Mortgage overseas – financing the purchase of property overseas
Before you start looking for property overseas you should work out your budget so you know what you can afford. If this means obtaining finance then you should do this before setting your heart on overseas property which you cannot afford. You must also consider whether a mortgage overseas or in the UK is best for you.
Arranging a mortgage overseas
Most people are unable to buy outright and must arrange finance to buy overseas property. A property purchase always represents a risk, particularly when it is in a foreign country. This makes it imperative to take professional legal advice at all stages of the process of buying property overseas.
In seeking to minimise this risk you must decide whether it is better to take out a mortgage overseas or at home.
A mortgage overseas for your property overseas
Deposits for a mortgage overseas tend to be higher than in the UK and at least 20% would be a common figure that would need to be put down on a property overseas. This may leave you with a shortfall to be found elsewhere. The mortgage overseas would be secured on the overseas property.
Although the market for property overseas is growing all the time, the range of mortgages overseas still lags some way behind the UK. In Europe, interest rates are normally tied to the EURIBOR, which has been lower than Bank of England rates for the past few years.
How much a bank will lend you to buy overseas property depends upon your net monthly income. The situation differs from country to country but as a rule of thumb your repayments should not exceed one-third of your income. If you take a mortgage overseas then it will be secured on your property overseas, meaning there is no risk to your UK assets.
Buying a property overseas with a UK mortgage
A mortgage must be secured by property in the same country. To obtain a UK mortgage for overseas property you would therefore need to remortgage your main UK residence and release equity to buy the property overseas.
UK banks are willing to lend a far higher percentage of the cost than you would get from a mortgage overseas. There is less to pay in set-up fees but the interest rate is higher than in many other countries.
Many UK banks now operate in other countries and have introduced more flexibility and choice to the market for those looking at a mortgage overseas for their overseas property. Whatever option you choose, you must give careful consideration to what will be the best method of financing your property overseas.
