Remortgaging an overseas property: how does it work?

Thursday, 10 March 2011 10:56

Remortgaging a house is a big step when it comes to your personal finances – and if you have a holiday home or other property abroad that you wish to release equity from, there are several things to think about before you do so.

The process of remortgaging basically involves taking out a second mortgage on a property you already own in order to gain access to extra cash for whatever purpose you have in mind.

Many people remortgage their overseas properties for one of a variety of reasons. They may wish to obtain funds for another big purchase – whether this is back at home or elsewhere abroad – or for the renovation of the property they are remortgaging.

Others may seek international mortgages to either manage or repay any debts they currently have – for example, remortgaging a property abroad could help those with their main residence in the UK to secure a better mortgage deal for their primary home.

Whatever your reason for choosing to remortgage an overseas property, you'll have a number of things to consider when it comes to picking a mortgage product – and a suitable international bank.

Your bank will need to be able to offer a mortgage in the right country and in the best currency for your needs. Most banks normally do not offer second mortgages for your main residence – whether it is in the UK or abroad. Remortgages tend to apply to holiday, buy-to-let and investment properties as well as for equity release and mortgage switching.

Usually, lenders will only offer international mortgages in a limited number of countries and currencies, so it's important you make all the right decisions from the beginning.

For example, you may be able to choose to take out a second mortgage in either the currency of the country the property in question is located in or in the currency in which your main income arrives in your international accounts.

Whichever you select, you might also want to ensure you go with an international bank that leaves open the option of switching your mortgage's currency so you can cut the value of your debt.

Other factors to think about include any extra charges for insurance and valuation and whether there are penalties if your property is a buy-to-let one or if you wish to make early repayments.

As with other types of mortgage, you will also need to look at the maximum repayment term and check any age limit that might be associated with the longest terms.

Furthermore, it could be especially helpful if your international bank offers related services in the country that your property is situated in – for example, access to tax and legal advisers with the necessary local expertise can be particularly useful when it comes to remortgaging an overseas property.

Whatever bank and mortgage you opt for, it is clear that remortgaging an overseas property requires just as much thought as – if not more than – taking out a second mortgage on your main residence.

You should always make sure that you take appropriate advice and that you thoroughly research all of the options available to you before making any big decisions.



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