Can you get a mortgage for an overseas property?

Can you get a mortgage for an overseas property?
Can you get a mortgage for an overseas property?

Being able to buy a property abroad is an exciting prospect. You may be looking for a holiday home to enjoy or prefer somewhere more permanent to retire to. Perhaps the idea of a buy-to-let investment abroad appeals to you. Whatever your reason for buying abroad, you need a way to finance your purchase if you don’t have enough cash to buy a property outright. This is when an overseas mortgage can help you.

What is an overseas mortgage?

This is a specialist type of mortgage to buy overseas property. Buying property abroad has become increasingly popular. Unless you can pay in cash, however, you need to choose from these three options to finance an overseas property purchase:

  • Secure an overseas mortgage via a UK lender
  • Apply for a mortgage with an overseas lender
  • Remortgage your UK property

The option you choose depends on your circumstances and we’ll explain each of them in a bit more detail below.

Secure a mortgage in the UK for overseas property

Some UK lenders offer an international mortgage service, enabling you to apply for an overseas mortgage. These lenders tend to have a presence in the countries they provide mortgages for so check this first. Using a UK lender is a lot easier if you don’t speak the foreign language. Your mortgage will be arranged in your own language, preventing any translation issues that may otherwise occur. This also saves you from having to pay for a translation service. The mortgage process through UK lenders is quicker than via international mortgage lenders as they have access to your credit file.

Arrange an international mortgage via an overseas lender

Instead of applying for an overseas mortgage via a UK lender, you can approach an overseas lender with the help of an international mortgage broker. An overseas lender has in-depth knowledge of the local property laws as well as the mortgage market. A wider range of mortgage deals will be available to you and, in some countries, you may benefit from cheaper rates than if applying for an overseas mortgage in the UK.

However, being accepted for a mortgage via an overseas lender can be much harder. As a foreigner, you’re likely to be charged higher rates than a local. You also won’t be afforded any protection by the Financial Conduct Authority (FCA). Another factor to bear in mind is that you’ll be dealing with a foreign currency. As such, exchange rate fluctuations can impact how much your mortgage repayments cost.

Remortgage your UK property to buy one abroad

If you already own a property in the UK and have equity in it, remortgaging is an option to raise some cash. You can use the released equity to pay a larger deposit so that you don’t need to borrow as much for your overseas mortgage. Or, if you have enough equity in your Pimlico property, you may even be able to pay for your overseas property outright. Before taking this route, speak with one of our expert mortgage advisers in London, Kent or Edinburgh. They can check your affordability first as remortgaging will increase your monthly repayments.

How much can you borrow?

When buying an overseas property, the amount you can borrow depends on the lender, your circumstances and the country you’re buying in. You generally need to pay a higher deposit than you would for a UK mortgage, such as 30% to 40%. The deposit may also be non-refundable so it’s essential to get legal advice before you pay anything.

Considerations when buying a property overseas

There are many factors to think about before buying a property abroad. Be sure you’re aware of all the fees you need to pay for your purchase and other costs, such as insurance. Check that there are no outstanding utility bills for the property and what steps to take if there are. You also need to consider the local property laws, your tax obligations and planning permission requirements. As mentioned earlier, you need to factor in exchange rate fluctuations too.

  • Tax liabilities: These depend on the country you’re buying in so it’s important to get the right tax advice. For example, you may be liable for capital gains tax if you sell the property in the future. You may be taxed on the rental income received for a buy-to-let investment. Inheritance tax may be payable if you leave your property to someone in your will.
  • Property laws: Ensure that you get independent legal advice from someone with extensive experience in the country’s property law. For example, restrictions might apply to you as a foreign buyer, such as the area you can buy property in. Or you may need a licence to be able to rent out your property.
  • Planning permission: Check whether you need planning permission to make any changes to your property. Whereas you may only need it for renovation work in some countries, you’ll need it just to carry out small repair jobs in other countries.
  • Fluctuations in the exchange rate: When paying for your property in a different currency to your own, think about how the exchange rate will affect you. Any fluctuations will alter how much you have to pay for your mortgage repayments. The lender may take this into account when calculating your affordability for an overseas mortgage.

Finance your property purchase abroad with an overseas mortgage

Get in touch with us on 01322 907 000 when you’re ready to buy a property overseas. Whilst we’re unable to arrange overseas mortgages ourselves, we can refer you to a third party for this. Having formed extensive relationships with overseas mortgage lenders in different countries, they can guide you on all aspects of financing a property purchase abroad. They can also advise you on various points about buying in the country you’re interested in. That way, your attention will be drawn to factors that you may not have considered about buying overseas. This ensures that you’re fully prepared for your purchase. You can rest assured that the ideal lender will be approached for your needs and the best overseas mortgage deal will be arranged for you.

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