The UK’s very buoyant property market has long attracted Swiss investors to purchase property that they go on to rent out. London remains an especially popular location for buy-to-let investments, but other leading cities and regions of the UK also make excellent locations for buy-to-let property purchases.
A UK buy-to-let mortgage is very possible for Swiss residents (regardless of whether you are a British expat, Swiss national, or another nationality, but you reside in Switzerland). However, the process can be slightly more complex than if you were a UK resident.
The first thing to understand is the UK’s buy-to-let market. Most UK mortgages for a buy-to-let property are ‘unregulated’ mortgages, which means that you are the owner of a property you neither plan to live in nor rent to a family member. Unregulated mortgages have different affordability rules than regulated mortgages, which can impact what you will be able to borrow in relation to your property purchase.
For most Swiss residents buying UK rental property, you will be planning to use the rental income to cover your mortgage repayments. Lenders will be looking to see rental income is higher than your mortgage repayments by a considerable margin. The excess coverage will vary from lender to lender but expect rental income to need to cover the mortgage by at least 110%, but more likely in the range of 150%.
A quirk of the UK buy-to-let mortgage system is that the figure your lender would like to see in rental income (which includes the excess mortgage coverage) doesn’t necessarily reflect the mortgage amount you will actually pay. For many Swiss resident buyers, a broker like Enness, who can help you understand what lenders are looking for and how to present your case is often invaluable.
Especially as you are based in Switzerland, lenders will also want to assess your income carefully in relation to a buy-to-let property. Swiss income or salaries tends to be higher than average UK income (given the much higher cost of living). Provided you are making a sensible purchase in terms of affordability, your income is unlikely to hamper what you can afford to buy. However, you must ensure lenders understand your expenses, especially if you are borrowing from a UK creditor. Given that Switzerland is so much more expensive than the UK, some lenders can baulk at your regular costs without an explanation and careful clarification of your outgoings.
UK lenders like to lend to seasoned investors, and many will want to ensure you have a plan detail how you will handle the maintenance and marketing of the property from abroad. If you have a portfolio of property in the UK, it can be easier to borrow based on your experience in the space. However, providing concrete information about finances, income and affordability will still be necessary, given lenders can be concerned that more extensive rental portfolios can present more risk than landlords with fewer properties.
If you are a first-time buy-to-let borrower, Enness will still be able to secure a mortgage for you, although you may find you will not be able to borrow as much as a more experienced investor would.
Top slicing is also an option. Top slicing is used if the rental income you will derive from your UK property won’t cover the mortgage. In these cases, lenders will usually look at your salary to determine if you can borrow more, using a mix of rental income and your personal income to cover the mortgage. Here, how you present your case to lenders is paramount. Given you most likely generate income in Swiss francs (and potentially in other currencies) and you will probably have other financial commitments, how you explain your plans to lenders is often the difference between getting a mortgage or not. Top slicing adds a level of complexity for Swiss residents, given lenders will want to ensure that you can afford to pay the mortgage and meet your commitments (given the international element, this will be particularly important). Not every lender has an appetite for allowing international borrowers to top slice, so Enness’ network of lenders and ability to negotiate on your behalf is likely to be particularly helpful in these cases.
Whatever you are looking to buy in the UK and whatever your personal situation, nationality or financial background, Enness will be able to secure you the best rates and terms for your UK buy-to-let mortgage. We specialise in mortgages in the UK and beyond.