How do I finance a house abroad?

People buy property abroad for several reasons: as a holiday home, as a buy-to-let investment, or perhaps a combination of the two. Whatever your reasons, our easy to understand guide will take you through the most common questions about the where and how to get an overseas mortgage.

To fund your purchase you’ll need an overseas mortgage. You can’t use a UK mortgage product or deal for a foreign home. In addition, it is rare that a UK bank will lend against property in another country – even if they have branches and operations there themselves. Most often you’ll need to obtain a mortgage from a lender in the country of your overseas property. However, do be aware that some won’t accept applications from people who aren’t permanent residents in their country.

Help can be found by using a specialist overseas mortgage broker who will able to help with what mortgages and lenders are available, as well as finding you the best deal.

There is also a third option: if you are lucky enough to have enough equity in a UK property (such as your usual UK home), then it is quite common to remortgage to raise the cash to pay for your new overseas property.

However, it is worth remembering that overseas mortgages and house purchases are not covered by the Financial Ombudsman Service (FOS) or Financial Service Compensation Scheme (FSCS). Other countries might have something equivalent but don’t take this for granted – do your research and make sure you understand all the legal protections (or liabilities) you may encounter if buying abroad.

It is often the case that deposits in other countries are larger than those in the UK. Where it is perfectly possible to get a mortgage with a 5% or 10% deposit in the UK, overseas you may have to pay 30% to 40%, or even more. Consequently, depending on the price of your new overseas home, you could have to raise a significant amount of capital to put down against your purchase.

There will also be additional fees to consider, such as legal costs, valuation and surveyors fees, etc. In some cases, these may be covered or partially covered by the incentives for your mortgage deal, but it’s more likely you will have to pay these yourself.

In addition there are a host of other local fees that may be charged – much like the land registry fees and even stamp duty in the UK. Again, make sure you know what fees apply, roughly how much these will cost  and when they are expected to be paid. 

Finally, be careful about the currency of your fees. If you pay in Sterling abroad, you will be at the mercy of foreign exchange rates. Instead, it may be a good idea to have an account in the local currency – enabling you to pay fees from this source and avoid any potential negative exchange rate issues.