Mortgages For Property Abroad
Find out about the mortgages for property abroad
Mortgages for property abroad continue to be a popular form of finance for buyers looking to fund an overseas property purchase. As increasing numbers of wealthy baby boomers seek to retire and head overseas to enjoy sunnier climes there is a growing need for competitive overseas property mortgages providers.
Mortgages for property abroad can vary significantly by country and mortgage lender in terms of loan to value ratio and age lending restrictions. It is generally advised that you take out a mortgage in the same currency as you earn however there are several benefits to financing the purchase of a property abroad with a mortgage lender based locally in the country of purchase. You can apply for a mortgage for overseas property with a local mortgage lender usually through a local banking institution or secure an overseas mortgage with an international mortgage provider who provide financing for property in a wide number of countries.
Mortgages for property abroad : Factors to consider
Most lenders of overseas property mortgages will carry out an independent valuation which is fair and above board and check that the property has a clear title and the property is correctly registered in the clients’ name upon completion.
The most popular overseas property buying destinations are European countries such as Spain, France, Portugal and Italy, all of which use the Euro as their currency and all mortgages for overseas property are denominated in Euros. Financing your property with a Euro mortgage may be beneficial, if you intend to rent the property locally. If you are looking to rent out your overseas property then you will need to set-up a Euro bank account to collect the rent each month, this can then be used to fund part or all of your mortgage repayments reducing the impact of any currency movements. A foreign currency mortgage can present problems with variations in your overseas mortgage repayments as a result of currency fluctuations when exchanging sterling into local currency. For example the value of the Euro against sterling used to be significantly higher this is now not the case today so it would be advisable to guard against these types of currency fluctuations by using a foreign currency exchange service. Some overseas property buyers choose to avoid currency fluctuation issues by raising equity on an existing property in the UK and buy their chosen property abroad in ‘cash’.
Mortgages for property abroad : How much will they lend me?
It is tempting when you are viewing properties abroad to buy something bigger and better than you originally intended a villa with a pool or a beach front apartment but it is important to keep in mind how much can you realistically afford to spend buying a property abroad based on your current household income. While this may seem one of the more obvious points to consider this figure often doesn’t factor in additional property buying costs e.g. lawyer, mortgage opening costs etc. or any running costs such as maintenance charges, local property taxes and household utility bills. Although many buyers of overseas property intend to cover some of these costs by renting their property, you should be comfortably able to cover any of these costs yourself.
Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. Be sure that you can afford the repayments before entering into any credit agreement. Any quotation supplied is not an offer of mortgage and may be subject to a change without notice. Exchange rate movements may increase the Sterling equivalent of your liability under a foreign currency mortgage.
Most mortgages for property abroad are secured against the property. Today it is much more difficult to obtain 100% mortgages for property abroad and many overseas mortgage lenders have strict lending criteria normally based on affordability, as a rule, the debt to income ratio should not exceed 36% and suitable proof of income will be required. Mortgages on property abroad are normally available to a maximum of 70% loan to value ratio and for up to 30 years. There are not normally age restrictions on mortgages on US property, however for some other countries the term may be to age 70 or 75.
You can reduce the size of overseas mortgage you require by putting down a larger deposit and added benefit being that you will usually be offer better lending interest rate terms on the mortgage you are offered. You will need to open a local bank account to enable the payment of mortgage repayments, local taxes, utility bills etc. Some lenders also require that you hold six months mortgage payments in your account.
What are the different types of mortgages for property abroad?
Unlike the UK mortgage sector there is less choice although when it comes to the different types of overseas property mortgages available to finance an overseas property purchase, it is still possible to choose between variable or fixed rate mortgages for properties abroad. The number of international mortgage providers continues to grow, it is important to check the best deals on offer for your circumstances. Many UK high street banks now offer mortgages for property abroad which can help make the process of buying property abroad much smoother.