5 Facts About Overseas Mortgages

Many Brits choose to move abroad for a variety of reasons. If you are considering this yourself, it is important to understand how overseas mortgages work. An overseas mortgage is essential for living in a different country, unless you are a cash buyer. The following tips provide five basic aspects of overseas mortgages and how they differ from UK mortgages, so you are more informed before making any big decisions:

  1. What Type of Borrower is Likely to Want an Overseas Mortgage?

Borrowers who are interested in living abroad have typically been people wanting to retire to a warmer climate or family emigrating permanently. However, this demographic has changed in recent years. More first-time buyers are opting to buy their first home abroad because they want to get onto the property ladder, but the UK is currently too expensive.

  1. Which Countries are the Most Popular?

In Europe, the most popular places that UK residents want to move to include:

  • France
  • Spain
  • Italy
  • Portugal

Outside of Europe, the US and Turkey are also extremely popular destinations.

  1. How are Overseas Mortgages Different from Those in the UK?

Usually, properties located abroad are cheaper than those in the UK, unless they are in prime tourist locations. UK banks cannot be used for an overseas mortgage, because as banks cannot operate across borders. Generally, most foreign banks require a property to be worth a minimum value, so it can be resold in the event of repossession and the bank recoups the money.

Additionally, loan-to-values are typically lower at approximately 70%. However, Turkey will go to 75% whilst France can go up to 85%. All mortgages are on a repayment basis; therefore, some overseas banks lend well into retirement.

  1. What Are Typical Interest Rates?

Rates in Europe are similar to those in the UK, between 2.5% and 4.5%. In the US, they are much higher at 6% whilst rates in Turkey are 6.5%.

  1. How Does a UK Broker Find a Suitable Overseas Mortgage?

The process of obtaining an overseas mortgage can be challenging for brokers. It is a requirement in most countries that brokers be registered with national banks. Furthermore, foreign banks usually pay commission only if the broker has a bank account in that country. The majority of brokers achieve a better client outcome by using a master broker, who manages mortgages in that country already and pays a referral fee.


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