Buying Abroad

Buying Abroad means buying a property in another country as a second home or holiday home. There are a number of ways you can finance the purchase of a holiday home abroad. The most popular are:

Outright cash purchase: from your personal savings and or investments.

Outright cash purchase: from raising the funds from your residential home in the UK, e.g., you might have a small mortgage left on your current home. You ask your bank for a further advance. Depending on your existing lender and product, you can get the funds immediately or within two to three weeks.

Outright cash purchase: from remortgaging a BTL property in the UK, e.g., you may have a BTL property with plenty of equity and positive rental cash flow. The property value is £500,000 with an outstanding mortgage of £120,000 (24% LTV). The monthly rental is £1800. You wish to purchase a holiday home in Spain for £150,000. You remortgage your BTL and raise £150,000. Your new mortgage will be £270,000 (54% LTV). Rental income of £1800 adequately covers increased mortgage cost and meets lender’s rental criteria.

Raise the deposit for your holiday home in the UK and obtain an overseas mortgage for the balance: e.g., if you are looking to buy a holiday home in Spain, you could raise 40% of the purchase price in the UK from your existing home (by a further advance or remortgage) or from a BTL property (by a further advance or remortgage) and obtain a 60% LTV mortgage from a local Spanish Bank.

If you are looking to remortgage your home or a BTL property to buy or raise funds for the deposit, then feel free to discuss your options with an independent mortgage adviser. In addition, visit the remortgage section.

Obtaining a foreign mortgage

Foreign lenders operate on lending criteria similar to UK banks. There is no difference; if you want a foreign mortgage, it boils down to your income and overall affordability.

If you’re looking to buy a holiday home in Spain, Portugal, France, Florida, Dubai or in the Caribbean, the key metric that all foreign lenders utilise in assessing affordability for a foreign mortgage is your Debt-to-Income ratio (DTI).

DTI is the amount of debt you have in comparison to your overall income.

The Debt-to-Income ratio is expressed as a percentage, i.e., your total monthly debt divided by your gross monthly income.

For example, with a monthly mortgage cost of £1000, and a monthly car payment of £350, with gross income of £45,000 per annum or £3750 pm, your DTI = £1000 + £350 = £1350 / £3750 = 36% DTI ratio.

Lenders will look at your DTI ratio to determine whether to extend you credit. The lower your DTI ratio, the higher your chance of obtaining a foreign mortgage. The DTI ratio varies from lender to lender and from country to country; however, a DTI of below 36% is considered acceptable for the majority of lenders. A DTI ratio of 36% to 40% is satisfactory, but once your DTI ratio exceeds 50%, your foreign mortgage options diminish drastically.

Please note that when calculating your DTI ratio, the foreign lender includes the monthly mortgage cost of your foreign mortgage into the calculation.

For example: You are looking to buy a holiday home in Italy.

Your UK monthly mortgage cost is £975, monthly car payment is £325, and foreign monthly mortgage cost is £300, with gross income of £55,000 per annum / £4583 pm.

Your DTI ratio = £975 + £325 + £300 = £1600 / £4583 = 34.9% DTI ratio.

As the DTI is less than 36%, your chances of obtaining a mortgage are pretty high. Naturally, lenders like to see a low DTI ratio because it demonstrates that you’re not overburdened with debt.

Your DTI ratio and Debt Service Ratio (DSR), which is the proportion of income to service debt, are the same things.

Documents to assess eligibility for an overseas mortgage

Last six months’ payslips

Last six months’ bank statements

If self employed, last three years’ tax returns or business trading accounts

Experian/Call Credit/Equifax credit report

Full assets and liability statement

Income and Expenditure statement

Full Financial Questionnaire

If you are looking to buy a holiday home overseas, we have UK based firms that specialise in arranging overseas mortgages. They can assist you in remortgaging your assets in the UK as well as source mortgages abroad. Our panel of specialist firms can assist in arranging overseas mortgages in the following countries:

Australia

Antigua

Austria

Bahamas

Barbados

Bulgaria

Canada

Cape Verde

Caribbean

Cyprus

Germany

Greece

Holland

Hong Kong

Hungary

India

Italy

Ireland

Israel

Jamaica

Malta

Monaco

Morocco

New Zealand

Poland

Portugal

South Africa

Singapore

Spain

Switzerland

Thailand

Turkey

UAE

USA

And possibly a few more.

If your country is not on the list, then get in touch and we will soon find out if our panel of overseas mortgage specialists can assist.

Send an email with the headline, “looking to buy in (state country)” to: info@mortgageintellectual.com.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE