International Mortgages Explained

There are many reasons you might be looking to buy abroad, but if you’re looking for a mortgage to purchase an overseas property, it can be challenging to find the right lender. Not all UK lenders are willing to lend for this purpose, and those that do won’t necessarily lend in the country you’re looking to buy in.

In this article we’ll look at the options available to you if you’re looking to finance an overseas property, and how the right advice can simplify your journey.

Can you get a mortgage overseas?

Yes, you can. However, UK mortgages are not suitable for overseas property purchases, so if you’re looking to finance a property abroad, you’ll need to obtain a specialist overseas mortgage. There are 3 options if you’re looking to fund a property purchase with an overseas mortgage.

A number of UK lenders offer mortgages internationally, however, you’ll need to ensure they cater for your chosen country, as this type of lender usually only provides mortgages in countries where they have an overseas presence. If you already have a UK mortgage with significant equity, it may also be possible to remortgage your current home to make a purchase abroad, although not all lenders will allow this.

The next option would be to apply for a mortgage directly in the country you wish to buy in (if they allow foreign borrowers), or you could use an international mortgage lender that is not necessarily based in the UK or your chosen country.

There are a plethora of considerations to make when determining which is the best option for your circumstances, so it’s strongly recommended that you speak to a broker who specialises in overseas mortgages, and preferably, purchases within your chosen country, before you decide which is the best option for you.

UK vs International mortgage lenders

International mortgages anywhere in the world are similar to UK mortgages, in the sense that you borrow a lump sum of money in order to purchase a property. The criteria used to determine your affordability, general terms, and property laws will vary from country to country.

Whether you choose a UK lender offering overseas mortgages, or an international lender will depend on a number of factors, including how well you meet the criteria for each, and which, if any, offers better rates and terms for your needs. Of course, with a UK lender, you avoid the potential difficulties or costs that may arise from translation.

It’s a case of weighing up what is important to you, as a buyer. For example, in some European countries, the interest rates are far lower than in the UK, however, if you opt for a lender outside of the UK you won’t benefit from FCA (Financial Conduct Authority) regulations and protection.

Overseas lenders are also likely to have a stronger knowledge of their local laws and mortgage industry but the interest rates offered to you as a foreigner could be much higher than if you were a local, depending on the country and type of lender.

If you choose a UK bank with a presence abroad, it could be simpler for their international branch to assess your credit, due to access to your UK records. A broker that specialises in this area will be able to help you choose the right path for your needs and circumstances.

Rates and lenders

Many UK banks with an international presence, such as HSBC, and Natwest, will only offer overseas mortgages to their own banking customers. In some cases, a minimum maintained balance is also required within the account held.

International banks such as Chase or IMS are able to offer international mortgages, and every country that offers mortgages to foreign buyers will have many hundreds of mortgage lenders available.

There are so many factors that could affect whether more competitive interest rates will be available to you via a UK or foreign lender, that this is basically impossible to determine without the help of a specialist international broker.

Mortgages in Europe

If you’re looking to buy in Europe, there are a number of high street lenders offering overseas mortgages, such as Santander and HSBC. You may find that the criteria are slightly stricter than for UK residential purchases, however, so it can be more difficult to secure a suitable product.

It’s also worth considering that not all UK lenders will have local knowledge abroad. Therefore using a UK broker with experience in overseas mortgages in your specific area of interest will be hugely beneficial.

Ireland

It’s possible to buy a property in Ireland as a foreigner, however, there are substantial restrictions in place that can make it more difficult than buying at home.

If you’re considering borrowing from an Irish lender, many will need you to earn in euros, which means it may be easier for buyers in the eurozone to obtain an Irish mortgage than UK buyers.

Most Irish lenders will offer a maximum of 3.5 times the annual income of individual, or joint buyers, which can make it a little harder to raise the funds needed. As a foreign buyer, you will typically need to offer a higher deposit, in the region of 30%.

Proof of income and affordability checks are more stringent, with at least 12 months bank statements usually required. There is also often the need to take life cover with your mortgage, unless you meet exceptional criteria.

Those unable to secure a traditional mortgage in Ireland may be eligible for a subprime mortgage, however, these are not available to the general public, and can only be sourced through a specialist international mortgage broker. This type of product can be easier to obtain, but in balance, typically has additional requirements, such as a larger deposit or guarantor.

Of course, if your plan is to buy a property in Northern Ireland and you live in a different part of the U.K this will naturally be a much less restrictive process, but it’s still important to find a local broker who can help you find the right lender.

Spain

If you’re considering buying in Spain, there are not currently any UK lenders that will provide a mortgage for this. The good news is, Spanish lenders will consider foreign applicants, however, there may be limits to how much you can borrow, depending on your residency status.

As a non-resident, you may struggle to obtain a Spanish mortgage if you have experienced bad credit within the last six years. Much like UK lenders, however, what is considered bad credit varies from lender to lender, and it’s perfectly possible to be turned down by one lender, and accepted by another.

In Spain, foreign buyers can borrow from either traditional banks, or cajas (savings banks). The lending criteria are fairly similar to that of UK lenders, for example; income, employment type, credit status, and age, as well as the property you wish to buy.

The amount you can borrow will depend on how well you meet the criteria, but is likely to be capped at 60-70% LTV, unless you work and pay taxes in Spain. A deposit of 30-40% of the cost of the property will therefore likely be needed. Lenders use a debt-to-income ratio (DTI) calculation to ensure that your outgoings don’t exceed 35%-40% of your net monthly income after you’ve taken on the mortgage payment.

If you’re looking for an investment property, rather than a holiday home, there is no equivalent to a buy-to-let mortgage available in Spain, however, there are no restrictions to renting out standard mortgaged properties.

Spanish mortgages generally have variable interest rates and are repayment style, although there are some fixed deals available. All rates are tied to the Euribor (Euro Interbank Offered Rate). You will ordinarily need to have a bank account with the lender, and in many cases, home and life insurance, however, lenders typically discount your rate based on each of their products you take.

France

France is another European country willing to accept foreign mortgage applicants, and with historically low interest rates, a French mortgage is understandably an attractive way to purchase a property there.

French lenders include:

Rather than use income multiples, French lenders determine mortgage borrowing based on your DTI ratio, similarly to Spain and a number of other European nations. The DTI ratio is typically 35%, although lenders do have an element of flexibility, depending on your circumstances.

Mortgage terms in France cannot exceed 27 years for new properties, and 25 years for any other type of property.

Italy

Italian mortgages are available to foreign buyers, however, there are some restrictions imposed upon non-resident buyers that can make them less attractive than other international finance options. The vast majority of interest rates are fixed, however, and long-term competitive rates are available to most.

As a foreign borrower, your borrowing is likely to be capped at around 60% LTV, meaning that at least 40% deposit will be needed. Most Italian mortgages also have a DTI ratio of 30-40% of your monthly income.

The terms are also much shorter than UK mortgages, with 15 years being a typical mortgage length. This could limit the amount available to you and/or increase your monthly repayments fairly significantly.

Germany

If you’re looking to buy a home in Germany, you can get a mortgage as a non-resident of the country, however, this will typically limit your borrowing to 55-60% LTV, and therefore, a large 40-45% deposit requirement is likely.

Whilst German mortgage lenders use income multiples to determine the level of borrowing, similar to UK lenders, as a foreign buyer, you will be limited to a figure of 3 times your income.

If you’re a British expat who is resident in Germany, however, you will not usually be bound by these lending restrictions, and potentially have access to 100% German mortgages.

Turkey

Until fairly recently, much of the property market in Turkey was on a cash purchase-only basis, however, it’s now possible for both residents and non-residents of Turkey to access mortgages from Turkish banks.

As a country where property is still moderately priced when compared to the UK, it is popular with both investors, and those unable to afford property elsewhere. Although there are some Turkish lenders that will offer competitive interest rates to foreign buyers, they are typically much higher than with UK lenders.

The criteria are similar to those of a UK mortgage lender, with Turkish lenders most concerned  with your affordability and creditworthiness. If you’re looking for an investment property, however, most Turkish lenders won’t allow foreign buyers to secure a buy-to-let mortgage, although a broker may be able to source private lenders willing to do so on a case-by-case basis.

USA Mortgage

It’s possible to buy an American property using a US-based mortgage lender, as a foreigner, however, there are some differences to UK mortgages.

Mortgage types are similar to the UK, with repayment being the most popular type for residential purchases, although the fixed-term deals available are often longer. To a lesser extent, it’s also possible to get interest-only mortgages and variable interest rate deals.

There are a variety of term lengths available, but the typical mortgage is 25-30 years. Again, similarly to UK lenders, the maximum age varies from lender to lender, but 75 is typical.

The documentation needed to support your application will depend on whether you’re a resident or not, and the type of resident that you are, but largely consists of proof of income and tax payments for 1-2 years, as well as bank statements and a UK and/or US credit report, as well as a list of, and proof of your outgoings.

When calculating how much you can borrow, American lenders tend to use the DTI ratio method and will cap your borrowing at 25-35% of your monthly income. The amount of deposit needed will be heavily gauged by your residency status. Whereas those with a Green Card or work visa may have access to low deposit mortgages, other foreign borrowers will generally require a 20-30% deposit.

Canadian Mortgage

Canada has no restrictions on foreign buyers purchasing property, however, they will not allow foreign banks to register mortgages in Canada. Therefore you will need to obtain a mortgage directly with a Canadian lender in order to buy property there. There are a couple of UK lenders with a Canadian presence, however, such as HSBC.

Canadian mortgage lenders are categorised into ‘A lenders’ and ‘B lenders’. A lenders, such as Scotiabank, are similar to what the UK market would refer to as high street lenders, and typically offer lower rates, but have more stringent criteria. B lenders, similarly to specialist lenders in the UK, generally have more flexibility in terms of the applicant’s credit history or employment type.

Canadian lenders typically cap their borrowing at around 80% LTV, and foreign buyers may need to provide as much as 35% deposit, however, this will depend on the length of time you’ve been in Canada, and whether you have a credit record there.

How an international mortgage broker can help

As mortgages and property regulations vary so drastically from one country to the next, buying in a country other than your native home can be complex, especially if there are additional language barriers. An international broker who specialises in overseas mortgages can help you navigate this type of application, and provide knowledge of local property and finance laws that will be invaluable to your purchase.

The international mortgage market is vast, and taking on this task independently would be difficult to say the least, especially if you are perhaps self-employed, or are an expat without permanent residency status. The brokers that we work with have experience with international lenders in every country you could imagine, as well as with those UK lenders who offer overseas mortgage options.

They will be able to help you determine which finance options are most suited to your needs and source you the most suitable lender and terms, whether that be with a UK lender, a local lender in your intended purchase country, or elsewhere. Another significant benefit of working with a UK-based international broker like the ones in our network is that it entitles you to protection by the FCA (Financial Conduct Authority) and Financial Ombudsman Service in the UK.

Things to consider when buying abroad

Before you make the final decision, there’s a few other important factors to take into account:

Speak to an overseas mortgage expert

We have access to a network of overseas mortgage brokers and international mortgage specialists who can provide you with bespoke advice in this niche lending category.

They can help you find international lenders, UK lenders who lend abroad, and foreign mortgage providers who’d be willing to consider overseas applications. Our free broker matching service will match you with an expert broker who has experience in international mortgages in the country you are looking to buy in.

Simply contact us on 0808 189 0463 or complete this online form with as many details as possible about your foreign property ownership goals, and we’ll introduce you to someone who can help. We only work with brokers who offer their initial consultation for free.