A mortgage to buy abroad? (Yes)

What is a mortgage to buy abroad?

A mortgage to buy abroad is a mortgage for a property that’s not in the UK. A mortgage to buy abroad is usually advised on by mortgage to buy abroad brokers who have knowledge of this niche area if the mortgage market.

If you are considering buying a holiday home abroad then a mortgage to buy abroad may be just what you are looking for. You should remember that you may not be able to get a mortgage lender from the UK to lend to you and the mortgage lenders abroad may not be covered by the financial services compensation scheme, should anything go wrong. You may also not be able to bring your complaint to the financial ombudsman.

A mortgage to buy abroad may be an option if you want to buy property abroad and escape the rising UK house prices.

You may be able to get a mortgage to buy abroad from a UK mortgage lender or an overseas lender. In some cases, borrowers remortgage their UK properties and use the funds to purchase an overseas property or use the funds as a mortgage deposit for overseas property.

This may not be the most suitable option for you and you may want to seek mortgage advice before doing this.

Mortgage deposits on mortgages to buy abroad tend to be much higher as UK mortgage lenders try to de-risk themselves due to the fact that they may not know the local property market as well as they may want to.

 You may be required to pay a mortgage deposit of between 3o% and 40% so the mortgage lender may  require a maximum loan to value of around 60%.

Is remortgaging your home for a mortgage to buy abroad good?

Remortgaging your UK home could be a straightforward way to raise funds to purchase an overseas property or raise a mortgage deposit for a mortgage to buy abroad but this isn’t always the best option.

It could be a good option if you have enough equity in your home and mortgage rates are down.

If your credit score is relatively good then this could also be a good option.

If you have bad credit hence any of the below then remortgaging may not be a smart financial decision as you may not find favourable rates, except you are already on a very bad mortgage rate.

Bad credit could be:

  • A CCJ
  • An IVA
  • A debt management plan
  • A default
  • A bankruptcy
  • A home reposession

You may also be able to get a mortgage to buy abroad from a UK bank.

This could be beneficial to you as you may already have an existing relationship with the mortgage lender.

Most UK mortgage lenders have a mortgage to buy abroad product but they will only lend in particular countries.

You or your mortgage broker will need to find which countries UK mortgage lenders offer their mortgage to buy abroad.

Although the mortgage may be set up through the UK bank, you would deal with the foreign arm of the bank once the mortgage had been arranged.

Government help

Unfortunately, when looking to buy a home outside of the UK, you will find that you do not qualify for any government help and you are not able to use any of the government schemes below.

Some of the Government schemes you will not be able to use:

  • Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
  • Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
  • Help to buy equity loan- gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership- You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy- similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy- This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy- allows you to buy your home at a discount price.
  • Preserved right to buy- same as above.
  • Right to acquire- same as above.

Depending on where you live, you may also have been  able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

If it is very important that you get some government help then you may want to consider buying in the UK.

Get a mortgage to buy abroad abroad

Your final option is to get a mortgage to buy abroad using a specialist mortgage broker who can introduce you to lenders abroad who may be willing to lend to you.

Some mortgage rates in mainland Europe may be much more competitive than what is on offer in the UK.

mortgage to buy abroad brokers are not covered by the financial services compensation scheme and you will not be able to get any compensation if anything goes wrong.

By getting a mortgage to buy abroad you will be borrowing in a foreign currency and you should consider the consequences of this if exchange rates fall or rise in the UK (if your income is generated in the UK).

In this brief guide, we discussed how to get a mortgage to buy abroad and what some of the challenges could be.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.