Mortgage with Pre-Settled Status: Your Guide to Eligibility & Options
The mortgage market can be daunting, especially if you have pre-settled status.
While some lenders may consider you a higher risk, the good news is that obtaining a mortgage with pre-settled status is possible for candidates that meet the lenders criteria.
Understanding your options and having the right guidance can make all the difference.
At Kerr & Watson, we specialise in helping individuals like you find the right mortgage, whether you’re a first-time buyer, moving house, or investing in property.
What Is Pre-Settled Status?
Pre-settled status is part of the EU Settlement Scheme, designed to protect the rights of EU, EEA, and Swiss citizens living in the UK post-Brexit.
It allows you to live and work in the UK but does come with some limitations compared to settled status.
Importantly, it’s a stepping stone to obtaining settled status after living in the country for five years.
As a pre-settled status holder, you may be eligible for a mortgage, but it’s important to understand what lenders look for and how your status may influence your application.
Can You Get a Mortgage with Pre-Settled Status?
Yes, borrowers that meet the lenders criteria can, although not every lender will offer this. Many lenders are open to working with individuals who have pre-settled status, though the requirements and criteria can vary. The key is finding the right lender who understands your situation and offers competitive terms.
Lender Differences
Some lenders treat those with pre-settled status the same as British citizens or individuals with indefinite leave to remain, while others may apply stricter conditions.
Factors such as how long you have lived in the UK, your deposit amount, and your financial history can impact a lender’s decision.
Find out Your Options
How Long Do You Need to Have Lived in the UK?
The length of time you have lived in the UK is an important factor for many lenders. Here’s what you need to know:
- General Requirements: Some lenders may require a minimum of 6 months of UK residency, while others may ask for up to 3 years of address history.
- Fewer Restrictions: Certain lenders will consider you even if you’ve been in the UK for less than 3 years, making it essential to know where to apply.
At Kerr & Watson, we match you with the right lenders based on your residency duration and other factors, ensuring the best possible outcome.
Deposit Requirements for Pre-Settled Status Mortgages
The size of your deposit can have a significant impact on your mortgage options. Here’s a breakdown of what to expect:
- Minimum Deposit: Many lenders will accept a 5% deposit, even for those with pre-settled status. However, if you’re purchasing a new build flat, you may need at least a 10% deposit. This may be the same with limited address and credit history in the UK.
- Higher Deposits: Some lenders require a deposit of 20-25% if they perceive greater risk or if you lack a longer UK residency history.
Having a larger deposit may open up more mortgage options and potentially secure you a better interest rate.
Kerr & Watson can help you understand how your deposit affects your mortgage and find the best deals available.
How Much Can You Borrow?
The amount you can borrow depends on several factors, including your income, financial commitments, and the lender’s criteria. Here’s what you need to know:
- Income Multipliers: Most lenders use a multiple of 4 to 4.5 times your annual income to determine how much you can borrow. For example, if you earn £40,000 per year, you might be able to borrow up to £180,000, although this varies heavily.
- Higher Multiples: In some cases, you may be able to borrow up to 5.5 times your income, especially if you have a high salary or a significant deposit.
Factors such as existing debt, dependents, or significant outgoings (like car finance) can reduce the amount you’re eligible to borrow. At Kerr & Watson, we carefully review your finances to give you a realistic borrowing estimate and guide you to the best lenders. Initially you can utilise our affordability calculators to give you an idea of affordability.
Are Interest Rates Higher for Pre-Settled Status Mortgages?
Generally, the interest rates for individuals with pre-settled status are not significantly different from those offered to British citizens.
However, your options may be limited, and the very best rates might not be available.
Working with a broker like Kerr & Watson ensures you have access to competitive rates tailored to your circumstances.
Required Documents for Your Mortgage Application
Applying for a mortgage with pre-settled status requires providing detailed documentation. Here’s what lenders typically need:
- Proof of Income: Payslips for the last three months. If you’re in a new job and don’t have payslips yet, a signed employment contract may be acceptable.
- Bank Statements: Three months of bank statements showing your income and expenditure.
- Proof of Deposit: Evidence that your deposit is held in a UK bank account.
- Residency Evidence: A share code or other documentation proving your pre-settled status.
- Identification: A valid passport or national ID.
Gathering these documents early can speed up your application process. We ensure you’re fully prepared before approaching lenders, making the process as smooth as possible.
Should You Wait for Settled Status?
Many people wonder if they should wait until they have settled status or indefinite leave to remain before applying for a mortgage.
While having settled status may increase your lender options slightly, the benefits may not outweigh the cost of delaying your property purchase.
Renting longer can be costly, and with pre-settled status, you still have access to competitive mortgage deals. Get in touch for individual advice regarding this.
Buy-to-Let Mortgages with Pre-Settled Status
If you’re looking to invest in property, buy-to-let mortgages are also available for individuals with pre-settled status. Typically, these mortgages require a larger deposit of at least 25% but this can change.
Some lenders may have additional criteria, such as minimum income requirements or a history of property ownership.
We can guide you through the process, helping you understand the specific requirements for buy-to-let investments and finding the right lenders for your needs.
Conclusion
Securing a mortgage with pre-settled status may seem challenging, but with the right advice and guidance, it’s entirely achievable.
At Kerr & Watson, we’re dedicated to helping you to ensure you get the best possible deal.
Contact us today to explore your mortgage options.
