Mortgage for buying property abroad
A mortgage can be used to invest in property overseas. This property might be used as a holiday home or for moving abroad. There are two main ways of financing the purchase of property abroad.
Mortgage abroad for relocation
If you are relocating abroad and require a mortgage to purchase the property you will most likely need to obtain a mortgage from a UK lender or a lender located in the country you wish to move to. This is basically the same process as moving home in one country except with a few additional complications such as language differences and currency differences. If you are moving abroad and you wish to keep your current UK property you may be able to use a let to buy mortgage. A let to buy mortgage allows you to let out your UK home to tenants whilst using your rental income to repay the mortgage on your new home abroad. If you wish to build your own home abroad or make a renovation there are self build mortgages available that can be used to finance self build and renovation projects. Remember that a self-build project may take some time. During this time the exchange rate may change meaning you may lose money due to the rising price of one currency over another. To avoid this you could plan to buy all your currency in advance at the current exchange rate, thereby avoiding changing currency costs.
Financing property abroad using your existing UK home’s equity
The advantage of buying a second home is that you can let out the property and use rental income to repay the mortgage or remortgage. If you wish to purchase an additional home abroad and do not have the finances available to you immediately a remortgage or second mortgage may be the best way for you to raise finances. These methods both involve releasing the capital in your current UK home to finance the purchase of a holiday home abroad. You could also use a mortgage on the foreign property to finance your holiday home. However this would mean repaying two mortgages simultaneously if you already have a mortgage on your current UK home. If you get a mortgage through a foreign lender it may also mean repaying the mortgage in a foreign currency which is an added complication.
Buying Property Abroad
When buying property abroad there are a few important considerations to take into account. If you are looking into getting a mortgage secured on the property you are purchasing abroad then perhaps an international lender may be a good place to start. However if you get a mortgage through a UK lender they may not allow you to use the property you are purchasing as security against the mortgage. If you have no other large asset that can be used as security you may have to obtain a mortgage through a foreign lender or broker. The FOPDAC.co.uk has a list of regulated foreign brokers.
Remember the cost of buying a property abroad is more than just the price of the property itself. There will be fees associated with a mortgage and you will have to pay taxes and bills. Of course there are transport costs to take into account and other expenses that may arise during the purchase. It is a good idea to set aside up to 10% of the value of the property for other costs and contingency planning. Different countries have different regulations so it is also a good idea to get an English speaking but local solicitor to help you through the process.