What is an overseas mortgage?
If you want to buy a property which isn’t in the UK, you can use an overseas mortgage. They can be used to buy a holiday home, or to buy somewhere you wish to retire to or, if you can’t afford to buy in the UK an overseas mortgage is a way to buy property abroad, as a buy-to-let investment or somewhere to live permanently.
Can you get a mortgage for an overseas property?
There are specialist mortgage lenders in the UK and across the world who offer international finance for property abroad, provided you meet their criteria. If you want to buy an international property, mortgage lenders can be more wary so, while it’s certainly possible to find a lender and an overseas mortgage, doing so may take a little longer.
Some countries may require you to pay a larger deposit and each lender will have varying criteria, meaning that whilst you might be rejected by one lender, you may be approved by another.
How to get an international mortgage for a property abroad
Find an international broker
To avoid any unnecessary rejections on your credit file, work with one of the international mortgage experts we work with who has negotiated and managed international mortgages before. An experienced broker will:
- Find the best available interest rates.
- Negotiate the terms of the deal for you.
- Handle any paperwork.
- Arrange translations if needed.
- Check any contracts thoroughly before you sign.
Find out if you’re eligible
International mortgage lenders tend to focus heavily on salaries as opposed to the amount of your deposit. Unlike the UK, some overseas mortgage lenders have rules regarding how much debt a person can have when make an application. For example, in some territories such as Malta, any debts, including your future repayments, cannot be more than 35% of your total income. Many people apply to lenders without knowing their eligibility, which can result in wasted money in application fees as well as rejections on their credit file.
Prepare your documentation in advance
To process your international mortgage application, overseas lenders may ask for your:
- Passport, driving licence or other means of ID.
- Proof of address.
- Proof of income.
If you are self employed you may also need:
- Your most recent audited accounts.
- 6-12 months of personal and business bank statements.
Find a property
When you’ve been approved for an international mortgage, you should receive an agreement in principle. Once you have this, you can start to look at local properties and get a feel for which location is best suited to you.
How much could you borrow?
Overseas banks generally promote repayment mortgages rather than interest-only, with term lengths of 20-25 years, similar to that of the UK. The amount you can borrow for an overseas property will vary depending on the country, your choice of lender and, most importantly, your circumstances. The average loan to value (LTV) tends to be around 75% but again, this will differ depending on the above factors.
Top tips for buying foreign property abroad
Every country has different rules, taxes and processes when it comes to property, not to mention a different language. This can be daunting when you’re a foreign buyer so seek advice from one of the expert advisors we work with for the right guidance.
Check the local property laws
The laws regarding property can differ heavily across the globe and not adhering to them can result in heavy penalties and even legal action. For example, in Turkey, non-natives cannot purchase property within military forbidden zones or security zones. In Sweden, landlords are forbidden to ask for rental deposits. As well as this, if a landlord decides to increase the rent, the tenant has the right to appeal to the Swedish Rent Tribunal. Because of the differing laws, it’s crucial that you work with a solicitor who is registered with the Law Society in the UK. They should also specialise in international transactions and property conveyancing.
Think about the tax implications
A mistake or a misunderstanding of how much tax or what tax you’re required to pay could end up costing you a lot of money in missed payments and fees. It’s also important to understand how buying a foreign property could affect how much tax you pay in both the UK and the country you’re buying in. Because of this, you should work with an expert advisor who understands the tax requirements in the country where you are buying, as well as a proven history of handling international mortgages.
Research the planning permission you might need
The type of planning permission or license you need for any changes to your property will depend on the work you plan to do. In the majority of countries, formal authorisation is required for all new construction works, whether that be to an existing building or for a completely new structure. In some countries such as Spain or France, even small external repairs such as new windows or doorways will require a works license. Carrying out any work without the correct permissions could result in heavy fines or lead to prosecution, so always check with your solicitor who can read through your paperwork for you. You should check to see what future development plans are in place by local authorities when looking at properties. In some countries, if part of your property needs to be moved or knocked down to make way for a road, for example, there’s no right to appeal this and you may even have to pay for the works yourself.
How to finance an overseas mortgage
There are a number of mortgage options available to overseas buyers which may be suitable for you. These include:
- Using an international mortgage provider.
- Using a UK-based mortgage lender.
- Raise capital on a property you already own and buy for cash.
International mortgage providers
Because overseas lenders won’t have access to your UK credit file, it can take longer for them to establish whether or not you have bad credit and pose a risk to them. You may also require a larger, non-refundable deposit for your mortgage with an overseas lender, depending on the country and their specific laws. Because of this, always have your broker thoroughly check your paperwork and contract before you hand over any money.
Using a mortgage in the UK to buy property abroad
Most UK high street banks offer UK mortgages for homes abroad. This can be helpful for applicants who do not speak the native language. Santander, for example, have a very large presence in Spain. Not only can this help to avoid any document translation issues but it could also help to save money on translation fees. However, you may find that buying foreign property through a bank in the UK might end up more expensive. Furthermore, mortgage lenders in the UK can (in some cases) lack local market expertise. This can result in inaccurate valuations and therefore lower loan to value (LTV) rates.
Remortgaging to buy property abroad
In order to raise the money needed to buy an overseas property, you may consider remortgaging a property you currently own. Often the more equity you own in the property, the more you can borrow. Some investors use the equity in their current property to put down a larger deposit for their overseas property, whilst others have enough equity to buy the second property outright. This is a risky option and should only be considered if you’re certain that you can afford both your remortgage payments and the upkeep or your new property. Before proceeding with an overseas second home mortgage, seek financial expertise. A mortgage broker can calculate your affordability and then can research the market to find you the best remortgaging deals.
Can you remortgage an overseas property?
After living overseas and establishing some roots, some homeowners decide to remortgage their current overseas property in order to buy a second property abroad. However, it can be more difficult to remortgage an international property in some countries as these types of mortgage products, including equity release, are less common. Many lenders see remortgage products as riskier and prefer to stick to standard repayment mortgages. That being said, remortgaging an overseas property may be possible in the right circumstances as there are lenders who are more willing to offer this as a finance option.
Can you get a buy-to-let mortgage for an overseas property?
Buy-to-let mortgages can be more difficult to obtain as lenders see the risk of defaults as much higher. That being said, there may be lenders who will consider lending in the right circumstances. Some may require larger deposits of up to 40% whilst others may require your income to be sufficient enough that you are able to afford your Spanish BTL mortgage without rental income, should you not be able to find tenants.
International mortgages FAQs
Can older borrowers get a mortgage for investing in a holiday home abroad?
The maximum age that someone can get a mortgage differs from country to country as some lenders will want to ensure that the borrower can afford their monthly repayments, despite living on a pension or from their retirement funds. The majority of lenders will ask for proof of income to calculate affordability, whether that be from a pension, savings or benefits. There are lenders that specialise in mortgages for retired or older borrowers and you may find that these offer more reasonable interest rates and terms.
What happens to my mortgage if I move abroad?
If you have a mortgaged property in the UK but then decide to move abroad, you’re still legally required to pay your mortgage on time and in full. The terms and conditions of your UK mortgage are still legally binding, despite you no longer living in the country. Some homeowners decide to rent their UK property out whilst they live abroad, which can be a great way to earn income for your remaining payments. If you decide you would like to do this, you will need to register with the Non-resident Landlord Scheme.
Can you get a commercial mortgage for an overseas property?
Many expats buy commercial property abroad for business ventures including bars, restaurants or shops. Although commercial mortgages can be harder to obtain as a foreigner in some countries, there may be international mortgage companies that offer competitive interest rates to suit you. A top tip is to check beforehand whether the business has any undisclosed debts as well as any pending legal action. It can also be helpful to open a bank account in the country you are purchasing your foreign commercial property in. This makes it easier to keep your business accounts separate from your own, especially when paying wages or bills. Check out our guide to commercial mortgages for more on this topic.
Should you use an overseas mortgage calculator?
Although online mortgage calculators, found on many financial websites, can provide a quick estimate, they can’t take all factors that may affect your mortgage into consideration. This is because a calculator doesn’t factor in that each lender will assess a borrower differently. This leaves many people confused or disheartened because they receive an inaccurate quote.
Get the right advice
We understand that getting a mortgage for a property abroad can be overwhelming but with the professional help of one of the expert mortgage brokers we work with, it doesn’t have to be. Inaccurate information could cost you money and in some cases could even result in your application being rejected. To prevent misinformation, we carefully vet every broker before deciding to work with them. Not only do they have to be reputable and experienced brokers, they also have to be OMA accredited.
Find the best overseas mortgage rates
Researching and comparing the current international mortgage rates can be incredibly time-consuming. The advisors we work can do this on your behalf. They have access to hundreds of local overseas mortgage lenders as well as lenders in the UK and have successfully helped customers find the most favourable rates on overseas products including…
- HSBC: Has a worldwide network and specialises in properties in territories including Canada, the USA and Hong Kong.
- Santander: Specialise in mortgages for properties in Spain, and the advisors we work with have been known to land broker-exclusive deals with them.
- Barclays: Overseas mortgages are available to Barclays International Banking customers looking to borrow £500,000 or more, with at least £25,000 in sterling (or the equivalent in foreign currencies) to deposit and maintain across their accounts.
- Natwest: Natwest International offers mortgages for Jersey, Guernsey, Gibraltar and the Isle of Man.
- Halifax: Halifax do not lend internationally, but Lloyds (who are part of the same group) do – see below for more.
- Lloyds: Lends internationally in territories including the US, Canada, Hong Kong, Australia and Singapore.
- Skipton: A Channel Islands-based lender which specialises in expat finance.
- And many more besides.
Speak to an overseas mortgage expert today
If you have questions about mortgages or buying a house overseas and want to speak to an expert for the right advice, call 0808 189 2301 or make an enquiry online for a free, no-obligation chat. We’ll match you with a broker with the right expertise for your circumstances, no matter which country you want your international mortgage for. They’ll be happy to answer all your questions, find the right deal at the best available rates and offer a five-star service, without leaving marks on your credit rating.