The UK property market is one of the most popular destinations for US investors. It comes as no surprise London continues to lead the world as the top choice for foreign investment in financial services, professional services and of course property. Check out our UK Mortgages For US Citizens page here.
The rising cost of living, currency fluctuation, inflated house prices and political divisions are the main factors that led Americans to drive across the Atlantic. More recently, on Wednesday 7th September the pound fell to its lowest level against the dollar since 1985, meaning in real terms UK property is cheaper for Americans.
Retirees and the wealthy are traditionally the prime American real estate buyers in the United Kingdom. However, the UK has recently become much more attractive to a broader range of people, including younger entrepreneurs and professionals.
For US investors looking for an overseas second home or investment property, there are several critical differences in how the finance and buying systems work in the UK that should be considered.
This blog will give you a good understanding of these differences and some of the growth the UK property sector has seen in recent years.
The process of borrowing in the UK
Following 2020’s Pandemic, although the worldwide markets were feeling doubtful and arguably nervous, the UK property market saw a boom to rival that of 1987 and 2007.
Historically, UK property finance is more affordable than that in the US, add the excellent exchange rates and you can see why Americans are attracted to the UK. The London market welcomes US citizen buyers from jurisdictions deemed to be low risk.
The UK legal system is different from the US. The diligence checks occur before entering into a binding contract and completing the sale. In order to qualify for a mortgage in the UK, you will need to provide:
- Identification Documents (copy of passport)
- Proof of Address (e.g. utility bills or recent bank statements)
- Credit References (credit card, car lease, etc.)
- Proof of Deposit
Our brokers are all highly experienced in dealing with this process and aim to take as much work off the client’s desk and be as flexible as possible regarding documents.
Implications and differences to be aware
The 2010 Foreign Account Tax Compliance Act requires US citizens to declare any non-US-based financial assets annually to the IRS. This has led to many UK lenders being cautious about lending to US citizens due to the complexity and nature of the paperwork involved.
As with some states in the US, the UK has a stamp duty tax due at the completion of the property purchase and there is a surplus for extra properties.
The difference in terms: The US has ‘pre-qualification’ whilst the UK has ‘agreement in principle’. These terms are very similar; however, it is at this point in the UK that a credit search is authorised. Following a successful credit search, the underwriting process will commence.
Articus Finance is not a tax advisor and we highly recommend obtaining specialist advice – we would be happy to refer one of our trusted partners for this.
Conclusion
If you are a US citizen looking to invest in UK property, now is certainly an attractive time. Articus Finance is a whole of market broker, meaning we work with all banks, private lending institutions and non-bank lenders. We have developed a strong reputation through our years of experience and have solid relationships with all our lending partners. If you are looking to purchase in the UK, get in touch.
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