Getting a seafarers mortgage can be a complex process as it comes with unique challenges. Seafarers often face additional scrutiny from lenders due to their tax status, residency, and foreign income sources. If you’re a seafarer seeking to buy a home, this guide will help you navigate the steps needed to secure a mortgage.
What Is a Seafarers Mortgage and Why Is It Different?
Seafarer mortgages are designed to meet the needs of those who work at sea and have specific residency and income conditions. Similar to traditional home loans, they consider irregularities in a seafarer’s income, tax status, and time spent outside the UK.
Most lenders view seafarers as higher-risk borrowers because they may spend months outside the country and receive foreign income. As a result, they often require more documentation and may offer less favourable interest rates compared to standard residential mortgages.
Can You Get a Mortgage as a Seafarer?
Yes, seafarers can get mortgages, which may require more work than a typical home loan. Many lenders will review applications from seafarers, but the process involves additional checks, especially concerning income and tax status. Having an experienced broker can be key in navigating these challenges.
How Are Seafarer Income and Affordability Calculated?
One of the main challenges seafarers face when applying for a mortgage is proving income. Since many seafarers work for foreign companies and get paid in different currencies, this can complicate the lender’s affordability assessment.
Key Factors Considered by Lenders:
- Income Source: Income earned abroad may need to be converted into GBP for assessment.
- Proof of Income: Seafarers must often show two years of tax records and income documentation, including registered accountant statements or HMRC documents.
- Currency Fluctuation: Lenders prefer stable income sources, so income in currencies like USD or EUR is more readily accepted than more volatile currencies.
How Time at Sea Affects Getting a Mortgage
Seafarers typically spend extended periods away from the UK, complicating mortgage applications. Most UK mortgages are designed for residents who spend at least six months of the year in the UK.
Time at Sea Considerations:
- 183-Day Rule: If you spend more than half the year (183 days) outside the UK, you might not qualify for a standard seafarer mortgage.
- Expatriate Mortgages: If your time at sea exceeds the six-month limit, an expatriate mortgage may be a better option. These mortgages come with higher interest rates and stricter requirements.
The problem with expat mortgages
Applying for a mortgage as an expat comes with higher costs and trickier terms. Here’s why:
- Higher rates and fees: The mortgage rates and costs your UK-based friends talk about differ from what you’ll get if you’re treated as an expat borrower. Lenders see lending to someone outside the UK as risky.
- Extra verification: It’s more complicated for lenders to confirm your earnings and tax status, especially if you’re not UK-based. Plus, they worry about your house sitting empty, which could invalidate your insurance.
- The price of risk: More risk for the bank means more fees and a higher interest rate for you.
Currency risks
If you’re paid in foreign currency, fluctuating exchange rates can make your mortgage payments unpredictable. Some lenders use today’s rate, others use the worst rate in years, and some even deduct a flat percentage from your income. It’s important to know where you stand on this before applying.
Who counts as an expat?
Generally, expats are UK nationals living abroad, temporarily or permanently, and if you’re paying tax elsewhere, you’ll be treated as an expat borrower. But seafarers are a bit different.
Seafarers Earnings Deduction (SED)
The UK’s tax laws recognise that seafarers don’t neatly fit into expat definitions. Thanks to the Seafarers Earnings Deduction (SED), ship and yacht crews can claim a 100% tax exemption on foreign earnings, meaning you keep your UK residency status – and access to better mortgage deals.
To claim the SED:
- You can spend up to 183 days in the UK each tax year.
- You must start or end one voyage at a foreign port during the tax year.
- You must work on a ship (not platforms or drilling units).
Filing a UK tax return while claiming the SED helps you show lenders that you’re a UK taxpayer, increasing your chances of being treated as a UK resident.
Watch out for offshore banking
Be careful if you’ve opted to have your salary paid into an offshore bank. These accounts don’t build your UK credit score, can lead to more scrutiny from HMRC, and often come with high fees. It might seem convenient, but it could harm your chances of getting a decent mortgage deal.
What Do You Need for a Seafarer Mortgage?
Seafarers must provide thorough documentation to apply for a mortgage. Here’s an essential checklist of what you’ll need:
Proof of Residency
- A permanent right to reside in the UK.
- You may need to provide your passport, utility bills, and proof that you live in the UK while not at sea.
Proof of Income
- Two years of income history.
- Tax records and proof of earnings from foreign employers or HMRC documentation.
UK Bank Account
- Most lenders require a UK bank account, and your deposit may need to have been in this account for a specific period before applying for the mortgage.
Property Types for Seafarer Mortgages
Seafarers may face additional challenges when looking to purchase certain types of properties. Lenders often shy away from properties they see as high-risk, such as:
- Ex-Council Properties: These homes may have low resale value.
- Non-Standard Construction: Houses built with non-traditional materials may raise red flags.
- Small or High-Rise Flats: It can be more challenging to finance apartments under 30 square meters or those in high-rises.
Is It Easier to Get a Seafarer Mortgage with a Partner?
Yes, getting a mortgage with a partner can simplify the process. Here’s how:
Multiple Incomes:
- If your partner works in the UK, their income can help offset concerns about your seafaring income and tax status.
Continued Occupancy:
- Lenders worry about homes being unoccupied for long periods. If your partner will live in the house while you’re at sea, this can ease those concerns.
FAQ About Seafarer Mortgages
Can I Get a Mortgage if I’m Paid in a Foreign Currency?
Yes, but you’ll likely face additional checks. Lenders will review currency stability, and your income may need to be converted into GBP for affordability calculations.
Do I Qualify for a Mortgage if I’m Away from the UK for More Than Six Months?
You may need to apply for an expatriate mortgage if you’re away for more than half the year. These have higher interest rates and stricter requirements.
How Much Deposit Do I Need for a Seafarer Mortgage?
Most seafarer mortgages require a deposit of at least 15% of the property value. However, some lenders may accept lower amounts, though this usually means higher interest rates.
Is It Hard to Get Insurance as a Seafarer?
Standard home insurance policies often only cover unoccupied properties for up to 30 days. You may need specialist insurance to cover long absences.
Securing a mortgage can be challenging for seafarers, but it’s entirely possible with the right preparation and professional help. Understanding your unique needs and finding a lender or broker who can accommodate them will set you on the right path.
Seafarer Mortgage UK – The Bottom Line
Seafarers can secure mortgages, but the process is more complex than for standard borrowers. It’s essential to gather all the necessary paperwork, particularly around income and residency, and to consult a specialist mortgage broker who knows the ins and outs of maritime finance and can find you the best deal without adding unnecessary hassle. By doing so, you’ll increase your chances of getting approved for a mortgage that suits your needs.
At The Mortgage Blog, we specialise in helping seafarers navigate the mortgage market. We’ll ensure the process is as smooth as possible, from finding the right lender to getting you the best rates. Please call us on 0333 335 6595 or message us to submit an inquiry. We’ll connect you with the most suitable advisor for your needs.
