Mortgage for a holiday home abroad
Purchasing a holiday home abroad can be an extremely exciting venture; unfortunately, it is not as simple as applying for a mortgage and purchasing a home in the UK.
Thankfully, here at Loan Corp, we can offer you independent financial advice, and help you find the best lender for your situation, so you can start spending some of the colder months somewhere it’s warm and sunny.
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What is an overseas mortgage?
An overseas mortgage is a mortgage that has been taken out on a property that is not within the UK. There are many reasons one might consider doing this, such as purchasing a holiday home in a country where the property price is lower.
Some people may also want to take a mortgage out on an overseas property if they hope to retire in that country one day, or some people may only want to take a mortgage out overseas to increase their property portfolio.
Can you get a mortgage for an overseas holiday home?
Getting a mortgage on an overseas property is entirely possible for nearly any UK resident, so long as they meet the criteria that the specific mortgage lender requires for the amount that they are looking to borrow.
While taking out a mortgage on an overseas property is easily possible, it is a much more complicated process than getting a mortgage on a home in the UK for a number of reasons.
This is why you should always consult with a mortgage broker with some knowledge of the country you are planning on buying a property in, as they will be able to give you some insight into what you are getting yourself into, how much you will be able to borrow, and some information about local tax and property laws.
How do I get a mortgage for an overseas property?
There are a few ways you can go about receiving finance for an overseas property, so we’ll list and discuss their benefits and drawbacks below.
Apply for an overseas mortgage with a local lender
Some UK banks offer international banking services, which means they can arrange overseas mortgages, although there’s no guarantee that one of these banks will have a branch in the country you are looking to purchase a holiday home.
Some of the benefits of choosing this method include:
- Being less likely to run into a language barrier
- Saving money on translation service fees
- The process goes much quicker, as local lenders have easy access to your credit history
You could, however, run into issues with ownership laws, foreign tax, and other issues, so if you go this route, it will be important to make sure the local bank you choose has experience with mortgages in your chosen country.
Apply for a mortgage with an overseas lender
Another one of the options available to you is applying for a mortgage from a bank in the country you want to buy a holiday home.
Lenders based in the country will generally have extensive knowledge of the mortgage market in the country and the local laws. This can work in your favour hugely, as this knowledge can help you make a more informed decision.
Lenders based in the country will likely have access to more mortgage products, so you might be able to find much cheaper interest rates.
Using an overseas lender also means you’ll likely be paying for your mortgage using foreign currency, which can be either a benefit or a drawback, depending on the exchange rate, as it could cause you to end up paying more or less every month. Thankfully, the GBP is one of the strongest currencies around, so it will generally work in your favour.
The drawbacks of going this route include the fact that there may be a language barrier that will either be difficult or expensive to solve, as you will need a translator if you want to make any headway regarding mortgage advice.
Another drawback is the fact that some banks in other countries will not provide mortgages to foreigners, and if they do, they will often give you much higher interest rates.
Remortgage your home in the UK
One of the most interesting ways to go about obtaining capital for overseas property is by remortgaging a home you already own in the UK and purchasing your holiday home abroad with cash.
You will likely only be able to do this if you don’t owe that much on your current home or own it entirely. One of the major benefits of choosing this option is the fact that you’ll be dealing with a local lender in your own currency.
You’ll also be able to make your mortgage payments in your own currency, and you will likely also run into far fewer issues with laws and taxes in the country where your home is based.
Before going through with this option, you should still speak to a specialist broker from a company like Loan Corp, as we will likely be able to provide you with information about the country in which you want to buy a holiday home.
At Loan Corp, we can also help you choose between a variety of mortgage lenders, so you can get the best mortgage deal for your situation.
What types of mortgages are available for property overseas?
If you don’t want to spend as much money on a second mortgage payment and don’t plan on spending most of your time at your holiday home abroad, then there are some other mortgage options you can consider.
You’ll be able to choose between a holiday-let mortgage, and a buy-to-let overseas mortgage, both of which can provide rental income.
If you plan on using your property abroad mainly as a holiday home, then a holiday let mortgage will likely be best for you, as you’ll be able to occupy your home when you don’t have any guests.
The rental income you receive when guests stay at your overseas property can contribute to your mortgage payments, which can make them more affordable.
The only issue is you can’t guarantee that people will always want to stay at your property, which means the rental income will not necessarily be steady.
Buy-to-let mortgages work in a similar way, except these mortgages are usually better if your overseas home is occupied on a long-term basis.
Some buy-to-let mortgage contracts do not allow you to stay at the home even if it is not being occupied, so you should keep this in mind before opting for a mortgage like this.
What are the lender criteria when applying for an overseas mortgage?
As with applying for any loan, if you are applying for a mortgage, you will need to meet certain eligibility criteria to be granted credit.
Listed below are some of the criteria that you will usually need to meet:
Deposit
The deposit you will need to place on a home before you are given a loan differs from country to country, and you may have to put down a hefty deposit to secure a home.
In Spain, property buyers will sometimes need to put down between 30% to 40% of the value of a property if they want to secure a mortgage for it.
You will, therefore, need to do your research and make sure you will have enough capital for a deposit on your overseas property.
Credit history
Once again, any bank or institution lending you money will want to know what your credit history is like, as they will want to make sure that you’ll be able to pay back the money you have borrowed.
While good credit will often give you access to the best lenders, lowest interest rates, and lowest monthly repayments, you will likely still be able to find a lender with bad credit, but it will limit your options hugely.
FAQS
Do I need to pay tax on foreign property income?
If you are a UK resident, you will need to pay tax on any income you receive, whether it comes from a foreign country or not.
However, you can avoid being taxed twice if your overseas property is based in a country that has a double taxation treaty, so you may only need to pay tax to the country where your rental income comes from.
Can I get a mortgage in the UK for a property abroad?
Yes, some UK banks offer international banking services, but this will differ from lender to lender. You should be able to find this out by doing some research or contacting the bank in question.
Where do UK residents buy overseas property?
Some of the best countries to buy a foreign holiday home in are France, Spain, Italy, Portugal, UAE, and Costa Rica.
Get Mortgage Advice From Loan Corp Today
If you are interested in getting a mortgage for a holiday home abroad, then you will likely need expert advice in order to find out which lender will be best for you.
Thankfully, here at Loan Corp, we specialise in mortgage advice and will easily be able to provide you with a list of lenders, so you will be able to choose one that is best for you.
Contact us now for expert advice for a holiday home abroad mortgage