Need finance to purchase your overseas home? We look at the options available in today’s market, a time when countering the weak pound with a foreign currency mortgage could make financial sense. Don’t forget to get professional advice before making any decisions.
Use a broker
For most buyers, the preferred route to getting a foreign currency mortgage is through an overseas broker. Typically, these will be based in the country where you are buying and are often expats geared up solely for helping foreigners like yourself. Some are based in the UK and work across a variety of countries.
Brokers make sense in the UK but are worth their salt abroad. They will speak both English and the local lingo fluently and have invaluable on-the-ground knowledge. Thanks to relationships with a choice of local banks, they can cherry-pick the best mortgage products across the entire market. They’re often offered exclusive deals, including ones their clients won’t get by applying to the lender directly. And crucially, your broker will oversee your application from start to finish. They’ll use their expertise to ensure your economic profile matches local lender eligibility and secure an agreement in principle before you even start searching for a property.
Mortgage products offered by foreign lenders often come with flexibility, including discounts on your headline rate if you take on other products from the lender. Again, your broker will negotiate these things for you. Finally, because brokers must collaborate with estate agents, lawyers and notaries on a daily basis, by default they provide an extra layer of protection throughout your purchase.
Direct from a foreign bank
Going direct to a bank where you are buying is another option, usually done via a referral or word-of-mouth recommendation. Your estate agent or developer will know which local lenders offer the best service to foreigners like yourself and often will have a useful contact at a local branch and be happy to do an introduction.
The most clued-up foreign banks have an English-speaking or multi-lingual team to deal with foreign clients. Some foreign banks have a subsidiary bank just for English-speaking clients – examples are Holabank (part of CaixaBank) in Spain and Britline (part of Credit Agricole) in France. The key to success in this route is having a good go-to contact at the bank, someone who speaks English and can guide you through the application process. In many countries, the service and what you are offered can vary between branches of the same bank.
Through a UK or international bank
Many of the larger high street banks offer overseas banking or private wealth management geared towards expats or people with overseas interests. Similarly, foreign banks with London branches often provide international banking facilities. These banks operate a network of cross-border businesses and by collaborating can offer foreign mortgages to clients through their UK operation. The number of banks offering this way has fallen in recent years, but amongst those to consider are HSBC, as well as Deutsche Bank and BNP Paribas.
The obvious benefit using a UK-based international lender is that everything can be done in English and often through a UK office. The process can also be quicker as the lender should have easier access to your credit score.
Remortgage or equity release?
Re-mortgaging your UK residence is a common way of facilitating a foreign property purchase. The released capital can be used to fund the overseas property outright or put down as a deposit. Bear in mind, re-mortgaging options are more limited for older people.
Alternatively, equity release – or lifetime mortgage – schemes allow you to take a loan against the equity in your home, either as a lump sum or in series of smaller payments, without the tie of monthly payments. Instead, the loan (plus interest) is settled when your home is sold at an agreed point in the future, typically after you have passed.
Another way of using capital tied up in your home is to downsize allowing you to buy a smaller home in the UK and a second home abroad, financing one or the other if necessary.
Whichever route you choose to finance your overseas purchase or if you buy outright, chances are you’ll need to transfer Sterling funds to a foreign currency account abroad. Be sure to talk through your foreign currency requirements with Smart Currency Exchange and take advantage of our specialist knowledge and personal service.