Getting a Buy-to-Let Mortgage for a Property Overseas

If you’re thinking of borrowing money to buy a rental property abroad you’re going to need a buy-to-let mortgage.

Buying property overseas can often come with a number of additional obstacles, but with the right advice there’s no reason why you can’t overcome them.

This article provides all the information on how to find the best buy-to-let mortgages, what steps you should take and who you can turn to for guidance.

Read on for more details or jump to the section that’s relevant to you via the links below…

Can you get a buy-to-let mortgage for a rental property abroad?

Yes, it’s possible. Naturally, there’s an added layer of difficulty for buying properties overseas regardless of whether it’s for rental purposes or personal use, which is centred around all the relevant local laws and regulations of the country where you’re looking to buy.

For example, in certain countries you may need a particular residency visa before you can buy or there may be different taxes payable before you can take ownership (similar to the U.K’s stamp duty tariffs).

Despite all this, there’s lots of lenders who are able to help with your borrowing requirements and with guidance from a broker with experience in properties abroad, a complex process can become much more straightforward.

How to get a buy-to-let mortgage for a property abroad

Getting a buy-to-let mortgage for a rental property overseas can be more complex than for one in the U.K, but there’s a number of steps you can take to make this process more straightforward.

Step 1. Do your research

It’s important to spend some time getting to know the particular territory where you’re looking to buy. Do some research on the local housing market – how do current prices fare versus the last few years?

This research should include the local rental market. What rental yield can you realistically expect from the property you’re looking to buy? Have you spoken with any local agents about the state of the market?

Step 2. Prepare your documents and credit reports

To speed up the process it’s always useful having three months bank statements, proof of address and proof of income all prepared and ready for when you want to apply for your mortgage.

If you’re wondering which documents you might need, you can find a full list in our guide to mortgage applications.

Also – check your credit reports, it’s important to have found out what your credit score is and have that information ready too. If there’s any details on your credit file that need resolving, you can do this before you apply.

We offer a dedicated credit reports hub, which you can download your credit reports through.

Step 3. Speak to an experienced buy-to-let mortgage broker

Once you’ve got your documents and your credit reports together, you should speak to a mortgage broker who specialises in how to get buy-to-let mortgages for overseas properties.

Your broker will guide you through the process from here and make sure your application gets off on the right footing by introducing you to the right mortgage lender.

In the case of overseas properties, this could well mean finding you an international lender rather than one who’s U.K based and advising on any additional documentation which may be needed.

They can also offer guidance on buying property in different territories, acting as a go-between with yourself and local agents on the ground in the country where you’re looking to buy.

Our free, broker-matching service will quickly assess your needs and circumstances to pair you with a mortgage advisor who’s ideally placed to help you – Make an enquiry to get started.

What is the eligibility criteria?

​​Eligibility criteria will vary from lender to lender and also could differ depending on the country, which is something an advisor will be able to go through with you during your application.

For example, deposit requirements for buy-to-let mortgages will differ from country to country. So, for Spain and the USA, most lenders could ask for up to 30%, Italy even higher – up to 40% but in France you may only need between 15%-20%.

Overall, eligibility can be stricter than a standard buy-to-let mortgage as there are more moving parts within the process, which causes complications for the lender.

How much rental income will the property need to generate?

It is likely that a lender will request evidence that the rental income will more than cover the mortgage payments. Typical rental yields should range from between 125%-145%, depending on the lender.

Find out whether your mortgage is likely to be affordable based on the property’s potential rental income by using our calculator below.

For more information on how rental yields count towards the overall eligibility criteria take a look at our in-depth guide on buy-to-let mortgages here.

What about personal (non-rental) income?

When looking at your annual income, some lenders will only look at applications where your earnings are at least £25,000 and all U.K based but there’s a few who will consider income generated worldwide too.

As well as this, some lenders will also consider evidence of other forms of income, which can include savings and pensions.

How do you find the best buy-to-let mortgage rates?

A good way to get the best interest rates for an expat mortgage is by offering a higher deposit; mortgage lenders reserve their lower rates for those who part with the most cash on application. A good starting point is usually between 20%-25%.

Rates for overseas buy-to-let mortgages will possibly be higher if you use a U.K lender, due to their uncertainty or lack of knowledge of a particular territory.

This is where using a lender based in the country you want to buy can be a better option and help you secure a lower rate.

This is where using the services of a lender with knowledge of handling mortgages for overseas properties can be beneficial.

They will have a variety of contacts to call upon – both in the U.K and abroad – saving you a lot of time and effort.

What are the tax implications?

If your intention is to remain resident in the UK, the government will view any income you receive from renting out your home abroad as UK income, which means you are subject to UK income tax on the rent you receive

Since April 2020, you have not been able to deduct any of your mortgage expenses from your rental income to reduce your tax bill. Now you receive a tax-credit based on 20% of your mortgage interest payments.

Unfortunately this is far less generous than the old system for higher-rate taxpayers, who effectively received 40% tax relief on mortgage payments.

If your intention is to become resident in the country where you want to buy a property, it would be recommended to seek the advice of a local tax expert to find out what the rules are for rental income.