Overseas Buy-to-Let Mortgages

Looking to invest in a buy-to-let property overseas but not sure where to start? Read on to find out everything you need to know.

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Home Buy To Let Mortgages Overseas Buy-to-Let Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: November 28, 2023

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

November 28, 2023

Getting a buy-to-let mortgage on a property overseas is a little more complicated than getting one at home. In this article, we’ll explain how to overcome these obstacles with the help of a specialist overseas mortgage broker.

Can you get a buy-to-let mortgage abroad?

Yes – and you may even benefit from lower interest rates and cheaper property prices. There are three main ways to raise finance for an overseas property purchase:

  • Apply to a lender in the country you’re buying in. If mortgage rates are lower in the country you’re buying in, this could be your best bet. However, you’ll need to navigate the local laws, and there will likely be translation involved, which can be slower and add to costs.
  • Borrow from an international lender with a UK presence. These lenders are usually easier to deal with, but they’re limited in number, and that can result in higher rates.
  • Remortgage your UK home to buy an overseas property. If you’re mortgage-free, or nearly there, this could be an option. The remortgage process is generally straightforward.

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Which countries can UK citizens get a mortgage in?

The most popular countries for Brits to get a buy-to-let mortgage are France, Spain, and Greece. Portugal is another country where people from the UK tend to invest in property. Buy-to-let mortgages don’t exist there, but you’re free to rent out any property you have a mortgage on.

Note that not all countries allow foreigners to rent out their property. Cyprus is one example. If you’re a non-resident, you can only buy a property for non-commercial reasons.

Some countries don’t allow foreigners to own property at all. For example, the New Zealand government banned the sale of property to non-residents in 2018 (there are exemptions for Australians and Singaporeans). In Thailand, you can own a property, but not the land it’s built on. So, it’s important to check the law for the country you have in mind.

How to purchase a buy-to-let property in a foreign country

The process of getting an international buy-to-let mortgage varies from country to country. So, your first step should be to speak to a broker who specialises in the country you’re buying in. If you need help finding one, simply make an enquiry.

Your broker will then assist with the following steps:

  • Explaining the local laws and regulations on buying a property that may differ from those in the UK and any specific rules that apply to non-resident buyers
  • Providing guidance on the eligibility criteria you’ll need to meet and the documentary evidence you’ll need to gather
  • Finding the best mortgage lender for someone in your circumstances. Not all local lenders will accept applications from foreigners, but your broker will work from a shortlist of those who do.
  • Help you in submitting your application so that you can avoid the mistakes that can easily occur when navigating an unfamiliar system in a foreign language.

Work out how much you could borrow

Before speaking with an advisor you can check whether your mortgage is likely to be affordable by using our calculator below. It will give you an idea of what your repayments will look like and how healthy your rental income is, relative to those payments.

Buy-to-Let Mortgage Calculator

Our buy-to-let mortgage calculator can show you how much your mortgage could cost you each month and overall. Simply enter the rental property value, deposit, anticipated monthly rent, interest rate, mortgage term and our calculator will do the rest.

Enter the value of the rental property here (in pounds)
A deposit of at least 20% is usually required for a buy-to-let mortgage
Most lenders will require a deposit of at least 20%
Deposit must be less than the property value
Enter the anticipated monthly rent here (in pounds)
Enter the mortgage rate, 5.5% is a typical rate currently but this can vary
Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms

Loan to Value ratio (LTV):

Most lenders won't offer buy-to-let mortgages over a LTV of 80%.

Interest Cover Ratio (ICR):

Most lenders require rental income to be at least 125%-145% of the interest repayments for a buy-to-let mortgage.

Get started with a specialist buy-to-let broker to find out how much they could help you save on your monthly mortgage repayments.

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Eligibility criteria and deposit requirements

Each country, and even lender, can have different eligibility criteria, but here are some of the common requirements:

  • Affordability – Generally, you will need to have annual earnings of at least £25,000. With the right provider, this can include international income, pension income and complex income streams.
  • Rental yield – As well as assessing your income and expenditure, providers will need to satisfy themselves that you will be able to afford repayments even when the property is unoccupied. For this reason, most lenders insist that rental payments are equivalent to between 120% to 140% of monthly repayments.
  • Deposit amount The amount required varies between countries. In Spain, for example, you’ll typically need a deposit of at least 30%, while you can often buy property in France with a 15% deposit. A higher deposit will reduce the loan-to-value and usually provide a wider choice of options, which results in more competitive rates. Some countries require non-refundable deposits, so make sure you know what you’re dealing with before parting with your funds.
  • Credit file – A clean credit file will give you the widest choice of lenders and the best rates, but it is possible to get an overseas buy-to-let mortgage with bad credit. However, any kind of adverse on your credit file is likely to complicate things. Buy-to-lets are considered higher risk than residential mortgages, so expert advice is strongly recommended in these circumstances.

Tax implications

In addition to any local taxes, if you’re a UK resident, you will need to pay income tax on your rental income. Tax may also be due in the country where your property is located unless there is a double taxation agreement in place between that country and the UK which allows you to claim back contributions paid in the UK via tax credits.

The UK has double taxation agreements with most countries around the globe, including popular locations for buying such as Spain, France, Italy and Australia. However, each agreement has been negotiated individually with the respective country so the terms, while broadly similar, are not necessarily the same.

You will also have to pay capital gains tax on the property if you are still a UK resident when you sell it.

There are separate tax arrangements for those who subsequently move to the country in which they have bought a buy-to-let.

You will not need to pay stamp duty in the UK on a purchase abroad, but there may be similar costs due in the country you are buying in. Research the local tax laws or get independent advice.

Getting your immediate tax calculations or future predictions wrong can be costly. To avoid this, it’s worth getting expert advice at an early stage to make sure you are buying in the right country to suit your plans.

Does it make a difference if you’re living abroad?

It can do. Tax is always a complex issue, even more so when it involves more than one jurisdiction.

As part of your research into the right place to buy, it makes sense to check the tax information on the UK government’s website. But it’s important to remember that this should act as a guide, and you should seek professional advice before making a final decision.

Exchange rates

Exchange rates can have a significant impact on your investment, and this should be factored into your decision. As a relatively stable currency, the pound doesn’t generally fluctuate too much, but when you’re talking big numbers, small amounts matter.

Imagine you agree to purchase a buy-to-let in Spain for a price of €140,000. At an exchange rate of €1.18 to the pound, your purchase price is £118,644. If the rate exchange goes down to €1.16 to the pound between you agreeing on the price and completing the purchase, the property will now cost you £120,689 – an increase of £2,045.

The same principle applies to monthly payments, with the real-term value of your rental income, and your mortgage payments, subject to fluctuations.
When it comes to buying, there are some safety nets you can put in place to provide greater certainty:

  • Forward contracts – These are ‘exchange now, pay later’ arrangements with currency brokers. Essentially, you lock in an exchange rate (often for up to two years) so you know exactly how much you will pay when you complete the purchase. It means you miss out if exchange rates shift in favour of the pound but you’re protected if the opposite occurs.
  • Market orders – A market order allows you to create an automatic currency exchange when the rate between the two hits a predetermined amount.

To help regulate rental income, you can set up a regular payment plan and agree on a fixed rate of exchange for a set period. For example, you could agree with your currency broker that your €700 monthly rental income will be paid at £591 (assuming €1.18 to the pound) for a fixed period of two years, regardless of exchange rate fluctuations.

Other things to consider when getting a mortgage overseas

The first thing to note is that overseas mortgages are not regulated by the Financial Conduct Authority (FCA). This means you’re not protected if the transaction goes wrong. However, some countries have their own schemes that offer protection for this type of sale.

Other obstacles include:

  • Language barriers
  • Lack of knowledge about the housing sector in the area you want to buy in
  • Local taxes and regulations
  • Different timezones
  • Additional maintenance costs

Get matched with a broker who specialises in buy-to-lets abroad

An overseas buy-to-let can be a great investment, but there are also plenty of things that can go wrong.

Expert advice is essential. To find a specialist in the country you plan you buy in, you can use our free broker-matching service. Call today on 0808 189 2301 or enquire online.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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