Non Standard Mortgages - Foreign Currency
Buying Property Abroad
The second major use - and easily the biggest - that UK
nationals have for foreign currency mortgages is for buying
property abroad.
Buying property abroad is normally easier if it can be
done without a mortgage. Most mortgage lenders will refuse
to lend on a property that is going to be let out commercially,
because of the risks involved. Letting law on the continent
is biased towards the rights of the tenant and it can be
a long, drawn out and expensive legal process to evict of
them. They may well turn a blind eye if your property is
to be occupied by friends and family, indeed some encourage
it, but you will struggle to get a loan for a buy to let
property abroad.
Assuming that you are not in a position to buy the property
outright, you must decide whether to arrange your finances
from the UK or use a local lender in the country where you
are purchasing a home.
The decision is often made easy by the difficulty that
many Brits face in getting a mortgage through a local bank.
Outside of the major towns and cities, very few of them
are really set up to deal with the needs of foreigners.
Whilst they may have the massive advantage of detailed knowledge
of the local market and all of the relevant legislation,
the language barrier can be an insurmountable stumbling
block even for those who are proficient in the local tongue.
The complicated paperwork and bureaucratic process take
specialist linguistic knowledge which would really require
a bi-lingual level of knowledge in order to properly understand
and the bank may be unwilling or unable to provide this
service for you.
British lenders arranging mortgages abroad are a little
more conservative than if you were buying here, but often
still more flexible than local lenders. A number of them
also have dedicated departments that are experienced in
overcoming the difficulties that British nationals face
when buying property abroad.
In terms of product technicalities, the maximum LTV is
generally from 65 percent to 80 percent, while the term
is commonly a little shorter than in this country, sometimes
as brief as 15 years. The interest rate that you pay is
normally a fixed percentage above what is known the LIBOR
rate (the London Inter-Bank Offered Rate). Most lenders
that offer foreign currency mortgages will charge you between
one and two percent above the LIBOR rate.
