Guide To Overseas Mortgages

For many, buying a property overseas is the opportunity to own that dream holiday home or to invest in something long-term.

Finding the ideal property is often the easy part, but when you need mortgage finance for your overseas property purchase, things can get a little bit complex. There is the language barrier to consider as well as getting answers to all your questions and who can help you through the process could mean you miss things.

Where to start

Firstly, you should get your finances in order, so you know what you have for your deposit and what you can afford. Whilst European house prices are now generally on their way back up again, following the recession. Foreign lenders in places like Spain, Portugal and France are becoming more flexible, couple that with lower interest rates in the Eurozone it is an encouraging time for buyers to start investing in overseas property.

Once you have your finances in order, the next step is to get in touch with a specialist mortgage broker. Not only do they have access to ‘broker only’ products and deals, but they are equipped to deal with the processes for overseas mortgage applications.

What are the costs involved?

In the UK, we are often able to put down 10% or sometimes as little as 5% for the deposit, when you buy overseas prepare to pay a bigger deposit. Generally, around a 30% deposit and the lender providing a 70% loan to value.

Depending on where you are purchasing the ‘extra’ costs such as mortgage broker fees, lawyers’ fees, taxes and insurances should be factored in when planning the overall cost of your purchase. Usually these add up to about 15% of the purchase price.

What about exchange rates?

As with any international purchase, there is a degree of risk in terms of the exchange rates. If you agree a price for a property, but you are not required to pay for a while, you could find you are out of pocket if, for example, sterling weakens when it is time to make the payment.

Most people use their bank to make the payment for the deposit and any subsequent maintenance or mortgage payments that need to be made. However, as an alternative you should contact a currency exchange specialist service, who provide competitive exchange rates and help people save money when making international payments. Also, the fees tend to be lower and the levels of service will likely surpass what you get from your bank.

In terms of ‘not losing out’, there are products that let you protect your payment from adverse moves in the exchange rate. For example, you can fix a rate in advance for a payment in the future, but if the rate goes against you before the payment is due to be made, you’ll be unaffected, having already agreed a rate. On the other hand, it is important to bear in mind that you will not be able to benefit if rates move in your favour as the rate and amount is fixed. If you decide this is the best choice for you, you can be asked to pay an initial deposit so that the rate can be ‘held’ for you.

What lending options are available?

While there used to be plenty of lenders willing to lend to overseas borrowers, that number has dwindled somewhat in recent times. Since the property market crashed in the last decade and with those that owned properties overseas seeing a massive increase in their foreign currency debt – fewer banks have been willing to offer mortgages in foreign currencies. Nevertheless, there are still those that do, a specialist mortgage broker can help you gain access to overseas lenders as well as a number of UK banks which also operate abroad.

Approaching a foreign lender can be quite difficult, especially if you do not speak the local language. The mortgage process can vary from country to country with different legal systems and local customs. It is also important to remember that overseas lenders are not regulated by the Financial Conduct Authority (FCA) so ensure that anyone who advises you on the mortgage process is regulated by the local ombudsman.

To find out more about buying an overseas property and what mortgage finance options are available to you, get in touch with Liquid Expat for your free quote.

Liquid Expat Mortgages offers professional advice on mortgages to expats since years. The company has a strong network which they leverage to provide their clients with the best solutions possible.

License: You have permission to republish this article in any format, even commercially, but you must keep all links intact. Attribution required.