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Expats letting out UK homes face new mortgage problems
| Published: | 24 Sep at 6 PM |
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A new EU ruling may cause hassles for expats wishing to let out their UK homes using a buy-to-let mortgage whilst they work or live overseas.
Until March next year, expats looking to take up a contract overseas are able to let out their UK property with the permission of their mortgage lender. After that date, new EU rules will compel mortgagees wishing to let their properties to prove they can afford the monthly payments on an existing loan or new buy-to-let mortgage.
Expats planning to stay outside the UK for a considerable time before returning often opt for letting out their existing property as a means to extra income and a hedge against house price spikes during their absence. If they’re planning to stay overseas for some years, a buy-to-let remortgage is often the best option as it can give extra cash for relocation costs.
The new European Mortgage Credit Directive forces banks and building societies to submit a request to let or for a buy-to-move mortgage to rigorous underwriting. The red tape involved is aimed to ensure borrowers understand the legal responsibility of being a landlord and can continue to afford the loan.
From next March, this category of borrowers will be treated as if they are residential mortgage holders rather than buy-to-let landlords, although professional landlords will not be affected. The Council of Mortgage Lenders trade body will issue a voluntary code of conduct for its members including a formal affordability test for let-to-move mortgagees.
The new EU rules are expected to complicate the lives of those planning to move overseas, and each application will take extra time to process. A plus point is that borrowing terms and conditions must be stated clearly in writing, making understanding the small print easier for stressed emigrants.
Until March next year, expats looking to take up a contract overseas are able to let out their UK property with the permission of their mortgage lender. After that date, new EU rules will compel mortgagees wishing to let their properties to prove they can afford the monthly payments on an existing loan or new buy-to-let mortgage.
Expats planning to stay outside the UK for a considerable time before returning often opt for letting out their existing property as a means to extra income and a hedge against house price spikes during their absence. If they’re planning to stay overseas for some years, a buy-to-let remortgage is often the best option as it can give extra cash for relocation costs.
The new European Mortgage Credit Directive forces banks and building societies to submit a request to let or for a buy-to-move mortgage to rigorous underwriting. The red tape involved is aimed to ensure borrowers understand the legal responsibility of being a landlord and can continue to afford the loan.
From next March, this category of borrowers will be treated as if they are residential mortgage holders rather than buy-to-let landlords, although professional landlords will not be affected. The Council of Mortgage Lenders trade body will issue a voluntary code of conduct for its members including a formal affordability test for let-to-move mortgagees.
The new EU rules are expected to complicate the lives of those planning to move overseas, and each application will take extra time to process. A plus point is that borrowing terms and conditions must be stated clearly in writing, making understanding the small print easier for stressed emigrants.
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