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Mortgage for Overseas Property

If you’re a UK resident looking to buy properties overseas, then this is the only guide you need to succeed!
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If ONS data is any indication, over 100,000 Brits are currently owning property overseas, and this number is only going to grow.

So, if you want to count yourself among that number, you might be wondering about the possibility of getting a mortgage for overseas property. If that’s the case, then you’re in luck.

In this guide, we will cover everything you need to know about overseas property mortgages. 

We’ll equip you with all the know-how that you need to understand about buying property overseas and help you get the best of both worlds.

Reasons To Buy A Property Abroad

There are multiple reasons why you might want to buy a property abroad while living in the UK. 

You might miss the sunny, sandy beaches, want to have a place you can return to for vacation every year, or just want to own a rental property overseas.

Another popular reason to want an overseas property is for retirement. Many UK nationals are looking to other countries to settle in post-retirement so that they can benefit from the positive effects of foreign exchange rates as an example. 

You might also be an investor looking to buy a property overseas, which you can later sell at a premium. Whatever your reason, there are potential ways to buy property abroad. 

How To Fund An Overseas Property Purchase

1. Use Cash

This is, without a doubt, the most simple way to buy a property overseas. If you’ve got enough savings to buy the property, you won’t have to worry about mortgages and the associated processes.

This way, you can save on interest and might even get a discount on the property if you’re putting it all down in cash. 

However, this might not always be a wise decision, as in this case, your money is going to be tied down to the property, and you’ll not be able to access it when needed.

2. Release Equity

Another method for buying an overseas property is to release the equity in your current UK home. This involves remortgaging to get enough cash for a deposit or potentially even buy the property outright. 

3. Using A UK Lender For Mortgage

The most popular method would be to get a mortgage from a UK lender for your overseas property, but you’ll need to ascertain if the bank of choice operates in the country where you’re buying. 

If the bank is a UK bank, you might even find it easier to buy properties in other European nations like Spain, France, etc.

There are a few benefits to this approach, such as the fact that you can deal with the paperwork in English. Working with a foreign lender might actually involve translation costs and introduce associated difficulties.

Since a UK lender will have easy access to your credit history, the process may be faster. Also, a good UK credit score will improve your chances of getting approved for a mortgage.

Keep in mind that lenders might require a higher deposit of 20%-30% for overseas property.

4. Using An Overseas Lender

In this option, you’re using a lender in the country where you’re buying the property. This can be done directly or through a broker. 

The advantage of doing this is that they’ll have a stronger knowledge of the local real estate market and know more about the laws of the land.

Whichever option you choose, make sure to compare available plans, pay attention to the specifics, and account for currency fluctuations. 

Costs Associated With Buying An Overseas Property

If you’ve ever bought a house in the UK, then you know that apart from the cost of the property itself, there are a large number of other associated costs involved when buying any property.

The same is true for buying properties overseas. These costs include taxes such as property tax, income tax on rental income, or even capital gains taxes if you’re selling a property. Taxes usually depend on the local laws of the place where you’re buying (or selling) the property.

The other costs that you need to be aware of are the fees of a specialist broker or mortgage advisor, surveying costs to assess the property, legal fees, translation fees, and even community fees in case you’re buying an apartment.

You’ll also need to take into account exchange rates, as you’ll most likely need to transfer a large amount of money overseas when buying overseas property. In this case, the better the exchange rate, the more money you’ll save.

Borrowing Amount

Next, let’s tackle the elephant in the room: How much can you actually borrow? This is the most important question you might ask, and sadly, there’s no straight answer. 

Some lenders use a standard income multiple of 4-5 times your annual income. However, you’ll most likely be offered a lower multiple for an overseas property. 

What’s more, there are special foreign property mortgage lenders who calculate mortgage affordability in unique ways. 

Best Places To Buy Property Abroad for UK Residents

By now, you might be wondering what the best places for UK residents to buy property are.

Well, there are a lot of options to choose from here, as the entire world is your oyster. Below, we’re going to discuss some of the most popular ones.

1. Spain

Whether it’s the mesmerising architecture of Barcelona or the serene waters of the Balearic Islands, Spain is one of the top spots for Brits looking to buy overseas property. The process of buying and getting a mortgage is also common for Spain.

2. France

Next on the list comes France, where you can look at options ranging from Parisian flats to quaint Chateaux in the country. For UK owners, France doesn’t impose any strict restrictions when buying property. 

However, if you’re looking to make a permanent move to your French property, you’ll need a visa. And if you’re renting the property, you must pay social charges of 17.2% of the rental income.

3. Cyprus

In case a Mediterranean life is what you’re looking forward to, then Cyprus can be your best bet. It’s the sunniest island in Europe, and you’ll get a lot of the island lifestyle you’re looking for. 

You must apply to the Council of Ministers for permission to buy property here, and you’ll also need a visa if you want to stay for more than 90 days.

How To Get A Mortgage For Overseas Property

Next, let’s discuss the process of getting a mortgage for overseas property. As you may have already guessed, this is a rather complex process that depends on the following:

  • The property you’re looking to buy
  • The location or country you’re looking to buy in
  • The amount of money you need
  • Your own unique financial status

Since this can become overwhelming, we recommend contacting a specialist mortgage broker with experience in overseas property mortgages. A mortgage broker might be able to help you in the following areas:

  • They’ll have a deep understanding of the local regulations and laws
  • They’ll help you get all the documentation in order
  • They might have access to special overseas mortgage schemes 
  • They’ll be able to ensure you get the best deals

Granted, the broker will charge a fee, but that might actually be small compared to the amount you save on other aspects.

Eligibility Criteria for Overseas Mortgage

Overseas mortgages are a special type of financing and have nuances that are different from usual mortgages. 

Since these types of mortgages can be a high risk to the lenders, there are special considerations that you have to keep in mind. However, the following are some of the common criteria to look out for:

  • These mortgages usually come with a larger deposit to offset the lender’s risks
  • You need to have a high income, as some lenders offer overseas mortgages only to High Net Worth Individuals
  • The type of mortgage you’re looking for, such as buy-to-let or interest-only
  • The foreign exchange rates and associated fluctuations
  • Finally, your credit history, which will play a very crucial role in the acceptance of the application

Some common lenders who offer overseas property mortgages are:

  • Standard Chartered
  • HSBC
  • Santander

However, the list is ever-changing so please connect with our mortgage advisors for up-to-date information.

Frequently Asked Questions (FAQs)

1. What’s the difference between an overseas mortgage and an offshore mortgage?

An overseas mortgage usually refers to UK residents looking for a mortgage to buy properties overseas. In contrast, an offshore mortgage refers to foreign residents looking for a mortgage to buy properties in the UK.

2. What if I get into a fraudulent scheme?

We recommend working with renowned lenders only to avoid this, but if you are a victim of fraud, it’s best to get specific legal advice.

If possible, work with someone you personally know in the country you’re looking to buy a property in, as they can provide much-needed guidance in legal and regulatory matters related to the locality you’re targeting.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.

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If you’re a UK resident looking to buy properties overseas, then this is the only guide you need to succeed!
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