Investment Mortgages for Overseas Property
For many investors, the returns are perceived to be much greater by investing in up and coming countries abroad than they are by investing in the UK. House prices in the UK are arguably at an all time high, which for some investors is off-putting as they feel that a crash or at least a slight decline in prices is likely, in the near future.
Even those without fears for the stability of the UK housing market are often tempted to look at investing in overseas countries that offer a different set of parameters from UK investments. For example, Eastern Europe is currently seen as an area that is full of opportunity for investors, with low priced property offering good rental returns and excellent potential for future capital growth.
Bearing this in mind, obtaining investment mortgages specifically to invest abroad is no longer a new concept and is becoming an increasingly popular option for investors both new and old.
Investment Mortgage Options for Overseas Property
Broadly speaking, there are three options available for an investor looking to secure finance for an overseas property:
re-mortgaging a UK property to release the required capital;
obtaining an investment mortgage in the UK for the overseas property;
obtaining an investment mortgage in the country in which the property is situated.
Option one is simply an equity release scheme, whereby any equity that has built up in a UK property is released to allow the overseas property to be purchased for cash.
The second option is becoming increasingly available and is often seen as the preferred option by investors. Obtaining the required mortgage, in the UK, is a lot easier for many investors as they are resident in the UK and can, therefore, better manage the process. There is also an added sense of security as investors understand both the language and the formalities involved. However, there are limits to the countries that are covered by these types of mortgages. For a mortgage lender, it is important that they can take possession of the property if the borrower were to default on their payments. For this reason, many lenders will not forward financing for properties outside the EU and are very restricted even within the EU.
Obtaining a foreign investment mortgage is an alternative option for overseas investors, but caution is required. Remember, every country has its own rules when it comes to mortgages. Therefore, local independent advice and accurate translations of documents are essential extra costs that must be included in budget calculations.
Overseas financing is much more readily available than it was 10 years ago;
despite this, there are limits to the countries that UK lenders will be prepared to consider; and
local mortgages can be fraught with difficulties and require additional local legal advice.