Investment property overseas - buy-to-let mortgages for property abroad
Buy-to-let mortgages are increasingly popular with people who want their homes abroad to generate income for them, as well as with pure investors. The concept of buy-to-let mortgages is slowly spreading as more people become interested in investment property overseas. Your property abroad could have substantial investment potential yet to be fulfilled.
Why buy property abroad to let?
The market for holiday homes abroad may have appealed to you for some time but at the same time you felt you should be investing your money. Investors have been increasingly turning towards property abroad in recent years. You would be able to combine investment and vacation by purchasing an investment property overseas, reserving a few weeks for yourself and renting it out at other times.
Buying property abroad to let has become popular in recent years thanks to low interest rates and attractive yields from rental property compared with returns on other investments.
Buy to let mortgages for property abroad
Although buy-to-let mortgages for homes abroad are growing in popularity, they remain practically unheard of in many areas, particularly continental Europe. Therefore, if you are seeking a buy-to-let mortgage to buy property abroad you may be better to contact a domestic lender.
Many overseas lenders will agree to a loan only on the basis of your earning before rental income is taken into account. Income you hope to generate through leasing out homes abroad will not be taken into consideration by banks.
Overseas lenders also typically offer a smaller loan-to-value (LTV) of the investment property overseas than UK banks with mortgages exceeding 80% being extremely rare.
In the UK, lenders can take account of the rent you will earn as well as your main income and will normally allow for an LTV of up to 90%.
Buying property abroad with a buy-to-let mortgage
Buy-to-let mortgages for investment property overseas will normally be slightly more expensive as they are viewed as a higher risk. Rates have come down in recent years, however, as more providers have begun funding the purchase of property abroad.
There is no direct tax relief when you buy homes abroad with a buy-to-let mortgage but you can offset interest payments against tax on expenses.
What else do I need to know about buy to let mortgages for homes abroad?
The rates on buy to let mortgages in Europe are normally linked to the Euribor (Euro Interbank Offered Rate). Over the last few years it has been lower then the rates set by the Bank of England and if you can find a European lender offering buy-to-let mortgages this may be more beneficial.
You should also be aware that capital gains tax, inheritance tax and exposure to currency fluctuations may affect your returns.
For a buy to let property abroad to be a worthwhile investment, your rental income should cover the mortgage plus an additional 30%. Some countries, like France, offer a government-sponsored scheme guaranteeing rental income on holiday homes abroad. The French leaseback scheme offers some of the best opportunities for investment property overseas.
