Ten top tips for getting an overseas mortgage
1. Get finance pre-approved. If you intend to borrow money to help you buy a property make sure you get the finance pre-approved before you commit to the purchase. If you pay a holding deposit to a property agent it is very unlikely you will get this money back if you are unable to raise the finance, so it is important you understand how much you can borrow and on what terms as early as possible. Knowing how much you can borrow before looking at properties will also help you understand exactly what you can afford and you can tailor your property search accordingly, saving you both time and effort.
2. Use a specialist independent mortgage broker. There are various ways you may be able to raise the finance you need in order buy a property. Using a independent mortgage service which specialises in both foreign and domestic property finance, may give you a wider spectrum of options that will enable you to keep the costs of finance down. Raising equity from your UK home or securing finance from a bank in the same country as the property are all options which should be considered. An independent mortgage specialist can help you understand all these options and help you to make an informed decision on which option is right for you.
3. Choose a mortgage that matches your requirements. Although it makes sense to use a mortgage provider that offers the cheapest product in terms of interest rate and mortgage fees, you should also consider other benefits that may be important to you. Variable rate mortgages are usually cheaper than those offered on a fixed rate, however fixed rate deals do give you the added comfort of knowing exactly what your mortgage payments will be every month, which is particularly useful if you are working within a budget.
If you are looking to buy a property as investment or intending to sell it within a few years you should also understand if any early repayment charges apply as these can be as much as 6% of the loan amount. Having a mortgage on a interest only basis instead of repayment may also help reduce your monthly costs, but this option should only be considered if you know exactly how you intend to repay the mortgage, as you will not be repaying any of your outstanding loan balance through your monthly mortgage payments. Another thing to consider is the standard of service offered by the mortgage provider, which is particularly important if you have a time commitment when buying a property. Using a mortgage provider with a good track record can mean you get a mortgage offer within weeks not months.
4. Be prepared to visit the bank. Some mortgage providers will insist that you visit them in person in order to sign the mortgage offer. This is of particular importance if you are buying a property located a great distance from where you live. Sometimes mortgage providers do have branches based within the UK meaning this process can be carried out closer to home.
5. Remember mortgage repayments are not always in pounds. Sometimes a range of currency choices are made available by international mortgage lenders when it comes to repaying a mortgage. Typically however property finance is expected to be repaid in the currency typically associated with that country, so for example in France the mortgage provider would expect your monthly repayments to be made in Euros. A currency specialist service may prove cheaper than your high street bank and therefore should be considered to avoid paying unnecessary fees.
6. Seek independent legal advice. An independent lawyer or solicitor means that they represent you and only you and have no interest in helping the agent sell their property. Impartial advice is important to ensure there is no conflict in interest ,which can occur if the legal representation acts for both the seller and the buyer.
Issues such as nearby upcoming developments or properties built illegally on land registered as agricultural (Spain is a good example of this) should be picked up by the lawyer early on to help prevent you from buying a “problem property”. Although a mortgage provider will carry out a basic property valuation as part of their process this is for their purposes and not yours, it is therefore important you do your own research.
7. Translate everything to English. Buying a property abroad can be a big financial commitment, it is therefore of up most importance that you understand every document and contract before signing them. Most mortgage providers will draw up a mortgage offer in the language associated to where you are buying and you should therefore get it professionally translated in to clear and simple terms that you understand.
8. Be mindful of currency fluctuations. Exchange rates can drastically effect the value of your property and should be considered not only when you look to buy a property but also when you look to sell it. A 5 to 10 percent drop in value of sterling against the currency where the property is located may push the property out of your price range or cause you to rethink the timing of when you choose to buy or sell. Currency rates are constantly changing and the advice from a specialist can help you understand what way the market is expected to move and secure a good exchange rate.
9. Buy to let finance is assessed differently. If you are looking to buy an overseas property as an investment with the intention of letting it out. An international mortgage provider will lend to you based on your disposal income and will not account for any monies you may earn by letting out the property, which is different to how mortgage providers assess applicants in the UK. Typically mortgage lenders abroad will expect you to have at least 35 – 45 percent disposable income left after your current credit commitments and new mortgage for your overseas property have been taken into account.
10. Be prepared not to refinance. Although many international lenders are happy to fund property purchases to foreigners a number of them do not offer remortgage or equity release options. It is therefore important that you are comfortable with any property finance terms you secure at the outset and that you do not stretch yourself financially. A common mistake made by investors is to buy a property outright using their own money with the intention of taking out mortgage finance at a later date, only to find that such an option is not available at that time.
Current international mortgage options – source Connect Overseas 20/11/2013