Mortgages for seafarers
If you work at sea, you may have faced difficulties when applying for a mortgage or remortgage from high street lenders.
This is because many lenders often don’t understand the unique way in which seafarers are paid and taxed, and may not recognise your true income and affordability.
Moreover, since the introduction of tighter regulations, such as the Mortgage Market Review of 2014 and the Mortgage Credit Directive of 2016, banks have adopted more stringent lending practices. These measures were designed to safeguard against the financial instabilities seen in the past, making banks more cautious in their approach to lending.
Why Banks Are Hesitant
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Regulation Impact: These regulations require banks to be more accountable, leading them to withdraw from market segments perceived as risky or complex.
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Detailed Underwriting: Seafarers often face additional scrutiny in the underwriting process due to their non-traditional income sources, which many banks are ill-equipped to assess accurately.
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Business Models: Some banks might find that seafarer mortgages do not align with their core business strategies, prompting them to focus on more conventional lending opportunities.
In essence, a combination of regulatory constraints and a lack of understanding of seafarers' financial profiles contributes to the reluctance of many banks to offer mortgages to those in the maritime profession.
Cleerly's expert knowledge of the seafaring profession enables us to put together comprehensive mortgage applications that highlight your strengths and suitability as a borrower. For over a decade, our committed team of advisors has been instrumental in assisting seafarers in securing or remortgaging their dream properties.
If you’re looking for a fair and flexible mortgage or remortgage that suits your needs and unique circumstances, Cleerly is the broker for you.
Contacting our seafarer mortgage specialists is simple – you can use our online mortgage calculator to compare mortgages, or simply give us a call on 02394 212912.
Introduction
What is a seafarer mortgage?
A seafarer mortgage is a type of property finance designed to meet the specific needs and requirements of people who work as professional seafarers and offshore contractors. This would normally include (but not be limited to) the following roles:
- Naval officers
- Cruise ship staff
- Yacht crew
- Offshore oil and gas workers
- Marine biologists
- Self-employed contractors
- Shop employees and entertainers
A sea-going ship is any vessel:
- On an international voyage or from a foreign port
- On a domestic journey from a UK port
- Over 500 gross tonnes
This type of contractor mortgage is slightly different to a standard residential mortgage as it considers factors such as foreign currency earnings, SED and time spent working offshore.
Eligibility
How to get a mortgage as a seafarer?
The best way to get a mortgage as a seafarer or offshore worker is to apply through a specialist seafarer mortgage broker. With Cleerly, our expert seafarer mortgage consultants have access to a vast range of lenders, meaning we can source the best mortgage or remortgage deal for you. We will provide you with simple clear advice, working out how much you can borrow, what type of mortgage would be most suitable and how much it will cost.
Once we’ve identified a mortgage that aligns with your specific needs and financial situation, we’ll prepare a comprehensive application to send to potential lenders, which will include the following documentation:
- Proof of Seafarers Earnings Deduction claim (such as tax returns or HMRC letters)
- Bank Statements
Lenders will often request additional documentation to assist them with underwriting your mortgage, and you will need to provide evidence you have a UK bank account for your monthly mortgage payments.
Navigating the Application Process
The application process for seafarers typically involves a paper-based approach. You'll be required to fill out an application form and provide necessary documents to confirm your identity, income, and proof of deposit. Be prepared to prove everything meticulously.
Essential Documentation
Aside from the initial documents, lenders may ask for additional items such as:
- Employment contracts
- Copies of your CV
- Existing mortgage statements
- Evidence of savings
Ensure the quality of your documentation is high, sending original documents whenever possible. If a document cannot be sent in original form, such as a passport, a certified copy from a UK solicitor may be acceptable.
If you receive documents like bank statements or utility bills online, make sure to provide them in a format suitable for lender assessment.
Complexity and Communication
The mortgage market for seafarers can seem complex and the process might feel protracted. Engaging fully with all parties involved in your property purchase—your solicitor, mortgage broker, and estate agent—is crucial. Effective communication ensures your purchase proceeds smoothly.
Your dedicated client service manager will advise you on all documentation required and take care of all the paperwork for you, giving you peace of mind that your application is in the best possible hands.
Trusted lenders we work with
The impact of claiming the SED on your mortgage opportunities
Seafarers can receive earnings tax-free in foreign currency but must still file an annual UK tax return to claim the SED exemption, preserving their UK residency and eligibility for a non-expatriate UK mortgage.
Convincing a mortgage lender and the tax office of your eligibility for this exemption can be challenging.
If you spend less than 183 days in the UK within a tax year, it's crucial to retain all travel-related evidence. Additionally, to qualify for a non-expatriate mortgage, you must prove you maintain a UK residence where you can stay for at least 91 consecutive days, which also serves as your postal address and voter registration location.
Impact of Mortgage Regulations on Seafarers
In recent years, mortgage lending has seen significant changes, primarily due to a series of regulatory measures. The Mortgage Market Review in 2014 and the Mortgage Credit Directive in 2016, alongside the interventions by the Prudential Regulation Authority, have reshaped the landscape of mortgage lending.
These regulations were implemented to increase accountability and mitigate risks in lending practices. For seafarers, this has meant navigating through more stringent lending criteria. Here's how these changes have specifically affected them:
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Stricter Lending Policies: Lenders now conduct more exhaustive underwriting processes. This rigorous analysis can complicate mortgage approval for seafarers whose income patterns may not align with traditional criteria.
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Enhanced Accountability: Banks are required to maintain higher levels of transparency and risk assessment. As a result, they often avoid market segments perceived as high risk, which can include borrowers like seafarers with irregular income.
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Market Participation: Some banks have opted to withdraw from specific market segments that no longer align with their updated risk profiles or business models. This has reduced the number of available lenders for seafarers.
These regulations have not solely impacted seafarers but have cast a wider net over all borrowers. However, due to the unique nature of seafaring income, these professionals find themselves particularly challenged by the tightened lending conditions.
How seafarers can make sure they're not classed as expatriates for a UK mortgage
1. Maintain UK Residency: Prove you have a permanent UK residence where you can stay for at least 91 consecutive days (not a hotel). This should be your mailing address and your voter registration location. An experienced broker can assist in compiling the necessary details to assure lenders.
2. Submit an Annual UK Tax Return: Ensure you file your UK tax return each year to support your residency status.
Getting a seafarer mortgage as a first-time buyer
As a seafarer looking to purchase your first home, the process can seem daunting. Fortunately, Cleerly can help make the mortgage journey more straightforward. Our consultants will guide you through the application process, ensuring you're in the best possible position for lender acceptance.
Engage Key Professionals for a Smooth Process
To ensure a smooth property buying process, especially for seafarers, it's crucial to engage with all parties involved, including your solicitor, mortgage broker, and estate agent. Clear and consistent communication with these professionals can help prevent delays and ensure a seamless transaction.
Seafarers looking to make their first home purchase can often encounter several challenges. However, it is still possible to qualify for a mortgage, even for offshore contractors trading via a Ltd company, starting on day one or using an umbrella company. We assess mortgages based on gross contract value, meaning if your daily rate is, for example, £500, you might be eligible to borrow up to £600,000.
Explore Financial Options
We also support the Shared Ownership scheme and advise clients that the use of Lifetime ISA savings towards a deposit is an option. Our offers include deposits as low as 5%, borrowing based on your annual contract rate, and borrowing up to five times your income.
Effective Communication is Key
Remember, effective communication with your team of experts is key. By actively engaging with all parties, you can navigate the complexities of property buying with confidence, ensuring that each step is handled efficiently and effectively. This approach is particularly beneficial for seafarers, who might face unique challenges due to their employment circumstances.
Buy-to-Let Mortgages for Seafarers
Securing a buy-to-let mortgage as a seafarer is feasible, whether you're interested in a long-term rental or a holiday property. As a seafarer, you may need to provide a larger deposit, typically no less than 25%.
However, if you're purchasing a residential property for your family while you're offshore, you might be eligible to borrow up to 95% of the property's purchase price. This largely depends on being paid in £ Sterling and working with a prominent UK employer.
For those using the property personally when onshore or being paid in a foreign currency, the maximum borrowing limit decreases to 80% of the property's value. This is particularly true if your employer is based outside the UK or is less recognizable. It's important to note that only a select few lenders might consider such cases.
When it comes to buy-to-let investments, you'll generally need a deposit of at least 25%, with some lenders potentially asking for more. This requirement ensures lenders have a safety net, especially given the nature of the seafaring profession.
Understanding these deposit requirements can help you navigate the mortgage landscape more effectively, ensuring you make informed decisions tailored to your unique circumstances.
Property Type Considerations
The type of property you're buying significantly influences a lender's assessment of your application. New build properties, for instance, often require a higher deposit due to the perceived risk. Ex-council properties might pose challenges too, as some lenders are unwilling to lend on these flats at all.
If you're considering properties that will serve as holiday lets or multiple occupation units, such as student housing or Airbnb rentals, be prepared for additional scrutiny. These properties may be classified as 'House in Multiple Occupation' (HMO), prompting lenders to question your management capabilities, especially if you're offshore. Generally, these are deemed suitable only for experienced investors.
Geographic Factors
The location of your potential purchase also plays a crucial role. Many lenders concentrate on properties in England and Wales, with a particular focus on London and the South East. Options in Scotland are limited, and currently, there are no known lenders granting mortgages to seafarers for property purchases in Northern Ireland.
Managing Risks and Responsibilities
These mortgages carry more risk than standard residential ones, particularly since you might be away for extended periods, making prompt property management challenging. This could reduce the property's attractiveness to tenants if issues arise. Employing a professional rental management company can alleviate this concern, although your lender may require evidence of such arrangements.
Alternatively, you could demonstrate a successful track record in managing other rental properties. Managing risks is especially vital for properties with multiple occupants. Keep in mind the tax implications of rental income in conjunction with your seafaring earnings and tax allowances.
By understanding how property type and location affect your mortgage application, you can better navigate the complexities of securing a mortgage as a seafarer.
Expatriate or Seafarer Mortgage
Expatriate mortgages cater to individuals primarily residing outside the UK. These mortgages typically come with higher interest rates and may require a larger deposit compared to seafarer mortgages. This is due to the increased risk for lenders, as taking legal action against a borrower living abroad can be challenging. Cleerly's brokers can help you understand the most suitable mortgage for your situation.
Understanding the Impact of Location on a Seafarer's Mortgage Options
When considering a mortgage as a seafarer, the property's location significantly influences the available borrowing options. Here's how:
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Regional Focus of Lenders: Many mortgage lenders primarily target specific regions. In the UK, you'll find that England and Wales, with a particular concentration on London and the South East, are often favoured. This means lenders may offer more competitive rates and flexible terms for properties in these areas.
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Limited Options in Scotland: If you're looking to purchase a property in Scotland, be prepared for fewer lending options. While some lenders include Scotland in their portfolios, the choices are generally more restricted compared to other parts of the UK.
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Challenges in Northern Ireland: Northern Ireland presents a unique challenge. Currently, it is difficult to find lenders willing to provide mortgages to seafarers for properties in this region. This scarcity can limit your ability to secure favourable financing.
By understanding these regional differences, seafarers can better navigate their mortgage options and strategically choose property locations that align with lending availability.
Receiving Salary via Offshore Banks and Limited Companies
Some crew members opt to have their salaries in foreign currencies deposited into offshore limited companies, which could be a tax-efficient method. However, this approach may affect future property financing.
It's important to note that all offshore banks are required to report their clients' financial activities to the appropriate tax authorities under the Offshore Disclosure Facility.
Instead of keeping your tax-free income hidden from UK tax authorities, utilising an offshore bank account could attract greater attention from HMRC.
Offshore accounts often incur higher fees, do not offer interest or lending facilities, and do not enhance your UK credit score. Consequently, this could complicate securing a mortgage, particularly a non-expatriate one, if you rely on offshore banking.
Insurance Considerations for Seafarers
Seafarers often encounter higher home insurance costs once they own a property. Extended periods of vacancy can invalidate the policy. To mitigate this risk, engaging a specialist broker like Cleerly can be beneficial, especially if you can prove that family or friends nearby can regularly check on your home during your absences.
Additionally, life insurance and critical illness coverage tend to be more expensive for seafarers, as some financial institutions view the occupation as inherently riskier.