‘Interest’ is what the lender charges you for your loan. For example, if you borrow £90,000 for a house, the interest is calculated daily or monthly on this amount. The exact interest rate is determined by the lender.
How do you find the best interest rates as an expat
It’s easy to find a list of lenders offering the lowest interest rates. There are many interest rate comparison websites, or you can contact each lender and compile your own list.
A mortgage broker can also collate the lowest interest rates for you but bear in mind, they might be influenced by the lender’s commission which is paid to them when a new customer is signed up.
However, do get a mortgage broker to, at least, give you a list of lenders who accept applications from expats. This list will be your best time-saving technique. Trust me.
I’d found that many lenders, including my everyday bank of five years, do not clearly disclose that their mortgages are not issued to expats. So you waste time making an application which will ultimately be declined.
Biggest challenge when applying for a mortgage
The challenge isn’t finding the lowest interest rates; it’s whether you qualify for these loans. My husband is French and I am Australian, and our properties are in Australia and the United Kingdom.
Due to our differing visa status in both countries, we had a very limited selection of lenders who would accept our application. And, unfortunately, all the lenders issued us higher interest rates because we were expats.
Remember, when multiple people apply for the same loan, all the applicants need to qualify. One person overly exceeding the eligibility criteria does not mean that the other person will be eligible on a ‘lesser’ criteria.
Improving your eligibility for the lowest interest rates
To further improve your eligibility with different lenders who offer the lowest interest rates, there are few things which you can do.
Ensuring you have a good credit score and eliminating as much of your bad debt, such as credit cards and other loans, is a good start. We cancel our credit cards before applying for any loan.
Having a regular source of income from stable employment, in addition to having savings which equal to at least 20% of the house deposit will also help your application. You can also avoid any applicable mortgage insurance costs if you have a larger deposit.
Make sure you have extra savings for emergencies and misfortunes with the property, in addition to your deposit. There’s nothing worse than struggling financially just after you’ve bought a property. Trust me, I’ve experienced this and would not recommend it!
Another tip to save yourself time, if you’re a freelance worker, you should consult with a mortgage broker first because the paperwork required for your application will be more comprehensive than that of full time employees. You don’t need to use the broker’s full services, but its good to get their insider knowledge.
Lower interest rates do not always mean the best interest rate
A word of caution, many lenders may offer amazingly low interest rates as part of their introductory deals. However, always question if something sounds too good true.
Many lenders charge you a much higher interest rate after the introductory offer ends.
Or worst, the lender might not have a branch and outsource their customer service to a third party call centre. Some lenders even expect you to email them first to request a call back. For me, this service is unexceptable.
A mortgage is probably the largest debt you will have in your life so your bank needs to be easily contactable, Monday to Friday, at the very least. Period.
What if you don’t qualify for a low interest rate?
At the end of the day, don’t despair if you don’t qualify for a low interest rate. I didn’t either … twice.
You can always switch banks, for a fee, after the introductory period ends. But make sure you do the calculations to ensure you can afford the repayments and the switching fee.
Alternatively, you, or your mortgage broker, can contact the bank after the introductory period ends and diplomatically threaten to switch banks if a lower interest rate is not offered. No harm in trying; banks are not loyal to you, so you don’t have to be loyal to them.
Remember, it’s important you always have enough cash flow to repay your mortgage loan and the interest regardless of the rate. If you can’t afford the repayments despite having the deposit, then you simply cannot afford the property. Keep saving until you are in be a better financial situation.
Please note, though I own a few properties, I am not a legal, financial or professional property expert. I’ve written this post to share my personal experiences and would love to hear your opinions and views.
So what tips do you have for securing a lower interest rate?
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