Can you get a mortgage for a holiday home abroad?

You can get a mortgage on an overseas property from UK or international mortgage lenders.

If you’re looking for an overseas home to enjoy your holidays in, you’ll be pleased to hear it’s simple enough to arrange an overseas mortgage.

Most of the processes and eligibility checks are the same as when buying a home in the UK, although you may face a different set of fees and charges. The way you pay your taxes will differ slightly too.

The biggest decision you’ll need to make is whether to use a UK or overseas lender.

There are plenty of UK lenders that are happy to arrange a mortgage on an overseas property, although it’s common to get a better deal using a mortgage provider from the country where you’re buying a home.

Finder survey: Would you ever consider buying a property abroad if you had the funds to do so?

Response
No49.42%
Yes49.32%
I already have a property abroad1.26%
Source: Finder survey by Censuswide of Brits, December 2023

Should I use a UK lender or an overseas lender?

If you use a UK mortgage lender to buy an overseas property, the process is likely to be less complicated. You won’t have to pay for documents to be translated and you’ll pay your mortgage in pound sterling, plus your lender will have to follow Financial Conduct Authority (FCA) regulation.

However, it’s common for overseas lenders to offer superior mortgage rates. There will be a bigger selection of overseas lenders to choose from and this extra competition drives rates down. Mortgages from international lenders tend to require a larger deposit though, plus there may be more one-off fees associated with the mortgage.

Overseas lenders don’t have to obey UK regulations either. All UK mortgage providers have to follow rules set by the FCA to ensure you’re treated fairly, plus you can appeal to the Financial Ombudsman Scheme (FOS) if you feel that hasn’t been the case. You won’t have this luxury with overseas lenders, so it’s worth shopping around for a trusted lender.

If you’re paid in pound sterling, it’s worth remembering that its strength compared to the local currency will affect the value of your overseas mortgage.

Pros

  • Overseas lenders tend to offer more-favourable mortgage rates than UK lenders.
  • You’ll gain better advice from individuals with broader knowledge of the local market and local laws.

Cons

  • You’ll usually need a larger deposit.
  • You’ll often need to pay for documents to be translated.
  • Overseas mortgage providers aren’t regulated by the FCA or part of the FOS.
  • Haggling over the mortgage rate is far more commonplace overseas. Unless you have a solid understanding of the local property market and the local language, it’s worth getting a mortgage broker to negotiate a deal for you.

Tax on overseas property

The tax you’ll pay when buying your overseas property will differ depending on the country. Always speak to a local tax expert, as there may be foreign taxes to pay.

You must declare all rental income from your overseas property every year via self-assessment. You’ll pay income tax on it at the same rate as you would in the UK. If you also pay income tax overseas, you can deduct this from your UK tax bill, so you’re not paying twice.

You won’t pay any stamp duty on overseas purchases, although the rules surrounding first-time buyers and second homes will still apply if you go on to buy a property in the UK. That means you’ll no longer qualify for the first-time buyer discount and you’ll have to pay the second-home surcharge unless the overseas property is sold.

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