Liz Syms offers some key insights on overseas mortgages.
- What type of borrower is likely to want an overseas mortgage? These borrowers have previously been either people wanting to retire to the sun or families moving abroad, but in the past few years this has changed. A growing number of first-time buyers want to get on the property ladder but find the UK too expensive so hope to buy abroad instead. Typically you get a lot more house for your money abroad, but not necessarily the same capital uplift.
- Which countries are most popular? France, Spain, Italy and Portugal in Europe, and then the US and Turkey.
- How do overseas mortgages differ from those for the UK? You can’t use a UK bank for overseas mortgages as no banks operate across borders. Properties abroad are typically much less expensive, unless in prime tourist spots. Most foreign banks require a property to be worth a minimum amount so it can be resold if it needs to be repossessed. LTVs are typically a little lower, usually around 70 per cent, although Turkey will go to 75 per cent and France to 85 per cent. All mortgages are on a repayment basis. Some overseas banks lend well into retirement. Many, however, especially in the US, are a lot quicker to repossess than would happen in the UK.
- What are typical interest rates? Rates in Europe are similar to the UK, usually 2.5 per cent to 4.5 per cent; in the US they are much higher, typically 6 per cent, whereas in Turkey they are 6.5 per cent for a sterling mortgage and double figures for a Turkish currency mortgage.
- How does a UK broker find a suitable overseas mortgage? It can be very challenging for brokers. Most countries require them to be registered with national banks, and foreign banks usually pay commission only if the broker has a bank account in that country. Most brokers achieve a better client outcome by using a master broker who handles mortgages in that country already and pays them a referral fee.
Liz Syms is chief executive at Connect for Intermediaries