselves Americans because they have lived here for most of their lives, but who are considered by the United States to be citizens because they were born there.

The fact remains that today the United States views these individuals as still having significant potential US tax obligations. It also means that they may have more difficulty securing a UK mortgage than they expected.

“A specialty of private banking”
Peter Izard, Director of Business Development at Investec Private Bank, explains that the reason private banks like Investec and Coutts tend to grant a good number of mortgages to American expats in relation to their overall businesses is that ‘they’ are able to manage these [complex] problems Americans face, because that’s what we specialize in – when most retail lenders can’t. ”

In addition to issues with foreign currency mortgages, clients’ may have issues with certain private banks in the UK – and not Investec, however – requiring their mortgage clients to entrust their portfolios to them as well. investment, even if, for example, it’s a senior executive at a company like JP Morgan or Merrill Lynch, ”says Izard. “So you have FATCA; and if they don’t have dual nationality, you have the question of the individual’s visa status.

“Here we take a pragmatic approach, that is, we question the determination of an individual to invest in a property in London or the UK if he is not absolutely convinced that he will get their level 1 or level 2 visa, with five years or less to run, renewed.

Andrew Grimes, Head of US Clients at Coutts, explains that FATCA in particular has seen many traditional banks pull out of the US expat market. “So that we saw FATCA as something that we had to integrate into our activities in the future,” he says.

True to its tailor-made approach, Coutts offers mortgages to American expatriates residing in the UK as part of a comprehensive wealth structuring service. It is the one that Grimes says is designed to accommodate high net worth and very high net worth individuals “looking for mortgage financing of at least £ 1million”.

“No end to the appetite”
Despite the complexities, those making the deals see these American expats’ “appetite” for British residential properties, says Izard.
His observation is echoed by others, including mortgage brokers specializing in American expats, who say any impact of Brexit on the US presence in the UK is being mitigated by the growth of other industrial sectors, such as the technology sector currently booming and expanding.

Coutts has yet to see a drop in demand for mortgages from American expatriates in the UK, said Grimes, adding that the number of mortgages the bank gives to Americans each year is in fact “on the rise.” since a while.

“It’s hard to say if we’re getting a bigger share of the market or if this particular subset of buyers in the market is thriving; it’s probably a bit of both, ”he adds.

“London is still the world’s international financial hub,” says Izard. “And a lot of American nationals in this financial world are still moving to London for work purposes.”

Even with the dollar strong, however, American expats won’t just buy everything they’re shown and are “good to go” if they feel like they’re being asked to pay more than the value of a property, explains. Andrew Montlake, Coreco Brand Director.

“They tend to be fierce negotiators and understand the value of things, including the value of service, so they very rarely question things like broker fees.”

Like other interviewees, Montlake says Coreco emphasizes that its US clients get expert tax advice early on in the property buying process.

Not to mention a good mortgage broker, adds Morrey, from mortgage brokerage firm Charcol, before recounting how a couple came to see him after their big UK bank told him they couldn’t give them a loan. mortgage on a property.

“I ended up giving them a mortgage with the international banking arm of this same big Isle of Man-based bank,” says Morrey.

“The point is, we have the information, the experience, and we are not tied to any lender.

“So the idea of ​​an American citizen looking for a mortgage here, as long as they have time on their visa and they’re not looking for more than 75% LTV, doesn’t bother us at all. . “

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