Which currency should my overseas mortgage be in?
There is no simple 'yes' or 'no', especially in these relatively volatile exchange rate conditions. There are considerable differences between markets so take independent advice from Somerset Mortgages as to the mortgages available and terms and conditions.
Generally, you should match the currency of the asset and liability: there are tax benefits, plus you are less likely to end up owing more on the property than it is worth.
If you intend to let the property this strengthens the case for the loan to match the currency. You may also avoid being hit by exchange rate fluctuations. Somerset FX can help you fix your monthly repayments from one currency to another, to avoid fluctuations in the exchange rates
Can I get a self-certification or buy-to-let mortgage when buying abroad?
Neither self-certification nor buy-to-let have ever been a feature of international lending with the exception of the US. Overseas banks have always based lending on affordability and borrowers must demonstrate they can easily meet the repayment of the loan in addition to their current borrowing and debt.All loans are full status with a requirement for full supporting documents proving income and outgoings.
How much can I borrow?
In most countries lenders calculate financial commitments (loans and rent) including the requested mortgage, as a percentage of stable pre-tax income. As a general rule the ratio should not exceed one third, but obviously this depends on the figures involved as the higher the income the higher the debt ratio can be. In fact, most lenders try to apply their rules with common sense and look at the actual amount of disposable income, not just the percentage.
As for loan-to-value, the usual maximum for non-resident buyers is 70% with some specialised lenders going up to 85%. Residents can usually borrow more.
What is the difference between the purchase price and valuation?
Lenders will carry out a valuation for their own purposes and depending on where you're buying, you may or may not receive a copy of this. So if you intend to carry out substantial work, or for any significant investment, consider instructing your own independent survey. If you have agreed a reduced purchase price, the lender will base its loan-to-value on the lower of the valuation or the declared purchase price in the contract.
What taxes will I have to pay when buying abroad?
There are differences between countries and their tax systems but generally you can expect to pay local taxes on an annual basis (Council tax equivalent). In addition you may be required to submit an annual tax return, especially if you are letting the property or have set up a company to buy the property. Consulting an expert in both the UK and the tax system of the country you intend to buy in is advisable and could save you significant money in the long run.
How should I structure the ownership of my overseas property?
Somerset Mortgages is able to arrange mortgages for the majority of ownership structures and offshore vehicles. But this depends on your financial situation and may have an impact on the number of lenders who will consider your application.
In some cases there may be legal considerations which determine that buying in the name of a company may be preferable to buying in your own name. Ask your Somerset Mortgages consultant what lending options this will leave you with. It is important to take advantage of any potential tax advantages and seek good advice.
How do I pay my mortgage?
The monthly payments of your mortgage will be debited from an account in the same country as the bank that you have the mortgage with. In addition to your mortgage payments, you may have other costs such as utility bills or taxes. Somerset Mortgages can help you arrange a bank account.
To make your life easier, Somerset FX will transfer funds to your overseas bank account at preferential rates. This service is free of charge (no commission or transfer fees) and represents an average saving of €25 a month (the cost of an international transfer varies from €15 to €s39 depending on your UK bank).
It will enable you to transfer every month a sum of money from any bank account. For example, a sum could be debited from a sterling account in the UK, converted into euros at a highly competitive exchange rate and transferred to your bank account in France.
When setting up this service, three options will be open to you:
- Option 1: Fix both the sterling amount to be debited and the euro amount to be received in France
- Option 2: Fix the sterling amount that you send, with euros purchased monthly at the prevailing exchange rate
- Option 3: Fix the euro amount that you receive in France with the equivalent sterling amount determined each month at the prevailing exchange rate.
Should you require any information on foreign exchange transactions and the conditions applicable thereto, please contact your mortgage adviser.
At what stage should I speak to a broker?
As soon as you start thinking about buying your first home or around six months before you are due to re mortgage. If you buying your first home, Somerset Mortgages will help establish how much you can borrow so you don't waste time looking at properties you can't afford. In this climate, where it is more difficult to get a mortgage, vendors will also take you more seriously if you have already contacted a lender to get a 'decision in principle'. If you are re mortgaging, you should leave plenty of time because rates are volatile so it may be worth securing one several months before you need it.
Why can't I go direct to my bank for a mortgage?
You could but there is no guarantee that you will get the right deal for your circumstances. Having a 'relationship' with the bank already will not influence the rate you get, or the service you receive. The advantage of using an independent mortgage broker such as Somerset Mortgages is that we have access to a wide range of deals, from many banks. As we are independent, we can also advise you on the best deal for your circumstances As well as help with the application and chase the lender to ensure the mortgage is processing within your specified timeframe. If you go direct to the lender, you are subject to service levels which can be extremely poor and restricted to only banks products.