Buying overseas property Mortgages for overseas property
Arranging a mortgage
It’s a good idea to get finance in place before you start looking for a property, so you know your budget. If you need a mortgage, there are several ways to raise the money.
Remortgage your UK home to buy overseas property
This may seem like the most straightforward option, but you could risk losing your home if you have problems making the repayments.
Borrow from a UK bank to buy overseas property
Your options for borrowing from a UK bank are limited. Institutions that do lend to buy abroad tend to be those with offices in the countries concerned, so technically you are still getting a mortgage in that country. They are still regulated by the Financial Conduct Authority (FCA), though.
The third choice is to take out an overseas mortgage through a specialist broker. You can find one in your area by visiting the independent financial adviser website Unbiased.co.uk. They can give you information, but advice about overseas mortgages is not regulated by the FCA. This means you have no means of redress if a mortgage adviser mis-sells you a mortgage. Specialist brokers may have links with estate agents or lawyers in your chosen country.
Since the credit crunch, some countries have become much harder to borrow in. Lending criteria and the maximum amount you can borrow as a proportion of the property’s value (loan to value) have been tightened up in many places, and you will need to supply detailed documentation to prove you can afford it.
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Whether to borrow in the local currency, such as euros, or sterling depends on the currency you earn in. If you are planning to rent out the property, it may be a good idea to borrow in the local currency – otherwise sterling may be better, because exchange-rate fluctuations can increase your repayments.
Other costs of buying overseas property
You will also need to budget for buying costs, such as mortgage and lawyers' fees, taxes and insurance. Estimate this as a percentage of the purchase price – around 10% for France and Portugal, 12% for Spain, 15% for Italy and 5% for the US.
Be careful when using money transfer services as not all firms put client money into a ring-fenced account to protect it in case they go bust. Read our travel money guide for more information.
What to pay when
Once you've found a property you like and agreed a price, you'll need to pay a non-refundable deposit of at least 10% of the purchase price.
In some countries, including Italy and Portugal, you may need to hand over up to a third of the total price upfront.
Don't hand over any money before you've negotiated an initial contract, and then only to a lawyer or bonded estate agent.
Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers, Which? Insurance Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.