Buying a home abroad is an exciting prospect but financing the purchase can be complex. Whilst some people opt to be cash buyers – if they are able to – to keep matters simple, leveraging can be beneficial for tax reasons so do make sure you take financial advice before you start your property search.

Most British banks won’t currently finance purchases abroad, though some international firms offer products in limited locations. For example. HSBC will lend on France, Spain, Malta and Greece, while Santander lends in Portugal. In some cases banks will only accept applications from current clients.

 

In most cases you’ll have to arrange a loan with a bank based in the country in which you’re buying. Not an easy prospect if you don’t speak the language or aren’t familiar with the different international processes, but the good news is that there are UK based companies at hand to help with this.

It’s possible with some lenders to use your UK home as collateral to secure a mortgage on an overseas property. Only do this if you are very sure you can afford to cover the repayments on the additional mortgage. If you default you are putting your main home at risk of repossession, as well as your second home.

 

Top Tip

Banks in most countries will not take into account property rental income to offset against the loan repayment, only your personal income. Your outgoings must be within 30-35 per cent of your income, including any mortgage debt, in order to qualify for a loan.

 

 

Lending Criteria

Clare Nessling, director of Conti Financial Services (mortgagesoverseas.com), says buyers should know how much they can borrow before house hunting. “Overseas banks don’t lend based on your salary in the same way as most UK banks,” she says. “They’ll want to understand exactly what your income and outgoings are. It’s based more around what you can actually afford.”

Nessling explains that checks involve all bank account statements and pay slips, or six months’ tax returns if you’re self-employed, along with income from investments and other sources.

 

Lenders will also investigate all financial commitments you have, including mortgage payments, credit card balances, store cards and loans, even payments such as alimony or any court judgements against you. If you fail to supply the right documentation or complete the paperwork correctly, the bank will reject your application.

 

Get an approval in principle before you go. Obtaining an ‘approval in principle’ is something we always recommend, suggests Lorna Waddell of Conti. “This costs nothing, but will tell you up front about how much you can borrow, and therefore what price range you can realistically consider before committing to anything. It will also prove to vendors that you’re serious about buying.”

 

 

Ask The Experts

There’s no reason you can’t do all this yourself but, if it seems too complex and time consuming, a specialist broker might be the answer. Brokers are regularly updated on the best mortgage deals and will check all the documentation for your application.Based on the information you give them, they then get quotes on how much you can borrow, what the monthly fees will be and any additional costs involved.

“People try to borrow too much but regulations are stringent,” says overseas finance specialist Simon Conn (simonconn.com). “A broker can see issues immediately, we offer advice on what finance is available and act as a go-between for the client and bank.”

Brokers charge a fee for their services, which varies based on the work involved, but they should save you time and effort. Nessling says there are no regulations on offering advice on overseas finance, so only choose a company with a solid, longstanding reputation.

This article was sourced from Place In The Sun

 

For more information about oversea mortgages please contact one of our One Stop Finance Team Below

 

 

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