Helping foreign nationals without leave to remain secure a mortgage

For foreign nationals without permanent residency or citizenship, such as those without indefinite leave to remain (ILR), securing a mortgage to buy a home can be challenging. After many years living and working in the UK, laying down roots and buying a house to make a permanent home is a natural next step that offers financial security and long-term stability.

Yet accessing the mainstream mortgage market is not easy. Many mainstream lenders insist on clients having indefinite leave, or will only accept certain visa tiers. There can also be restrictive loan-to-value (LTV) requirements and minimum time-in-employment criteria to meet.

Without ticking all of these boxes, obtaining a mortgage from a mainstream lender can be a struggle.

Helping these borrowers achieve their financial objectives is crucial. This is where the specialist mortgage market plays such an important role. Specialist lenders, like Norton Home Loans, adopt a more flexible approach, which means they can often cater to the varied and complex needs of non-mainstream borrowers, including non-UK residents.

Credit challenges for foreign nationals

Foreign nationals without leave to remain often face one key challenge when applying for a mortgage: a lack of UK credit history. Credit profiles can take many years to build, and those who have only been in the country a short time may struggle to evidence this, despite having a strong credit record overseas.

In the mainstream market, an individual’s low credit score or thin credit file is often a barrier. Credit data plays a fundamental role in determining mortgage eligibility.

Even those who have lived in the UK for several years and used unsecured credit during that time may find that meeting high street lenders’ credit scoring thresholds is difficult. To add to this, lenders will not consider credit history built up overseas.

Many specialist lenders either apply lower credit score requirements or do not credit score at all. Instead, they take a view on the borrower’s wider profile and account conduct. This opens the door for applicants who have managed credit well but have lower scores due to fewer years of residence or a lack of previous secured borrowing.

Visa and residency restrictions

Another key factor in determining mortgage eligibility is immigration status, which can prove problematic for those without leave to remain. Most mainstream lenders prefer applicants to have ILR or, at the very least, be on a long-term skilled worker visa.

Those on short-term visas, such as students or individuals with limited time left on their visa, often face difficulties securing a mortgage. Lenders may view these borrowers as higher risk due to the potential for sudden changes in employment or residency status.

If a visa is not renewed, or a work contract is not extended, this could affect the borrower’s ability to make repayments. As a result, many foreign nationals without leave to remain are locked out of the mainstream market and may delay or abandon plans to buy a home, despite wanting to stay in the UK long-term.

The specialist lending approach

In contrast, specialist lenders like Norton Home Loans recognise that many foreign nationals without leave to remain are financially stable. This is why we take a flexible approach to underwriting, using manual assessment rather than relying solely on automated criteria.

This approach allows us to better understand the applicant’s needs and assess their personal risk profile. It also enables us to offer solutions that may be more appropriate to their situation.

Rather than automatically declining applications, specialist lenders consider factors such as the applicant’s job role, savings, and future earning potential. Taking a broader view allows us to support foreign nationals who may be excluded elsewhere.

Flexible lending criteria

For example, some specialist lenders may approve a mortgage application from a foreign national without ILR if the borrower has a larger-than-average deposit. This is often around 20 to 30 per cent of the property’s value and helps to offset the perceived risk.

To compensate for limited credit history, specialist lenders may also take into account income stability, employment contracts, UK savings, and general financial conduct as evidence of affordability.

This combination of factors helps lenders build a more complete picture of the borrower, especially if they are working in a stable role for a well-known organisation, such as the NHS.

In some cases, applicants may also strengthen their application by adding a UK-based guarantor, offering further reassurance that mortgage payments will be met if their own circumstances change.

Ensuring compliance when advising clients

Advising clients without leave to remain can be complex, particularly for brokers who are less familiar with this part of the market. However, as with all mortgage advice, the priority must be ensuring affordability and the best possible outcome for the client.

The Financial Conduct Authority provides clear guidance on responsible lending to foreign nationals, which brokers and lenders must follow to avoid placing borrowers at risk.

This includes using realistic income projections and factoring in the potential for visa renewals or changes to the borrower’s circumstances. This helps to ensure the borrower does not become overextended.

Brokers can also add value by encouraging their clients to build a stronger credit profile, such as taking out a credit card and paying it off in full each month. This helps to establish UK credit history and improves their prospects of being accepted for a mortgage in the future.

It is also vital to be organised. Brokers should ensure clients have all their documents ready before applying. This speeds up the process and helps lenders assess the borrower’s financial background in full.

For foreign nationals without leave to remain, this includes providing evidence of overseas income, savings, employment contracts, and any other financial documentation that supports the application.

Conclusion

Foreign nationals without leave to remain often face challenges securing a mortgage from mainstream lenders. This is largely due to rigid lending criteria that do not account for wider indicators of affordability.

As a result, some borrowers wrongly believe they must wait for long-term residency before they can apply. But that is not necessarily the case.

Specialist lenders like Norton Home Loans understand the needs of these borrowers and offer flexible lending solutions that take a more individual view. This allows us to support clients without leave to remain, while meeting all regulatory expectations.

Brokers have a key role to play in this, from helping clients prepare a stronger application to working with lenders who can take a more flexible view. In doing so, they can help foreign nationals without leave to remain take a step closer to homeownership and settling permanently in the UK.

This information is for intermediaries only.