| Introduction | | | | fix the exchange rate for a set period and manage |
| With the dramatic increase in prices of property in the | | | | monthly transfers. |
| UK, many people are looking overseas to purchase a | | | | How to arrange a Foreign Mortgage |
| home. The problem is, it can turn sour once they get | | | | In each country the local lenders are increasingly |
| into the intricacies of dealing with overseas Solicitors, | | | | catering for UK buyers and some UK based banks will |
| Banks and Developers. One area that has become | | | | also offer mortgages on overseas property. For |
| more flexible, however, is arranging a mortgage | | | | example, The Halifax will provide mortgages on |
| overseas. This article discusses the ways you can | | | | properties in Spain and Barclays will lend on properties |
| take out a mortgage abroad, points out the | | | | in most of the mature European countries like France |
| disadvantages and tells you what the differences are | | | | and Spain and Italy. |
| between a foreign mortgage and a UK based one. It | | | | You can use a UK based mortgage broker to |
| also talks several times about the overseas buy-to-let | | | | research overseas mortgages. Conti specialises in |
| market. | | | | overseas property purchase, while other brokers, like |
| European and US Mortgages in Summary | | | | Savills, advise on mortgages in different markets. |
| You can get a reasonably competitive mortgage in the | | | | Barclays Bank noticing a growth in the market also |
| US and most of the established European overseas | | | | launched an on-line service that gives tips for people |
| property markets like Portugal, Spain, France, | | | | looking to buy abroad. |
| Switzerland and Italy. The rule of thumb is, the more | | | | Although you might prefer to deal with someone UK |
| established the market, then the easier it is, so in | | | | based you can also use an overseas broker to |
| emerging markets like Greece, Bulgaria, Poland, The | | | | arrange a mortgage. Otherwise you can go directly to |
| Caribbean and Israel, you can get a mortgage - but the | | | | a lender. This is probably easiest if you are using a UK |
| rates will be considerably higher (see below), the | | | | bank but bear in mind that some overseas lenders |
| amount they will lend is less and they also have stricter | | | | have a UK presence. Credit Foncier of France |
| borrowing terms. | | | | recently opened a London branch to target people |
| There are not too many fundamental differences | | | | looking to buy French properties and Piraeus from |
| between a foreign mortgage and a UK based one, but | | | | Greece has also launched a service for British based |
| bear in mind that the risks of buying a property are the | | | | buyers. |
| same as in the UK. In Europe it is not the norm to see | | | | There is the obviously the language advantage of |
| Mortgages offered interest only and it is very rare to | | | | dealing with a UK lender and you might be tempted to |
| see buy-to-let mortgages. They will usually base the | | | | go for one with a familiar name. If our looking for an |
| amount you can borrow on how much you earn | | | | interest only mortgage you will probably need to go for |
| rather than the rental income and also there is not | | | | a UK based bank, or at the very least one with strong |
| really a market for self-certification mortgages. A | | | | UK ties. |
| much wider range of secured loans is available in the | | | | Most brokers recommend looking at local lenders as |
| US. | | | | many offer the cheapest deals and offer the widest |
| Pros and Cons of Foreign Mortgages | | | | range of fixed and variable rates. Also lenders in the |
| In the established property markets like France, Spain | | | | popular European property markets will nearly always |
| and to a lesser extent Portugal the lenders have | | | | employ an English speaking team - so language |
| become much more flexible when dealing with UK | | | | shouldn't really be a barrier. |
| buyers. Although things can often change quite | | | | You will almost certainly have to check out the rules in |
| dramatically over the period of a mortgage, it is | | | | the country you are going to buy, but a local lender |
| worthwhile noting that Interests rates on the European | | | | could be bet if you are going for a specialist scheme |
| Continent are typically lower than in the UK. The | | | | like a France based sale and leaseback. |
| problem is that the low interest rates are starting to | | | | Final Summary |
| attract a lot of buy-to-let investors, who are finding that | | | | As mentioned before the rates can be lower than in |
| the UK market has begun to mature. | | | | the UK, for example in France, Spain, Italy and Portugal |
| If you do plan to let the property out the income can | | | | the rates can start as low as 3.5%. In the less |
| be offset against the loan for tax purposes. Check out | | | | established markets like Bulgaria and other eastern |
| the tax rules in the country you are proposing to buy in, | | | | European countries the rates can start at around 6%, |
| but some have very expensive wealth charges | | | | whereas countries like Greece and Cyprus roughly fall |
| payable on equity. Borrowing the money to make the | | | | half way between the two at 5%. The borrowing |
| purchase rather than buying outright could mean you | | | | criteria are typically tougher than in the UK and you |
| avoid this tax. | | | | should expect to be able to borrow only around |
| One of the disadvantages of taking out a foreign | | | | 70-80% of the property's value. |
| mortgage is that, as it is in another currency, it adds | | | | The documentation you need is proof of income and |
| another layer of risk. If, for example, the Euro goes up | | | | you usually have to prove you can meet mortgage |
| - it will cost you more to buy the currency using your | | | | repayments through your own earning rather than |
| sterling. You can however minimise this risk by using | | | | rental income. |
| services provided by currency specialists and banks to | | | | |