Overseas Mortgages Explained


Britons are travelling back into overseas property markets, as low prices and a stronger pound make buying abroad more affordable than ever.

Cash buyers will benefit most from the current excellent conditions, but what if you require finance from your country of choice?

After the global financial crisis, overseas lenders became much stricter about whom they lend to and now judge each case individually based on what and where you want to buy, rather than using specific criteria as they did before.

However, it is still possible to obtain finance, especially if you have a large deposit and can demonstrate that your accounts are in good shape.

So what are the lending conditions like in the top destinations for Brits buying abroad?

Spain

Although the Spanish property market has recently seen a boom and bust cycle, lenders are still willing to lend up to 65% loan-to-value (LTV) and rates start at just 3.22% for a variable deal up to 30% LTV. This rises to 4.85% for a variable rate on a 65% LTV deal.

At present, interest-only deals are rare, so you’re more likely to find a repayment loan. Many lenders will also only allow the choice of either a fixed or variable rate.

The maximum mortgage term is 35 years, but this varies depending on the type of loan.

France 

France has the widest range of mortgages for UK buyers in Europe, as well as the lowest rates on offer. For a variable deal over ten years, the rate is just 2.3% and only 3.8% for a 25-year fixed deal.

Unlike other countries, where the best rates are saved for those with the highest deposits, both of these deals are available on mortgages of up to 80% LTV.

For buyers with deposits of 15% of the property’s value, there is a range of deals starting at 3.15%.

Additionally, mortgage types are similar to those in the UK – rates can be fixed, capped or variable – and loans are often repayment rather than interest-only.

Portugal

In the past few years, Portuguese lenders have reduced the amount of mortgage products they offer. Fixed rate deals are now rare, but you can still borrow up to 80% LTV, and rates start at 4.74% for a variable rate at 60% LTV and 5.89% for up to 65% LTV.

The financial crisis of 2007 left the Portuguese economy in a mess, but the country is now in a more stable condition and therefore, lending conditions should start improving.

Italy 

Over recent years, lending to foreign nationals in Italy has been fairly restricted, but the market is becoming more accessible now and new lenders are joining the industry.

However, you must be prepared to purchase a higher value property, as the minimum loan available is €250,000.

The maximum term of any mortgage is 25 years and loans are on a repayment basis. Rates start from 3.2% for mortgages up to 60% LTV and 3.4% for up to 80% LTV.

If you are buying abroad, be prepared for lenders to require more details about your income and outgoings. It is important to have your accounts in order before you start looking, as lenders will use the debt-to-income ratio to determine whether you can afford a mortgage.

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