Is it easier to get a us mortgage than a UK one?
Despite fluctuations in the market, a wisely chosen property portfolio is a steady, long-term way for individuals to increase their investment income. Rental properties in popular holiday destinations around the world are a highly desirable element of any property portfolio, as they allow for receipt of monthly yields at the same time as providing the potential for capital growth. Now, with the UK system tightening up, many investors are looking overseas for just such opportunities in order to make their money work harder for them and the US is one market that is benefiting from this evolution.
Across the pond, foreign-national mortgages is one such product encouraging Brits to invest, with banks offering access to credit for non-residents wishing to invest in holiday homes.
Anthony B. Sanders, economics professor at George Mason University in Fairfax, Virginia, explains: “The American pool of borrowers is drying up. Middle-class borrowers have flatlined due to low income growth, and domestic investors are finding it less appetizing because the foreclosure inventory has dried up. So who do you go to? Foreign investors.”
According to the National Association of Realtors, foreign property investors spent approximately $35 billion on mortgages for US homes during the year to March 2014 – a 46% increase on the previous year's figure. While investment activity in the US has since decreased, as domestic buyers enjoy more favourable conditions, markets such as Florida remain a hub for overseas investors.
Philip Button, Managing Director of specialist property investment firm Brookes & Co, who have just launched a new gated development in the heart of central Florida, The Club at Sunset Lake, says they have enjoyed strong interest from Brits.
Are US mortgages actually cheaper than in the UK? Costs and rates are an impressive low in the UK, as lenders compete to stimulate flagging demand.
Button argues that, thanks to the recently introduced MMR restrictions in the UK, it is certainly easier to take out a mortgage in the US. American banks, meanwhile, typically ask for 30 per cent or more as a down payment for foreigners taking out mortgages, with others operating set deposit limits, such as HSBC Holdings Plc's $15,000 minimum requirement.
"It's fantastic to see investment in US property through foreign-national mortgages opening the sector up to growing numbers of buyers in the UK," comments Button. "US mortgages are straightforward to obtain and don't require those applying to travel to the country, thus making international property investment achievable for a greater number of UK residents."