Home » Currency 101 » The easy guide to overseas mortgages

So you’ve decided to buy a property abroad – how exciting! Now it’s time to decide how to pay for it. Overseas mortgages are a popular option for those who are not in a position to purchase their overseas home outright.

In this easy guide, we explain how to get an overseas mortgage and whether you should opt for a UK bank or an overseas bank. Endless holidays or a life in the sun await…

Get a quote from us today by completing our simple form or call us on 020 7898 0541. We’ll take a look at your requirements and arrange to speak to you at a suitable time to offer the best possible solution for all of your upcoming currency transfers.

What is an overseas mortgage?

An overseas mortgage is a mortgage for a property located outside of the UK. It is one of several options for financing an overseas property, whether that’s a holiday home or permanent home abroad.

An overseas mortgage is a popular option for those who do not have the cash or equity to fund a property abroad outright. Most countries in the western world offer mortgages to foreigners, however, the terms and conditions vary from country to country.

How do you get an overseas mortgage?

You can obtain an overseas mortgage from a local bank in the country you are looking to buy or through an overseas lender, such as a UK bank.

Overall, overseas mortgages are similar to UK mortgages. You will be required to show the same documentation that you would need to purchase a property in the UK, such as proof of income, your assets, and your financial history. Good financial records and a strong credit score will help your chance of getting a mortgage. Having a bank account in the country you are looking to buy in will also be advantageous.

The main difference between a mortgage for a UK property and a mortgage for an overseas property is the amount of deposit that you will need to put down. While in the UK, a minimum deposit of 10% is usually required, it is common to need a minimum deposit of around 30% for an overseas mortgage (the exact amount will vary between countries). This is because the loan-to-value (LTV) ratio is often lower for foreigners as banks want more security when dealing with overseas property.

This is the case for both UK lenders and local lenders – both will require a higher deposit than for a domestic mortgage.

The interest rates and mortgage terms will vary from country to country, so it is important to do your research thoroughly to ensure you get the best deal.

Get a quote from us today by completing our simple form or call us on 020 7898 0541. We’ll take a look at your requirements and arrange to speak to you at a suitable time to offer the best possible solution for all of your upcoming currency transfers.

Which UK banks offer overseas mortgages?

Several UK banks offer overseas mortgages, including HSBC and Santander. Banks tend to only offer overseas mortgages in the countries where they have offices.

You will likely deal with the UK branch of the bank at the start of your mortgage proceedings but will deal with the overseas arm once the mortgage has been arranged.

Is it better to take out a mortgage from a UK bank or an overseas bank?

There is no right answer and there are pros and cons to both.

Overseas mortgages can have lower interest rates and more favourable terms than UK mortgages. In addition, you would be protected by the regulatory bodies of that country – it tends to be easier to deal with the local legal system when buying property in a country. On the other hand, you will likely have a language barrier, and if you are not planning to live in your overseas property permanently, there will be some considerable distance between you and your lender, which can complicate things.

Therefore, if you choose to go with an overseas bank, it may be a good idea to find an international broker to ensure you do not get rejected and to ensure everything runs smoothly when you are not in the country, particularly if you do not speak the local language.

You may be more comfortable borrowing from a UK bank as you will speak the language, understand the system better, and be protected by the Financial Conduct Authority (FCA) which has made the UK one of the most highly regulated markets in the world. The downside to taking out a UK mortgage is that the interest rate is usually much higher than those at overseas banks.

How to pay for an overseas mortgage

When buying an overseas property, it is crucial to consider the currency markets. Exchange rates fluctuate all the time, sometimes dropping by as much as 5% in as little as a month. This can add thousands of pounds to the price of your overseas home.

For example, a €250,000 property has varied in price by almost £14,000 in the last 12 months due to the pound weakening and strengthening against the euro. Therefore, the price you thought your dream property will cost may not be accurate by the time you come to buy.

The good news is that you can easily protect your money from fluctuating exchange rates. Here at Smart, we offer forward contracts that allow you to lock in an attractive exchange rate for up to 12 months. This will give you peace of mind that your property will cost what you expect. Find out more here.

The threat of fluctuating exchange rates doesn’t end there, however. If you are sending money overseas regularly to pay for your overseas mortgage, you will find that your monthly payments vary each time too. With our regular payments plan, you can automate your currency transfers, scheduling payments either at the exchange rate on the day or at an exchange rate you have locked in for a period of time. Find out more here.

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