Overseas buy-to-let mortgages
Property is one of the safest investments you can make, as the market does not fluctuate nearly as much as many other investments, so if you’re considering purchasing an investment property somewhere nice and sunny, then you should consider a buy-to-let mortgage.
While obtaining a buy-to-let mortgage outside of the UK can be challenging, there are some notable benefits that can make this proposition a lot more appealing.
Thankfully, we can tell you everything you need to know about this process, and help you get through it unscathed, as we have an expert team of mortgage advisors that can provide mortgage advice that can help you find a mortgage lender to provide you with the best deal possible.
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What is an overseas mortgage?
Simply put, an overseas mortgage is a mortgage for a property that is not based within the UK.
You can take out a mortgage on a property in almost any country in the world while living in the UK, provided that you have enough income for the mortgage payments and good enough credit to receive a loan.
There are many reasons why someone would want a property overseas, but the majority of people are unable to fork out enough money to buy these properties in one lump sum, which is why mortgages enter the equation.
What is a buy-to-let mortgage?
Buy-to-let mortgages allow you to have your cake and eat it, too, as they basically entail taking a mortgage out on a property that you intend to rent out to other people.
This allows you to live happily in your UK home, knowing that the rental income from your overseas property will cover most of its mortgage payments.
If you opt to only rent your property out for holiday letting, then you’ll also be able to enjoy some time in your overseas property while netting more rental income. Airbnb buy-to-let mortgages can be handy for this reason.
While it might be much easier to have a buy-to-let mortgage on a property in the UK, there are several benefits to choosing a property across the pond.
You will often be able to benefit from lower interest rates, as well as lower property prices in many countries, so you could get a lot more for your money.
Taking a mortgage out on a larger property in a desirable area can also net you even more rental income, while it will likely cost you far less than if the property were in the UK.
What are your borrowing options for overseas mortgages?
You have a few different options to choose from if you decide to take a mortgage out on a property overseas, so we’ll discuss each of them and their benefits and drawbacks.
Borrow from an international lender with a UK presence
While you might think that borrowing from a UK bank to buy an overseas property would be the cheapest, quickest, and easiest way to go about getting a mortgage abroad, there are a few caveats to them.
First and foremost, not all UK banks have international mortgage services, and some of them will only be able to offer you a mortgage in certain nearby European countries like France and Spain.
Once your mortgage has been set up with a UK bank, you will usually need to deal with the arm of the bank based in the foreign country where you have purchased your property.
These lenders also won’t always have much knowledge about the mortgage market in the country you are looking to purchase a property. This can cause you to end up having to pay higher interest rates and mortgage rates.
Thankfully, Loan Corp can help you find international lenders with the best rates, so it might just end up being the best option for you.
Borrow from a local lender in the country you are purchasing your home in
Borrowing from a local lender can be quite a costly and confusing process if you haven’t done some extensive research, especially if English is not the first language of the country you are looking to buy in.
This is due to the fact that you will need to pay for translation costs and become familiar with the local laws and regulations if you plan to go through with this process on your own.
Borrowing from a local lender can sometimes still be the cheapest option, though, as mortgage rates can be significantly lower in some countries, despite you needing to pay for translation costs.
There is also no need to go through this process alone, as you can make contact with a mortgage broker from Loan Corp who will help you through the process.
Remortgaging your home in the UK for your overseas property
Remortgaging your home in the UK to help purchase a home overseas can be a good option to consider, depending on a few factors. Firstly, it will depend on your credit score and how much you owe on your current home.
If these factors are not a concern after speaking to a broker, then this can still be an option to explore. One of the issues with this method is that the lender you choose may not have any knowledge regarding the country you are looking to invest in.
This mortgage process can be simpler and easier than the other options available, but you should still consult with a professional who is knowledgeable about the property market in the country you want to purchase a home.
How to find a property overseas?
Before you do anything else, you should first do some research about the areas of the country that you are looking to buy in and what type of properties they have available at what prices.
This will give you a general idea of what to expect, but when you need to start looking for properties in a specific area for a specific price, then you should consult with one or more of the professionals listed below.
Find an estate agent in your chosen country
Suppose you want the inside scoop on what areas to avoid, hidden gem areas, and other useful information. In that case, you should consult with an estate agent based in the area you are looking to purchase a property in overseas, as they might be able to get you the best mortgage deal.
You may have to deal with a language barrier if English is not widely spoken in your chosen country, but getting a translator can combat this.
One last important thing to note is that ultimately estate agents work for home sellers and not buyers, so you should always have your wits about you.
Browse UK property portals
If you want to get ideas regarding how much properties cost in your selected area and what some of them look like, then you should consider using an online UK property portal that features an overseas category.
Some of the best websites for this purpose are Zoopla, Rightmove, and OnTheMarket. If you want to keep most of this process online, then you can speak to an online mortgage advisor here at Loan Corp.
They can help give you an idea of what your price range is and provide you with some important information regarding the country in which you want to purchase a property.
Can you get a buy-to-let mortgage in any country?
UK citizens can buy property in most countries around the world, but there are some countries that have restrictions against this practice.
Some of the countries that don’t allow UK citizens to purchase property include New Zealand, which has had this law in place since 2018. UK residents will also need foreign investment approval if they wish to purchase a property in Australia.
Most UK residents wanting properties abroad usually opt to purchase in France and Spain, as there are many lenders available, which makes the mortgage rates competitive.
Some other great countries to purchase property in that don’t have any restrictions for UK residents include the USA and the UAE.
You should make sure to read the fine print of your buy-to-let mortgage, as some of these contracts may have self-occupancy restrictions, so you may not be able to stay in your overseas property even if it’s not occupied.
What are the tax and legal implications of purchasing a property overseas?
Foreign countries will often have laws regarding real estate that can differ widely from the UK, so you should definitely consult with a lawyer that has a good understanding of property law in your chosen country.
These laws may require you to have a license if you wish to rent the property out or restrict you from buying a property in a particular area of the country. The law may also require you to have a notary present to oversee your transaction.
You will also need to know that the rental income you earn from your property will also be taxed by the government of the country you purchased in, so you will need to take this into account when working out the affordability of buying overseas.
What are the lender criteria for a buy-to-let mortgage overseas?
The lender criteria can vary depending on the lender you choose to go with, but these are some of the factors that they will take into consideration. Some of these factors include:
Deposit amount
The deposit you’ll need for a buy-to-let mortgage will depend on the country you are purchasing in. If you want a buy-to-let mortgage in Spain, then you may need a deposit of at least 30%, while in France, you may only need to put down 15%.
If you aren’t working with all that much capital, this is an important factor to consider and may change which country you decide to purchase a property in.
Some countries also require non-refundable deposits on buy-to-let mortgages, so this is also something you should be mindful of.
Credit file
One of the most important factors to consider when you are planning to borrow money from any institution is your credit file.
While you may not be purchasing a property in the UK, your UK credit file will have an impact on the possibility of you getting a buy-to-let mortgage overseas. If you have bad credit, your options will be far more limited, and your application may be rejected entirely based on your credit.
A good credit score will give you a large selection of lenders to choose from and good mortgage rates, but while difficult, it is not entirely impossible to get a buy-to-let mortgage with bad credit.
FAQS
Can you get a mortgage in a country you don’t live in?
Yes, you should be able to apply for a mortgage in many different countries, although some countries do restrict foreigners from owning property.
How much tax do I pay on rental income in Spain?
If your buy-to-let property is in Spain, then you will need to pay around 19% of your income to the Spanish government.
Do you need to pay UK tax on overseas rental income?
You will, unfortunately, also be subject to UK tax on your overseas rental income, as this is still classified as income.
Get Mortgage Advice From Loan Corp Today
If you are in the market for overseas property and need to find the best mortgage lender for your situation, then Loan Corp has your back.
We can provide you with expert advice and turn this sometimes arduous process into a breeze so contact us now.