A favourable buying climate is seeing a number of Britons return to overseas property investment. Extremely low prices and a resurgent pound are making an investment on foreign soil more affordable than ever before.
Of course, if you are a cash buyer, then these conditions are superb. However, just how easy is it to gain finance for an overseas property purchase?
Understandably, overseas lenders have tightened their lending criteria in the wake of the global economic crisis. Now, the majority are looking at each case individually, assessing your desired location and property type, instead of simply matching you up to criteria.
This said, it is still possible to secure finance for overseas investment, should you have a substantial deposit and prove your financial acumen.
Here, we look at how lending differs by some key European countries.
Although there has been recent uncertainty in the market, Spanish lenders are still open to lending up to 65% of the property’s value. Rates presently start from as little as 3.22% for a variable deal of up to 30% LTV. This rises to 4.85% for a variable deal of up to 65% LTV.
Those looking for an interest-only deal will have to search as repayment loans are becoming the norm. Many lenders allow the option of a fixed or variable interest rate, with the maximum length of any mortgage term standing at 35 years. This however will vary on the type of loan you require.
At present, France offers the greatest range of possibilities in Europe for UK purchasers. Further still, the country also offers the best lowest available rates on the market.
Rates begin at just 2.3% for a variable deal stretched over 10 year and 3.8% for a 25 year fix. Unlike many other countries, where best rates are reserved for those with a higher deposit, both of these deals are available for mortgages of up to 80% LTV.
There are even deals for those who are able to raise a deposit of just 15%, which start at 3.15%.
Mortgage types are fairly similar to those in the UK with rates able to be fixed or variable. These deals are often offered on a capital repayment basis.
Lenders in Portugal have cut their mortgage portfolios in the last few years, with fixed-rate deals becoming rare. However, it is still possible to borrow up to 80% of the property’s overall value and rates are reasonable. These rates normally begin at 4.74% for a variable deal with a maximum LTV value of 60%. This rises to 5.89% for up to 65% LTV.
In Italy, lending to foreign nationals has been limited in the recent past. However, the Italian mortgage market is beginning to thrive again, with new lenders entering the scene. That said, purchasers are still limited to higher-value properties, with a minimum loan of €250,000.
Deals are available for mortgages with a maximum term of 25 years. Loans are on a repayment basis, with rates beginning at 3.2%, capped at 5.2% for mortgages of up to 60% LTV. These rates change to 3.4%, capped at 5.4% for up to 80% LTV.
For all countries, lenders will require additional details about your income and about your outgoings. It is vitally important then to keep your accounts in good order. In addition, most lenders will utilise the debt-to-income ratio to establish whether you are able to afford to maintain your mortgage repayments.
As with all investing overseas, if you plan to use your property as a holiday home, taking out the correct holiday home insurance is vitally important. Lenders will expect to see that you have planned ahead and that all your paperwork is in order, before permitting you to borrow any cash.