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Concrete Analysis | Getting mortgage pre-approval to ensure a safe landing on your dream home in the UK
- Hongkongers have emerged as among the most aggressive buyers of UK property, snapping up more than £305.6 million (US$430 million) of prime London homes in 2020
- But the process can quickly turn to a nightmare if a buyer signs on the dotted line, only to have their mortgage application rejected
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Hongkongers have emerged as among the most aggressive buyers of UK property, snapping up more than £305.6 million (US$430 million) of prime London homes in 2020. This trend is expected to continue under a new wave of emigration, as BN(O) passport holders are allowed to live in the UK under the new visa scheme.
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While such a buying frenzy can be partly attributed to impulsiveness since very little down payment is required to be a UK landlord, the aftermath – in the form of a mortgage – can be a daunting task. Applying for a mortgage can feel overwhelming and intimidating to many borrowers. In addition, the approval process for UK mortgage can be vastly different from, and more stringent than, that of a Hong Kong bank.
Homebuyers could be disappointed when they are drawn to the refurbished kitchens and spaciously planted gardens of their dream home and hastily sign the exchange contract, only to discover that the mortgage denial turns dream house into nightmare, for reasons that can range from income profile to title deeds issue.
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Many clients ask me if there is a way to get a mortgage pre-approval for a firm indication of borrowing power before house-hunting in the UK?
The answer, fortunately, is a resounding yes. Some UK banks offer mortgage pre-approval before purchasing a property. Borrowers indicate the amount of loan needed and provide proof of income, as is the normal application procedure. Upon approval by the bank, a certificate of Agreement In Principle (AIP), which states the maximum amount of loan the bank is willing to lend, will be issued.
The AIP certificate usually carries a validity of up to three months. Hongkongers can then purchase their homes in the UK within the time frame.
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If they move onto the formal application via the AIP bank, they may not have to go through the time-consuming approval process again. This is highly desirable if speed is paramount after making a deal.
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