When you make the decision to buy a home overseas and move out of the UK, learning the local language and securing a property are probably your top priorities. To help make things a little easier, we’ve broken the process down for you. We take you through the basics and country specifics to give you a better idea of overseas mortgages and be at least a little more confident in taking the next steps to acquiring one for your new home abroad.
An Overseas Mortgage is a mortgage for a property that is not in the UK. You might want to consider taking out an overseas mortgage if you are buying a home outside of the UK. Generally, an overseas mortgage provider will ask for the same information that you’d be asked for when applying for a home here in the UK.
Firstly, you’ll want to know how to finance your overseas mortgage. There are three options…
• Use an international mortgage provider
• Use a UK-based mortgage lender
• Raise capital on a property you already own and buy in cash
Using an international mortgage provider
Overseas mortgage providers don’t automatically have access to your credit history here in the UK, so it can take longer for them to access your credit rating and whether you pose a risk to them. You may require a larger deposit with an overseas lender, depending on the country in which you’re applying, due to specific laws.
As this is usually non-refundable, it’s essential that you get your broker to thoroughly check your contracted paperwork before any money changes hands.
Using a UK-based mortgage lender
Most UK high-street banks offer mortgages for overseas homes. This can be helpful if you don’t speak the native language where you want to buy. But do your research. It could be that a bank in the UK has a large overseas presence that you can take advantage of. This could be helpful with translations, but it’s not always the case.
You may find that buying property overseas through a UK bank works out more expensive than using a foreign lender. They may lack foreign market expertise too, in a local sense, which could lead to inaccurate valuations and lower loan-to-value rates.
Remortgaging to buy a property abroad
It is possible to use the equity in your current property to put down a larger deposit for an overseas property. Usually, the more equity you own in the property, the more you can borrow.
This is considered a risky option and should only be considered if you’re certain you can keep on top of current mortgage repayments and the upkeep of your new overseas property.
To secure an overseas mortgage….
There are specialist mortgage lenders both in the UK and worldwide who finance international mortgages if you meet their criteria. This can differ between lenders. If you want to invest in overseas property, lenders can be more wary, so while it’s possible to find yourself a UK lender, it may take longer.
Some countries require a large deposit for overseas house deposits, but again, this varies depending on the provider.
Find an international broker…
To avoid any mishaps or rejections on your credit file, work with an international mortgage expert with experience managing and negotiating on behalf of clients abroad. The international broker will be able to
• Find you the best rates
• Negotiate terms of the mortgage
• Arrange for translations (if needed)
• Deal with paperwork
• Check over contracts before you sign
International mortgage lenders typically focus on your salary, rather than the amount of your deposit. Before applying for an overseas mortgage, you have to check if you’re eligible first. It doesn’t take long and will save you money in the long run.
Prepare the following before you apply for an overseas mortgage
• Passport, driving licence or other proof of ID
• Proof of income
• Proof of address
If you’re self-employed, you’ll need to provide:
• Your most recent audited accounts
• 6-12 months of personal and business bank statements
Different types of mortgages…
In Spain, you need a Número de Identificación de Extranjeros (NIE) to get a Spanish mortgage. You can apply for your Spanish mortgage this while in the UK. Many banks lend to non-residents, and you can start the application process online or over the phone.
You may find it easier to use a mortgage broker. Choose one in Spain, that speaks English and let them do the hard work of comparing the market for you.
Most Spanish mortgages are variable, but fixed-rate mortgages are available. There’s also a mixed-rate mortgage which combines an initial fixed rate period (an agreed-upon term, e.g. five years) with a variable rate after that point.
The average mortgage term in Spain is 20-25 years, but this depends on your age.
Getting a mortgage in France as a foreigner is possible, but some French banks may have specific requirements. For example, most banks will loan 70-85% of the property value, however some non-EU applicants may require a bigger deposit for a mortgage.
The most common mortgage type in France is the fixed-rate loan. These are usually repayable between six and 25 years, although 20 years is the most common term length.
Flexible mortgages are available and offer the security of a fixed rate but allow borrowers to vary monthly payments if needed, depending on their circumstances.
Variable rate mortgages typically depend on three-month or one-year Euriobor rates plus a 1-3% margin, so it can be tricky to get a long-term vision of the rates.
Capped-rate mortgages are a recent introduction to the market in France and are available to non-residents. Similar to variable-rate mortgages, the contract includes a capped upper limit for part or all of the repayment term. Capped-rate mortgages are popular with buyers who are worried about rates skyrocketing beyond what they can afford. However, do be aware they usually come with higher fees.
Interest-only mortgages are available in France. This means the borrower only pays back the interest and not the capital for an initial agreed-on period. This is common with investors who wish to rent out their properties, but it can be difficult for foreigners to take it out.