Overseas Mortgages Explained

Do you want to finance your overseas property purchase through mortgage abroad or remortgaging UK property to free up cash? This article can guide you. Firstly, let us know what an overseas mortgage means.

Overseas Mortgage Defined

An overseas mortgage is a type of mortgage for a property that is not in the UK. You can avail of an overseas mortgage if you purchase a holiday home or want to buy a property overseas since you cannot buy it in the UK.

You can do this by arranging an overseas mortgage with an international lender or UK bank. Usually, raising funds to purchase a home overseas by remortgaging your UK property is also advisable.

Advantages of Availing Overseas Mortgage:

Foreign lenders in major countries like France, Spain, and Italy are more flexible. With this, you can have an easier process of buying a property overseas. They also come with lower interest rates, which is favorable for buyers and investors.

Disadvantages of Availing Overseas Mortgage:

Take note that international purchase is associated with potential risks in terms of the exchange rates. In addition, there are also some barriers to language. With that, you must have a professional adviser that can help you with the process of your overseas mortgage.

Purchase Overseas Property Through Borrowing from UK Bank

Most high street banks in the UK offer international mortgage services. However, you must know which countries they work in. Commonly, banks offer mortgages for purchases in nations where they have offices. You can easily get a mortgage overseas in markets like Spain or France. Even though the mortgage can be arranged through a UK bank, you can also work with the foreign arm of the bank after the arrangement of the mortgage.

Advantages of Mortgage from Bank Overseas:

The following are the benefits of a mortgage from a bank overseas:

  • They have wide knowledge about the local laws which govern the mortgage market.
  • Local lenders can provide you with more mortgage options and lower interest rates.
  • The strength of sterling can create a loan in foreign currency a sound financial decision.

Disadvantages of Mortgage from Bank Overseas:

This option also comes with some disadvantages. These include the following:

  • You cannot expect to have similar legal protections as you can when using a UK bank.
  • Uncertainty due to Brexit on financial markets places sterling during precarious circumstances. As the sterling falls, loans from foreign currencies can also cost you more.

Remortgaging your UK property to Purchase an Overseas Property

If you plan to purchase overseas property, remortgaging your UK property is a good idea to raise funds. It is a good option, but it still depends on one’s personal condition. It can depend on your current credit rating and the current mortgage that you have paid off. You must also consider some factors like the interest rates at the time you apply.

Benefits of Remortgaging UK Property to Purchase Overseas

  • Easier procedure compared to using an overseas provider.
  • You can have more options for a mortgage product that suits your needs.
  • You have a chance to get better interest rates than a regular mortgage.
  • It allows you to borrow a bigger amount if you paid off your current mortgage.

Disadvantages of remortgaging UK property to purchase overseas

  • It relies more on personal factors like home value and existing level of equity.
  • It can be harder for you to remortgage because of more stringent lending rules made in 2014.
  • If you have UK property as collateral, it can be risky especially if you do not repay the mortgage.

Overseas Mortgage Abroad Arrangement

You can arrange an overseas mortgage with an overseas lender with the help of a specialist broker. With a broker, you can get well-tailored information like the list of lawyers or estate agents in the country you choose.

The mortgage rates in some places in Eurozone are lower compared in the UK. With this, you can get a good deal through borrowing abroad. You can opt for established property markets that have a variety of mortgage providers.

Take note that the Financial Conduct Authority does not cover overseas mortgage brokers. So, it can be challenging for you to get compensation if you received poor advice. So, you must know the repercussions if you borrow foreign currency.

Deposits for Overseas Property

The overseas mortgage deposits can be higher compared to a standard UK mortgage. For example, most overseas buyers in Spain pay about 30% to 40% of the property cost as a deposit.

The deposit is non-refundable in some nations, so you must not give the money before you deal with an initial contract. Moreover, you must only deal with a lawyer or bonded estate agent.

It is also a good idea to seek a company that specializes in international money transfers, so you can save more on transfer fees.

Calculating the Cost

Repayment mortgages are among the common mortgage options. It requires you to pay the interest accrued as well as the debt on a specific term.

Fixed-rate mortgages come with a consistent interest rate on the term. Additionally, it does not fluctuate when the interest rates rise or fall. On the other hand, variable-rate mortgages are susceptible to changes in interest rates, which can depend on factors like the state of the UK economy.

The tracker mortgage rate follows a fixed economic indicator, which is commonly the borrowing rate of the Bank of England.

Conclusion

To sum it up, you must have better preparation for mortgaging a property overseas. Additionally, be sure to have legal protection for your peace of mind. The overseas mortgage is ideal if you want to purchase a holiday home or buy property overseas.

Some of the popular countries for an overseas mortgage include Spain, France, Portugal, and Italy. There is also available overseas mortgage in Turkey and the US. Availing mortgage overseas both come with its specific advantages and disadvantages. So, before you decide, make sure to prepare and take important considerations to make the best of your overseas mortgage. With this, you can make the best experience with your overseas mortgage.


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