Overseas Mortgages  Financial Costs

Overseas Mortgages

When purchasing a property abroad, the issue of financing becomes slightly more complicated, for further information click here...

Financial Costs

Get a Free Quote Financial Costs of an Overseas Mortgage

When it comes to obtaining overseas mortgages, there are additional costs and hurdles that must be negotiated. Although buying an overseas property is often seen as a cheap alternative to investing in the UK, this is not necessarily the case when the additional costs of buying abroad are taken into consideration. As part of any budgeting, it is vital that local issues are taken into account and worked into the overall financial plan for your project.

Interest Rate Considerations
One of the main benefits of obtaining an overseas mortgage is the favourable EU interest rates that are offered both in the EU and further afield. Bear in mind that the Libor rate in the UK, on which many mortgage providers base their interest rates, is 4.5 percent, whereas for the equivalent EU rate the Euribor is 2.13 percent and the US Libor rate is 3.53 percent.

Therefore, it is possible to see that obtaining a foreign mortgage can be more cost effective in terms of interest rates and monthly payment costs.

Overseas Mortgages for Other Reasons
Amazingly, not all investors considering an overseas mortgage are actually looking for overseas property. In fact, some of the UK high street banks now offer Euro currency loans as yet another financing option for UK investors . Banks such as Barclays, NatWest , HSBC and Halifax are now all offering Euro currency loans. With these mortgages, the interest rate is normally set at 1 percent above the Euribor rate which any investor can see is a hugely discounted rate over the normal sterling offerings. Bear in mind, however, that these favourable rates often require a higher deposit level, many in excess of 40 percent.

Other Financial Considerations
When opting for a foreign mortgage, there is another key factor that should always be borne in mind. Currency fluctuations can have a substantial effect on the value of the mortgage and on the monthly payments that are going to be made as part of the mortgage. If 1 pound sterling is currently 1.48 Euro, this means that a mortgage of 100,000 would be 148,000 in Euros. At an interest only rate of 3.13 percent, the annual mortgage payments would be 4,632.40 or 3,120. If the exchange rate changes to 1 for 1.30, then the annual payments would remain as 4,632.40 but would become 3,563, a sudden increase of 443 per year for no reason other than currency fluctuations.

Summary
Bullet Point Overseas mortgages are normally offered at a lower interest rate than the equivalent UK mortgage;
Bullet Point in fact, some UK investors will opt for a Euro mortgage purely to take advantage of the lower interest rates;
Bullet Point be mindful that other considerations, in particular currency fluctuations, can have a very real effect on the level of monthly payments

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