A Quick Gide to Getting an Overseas Mortgage

Find out how to finance a real estate purchase abroad, from taking out a mortgage abroad to remortgaging a property in the UK to free funds.

What is a “foreign” mortgage?

A mortgage abroad is a mortgage for a home that is not in the UK. You consider taking out a mortgage abroad if you are buying a vacation home, retiring to sunnier climates or – a growing trend – buying your first home abroad because you cannot afford to buy in the United Kingdom. You can organise a mortgage abroad through a UK bank or an international lender. It is also common to raise money to buy a home abroad directly by reclaiming your home in the UK. Here we explain the pros and cons of each option.

Re-mortgaging your home in the UK to purchase a property abroad

Re-mortgaging your home in the UK can help you raise the money to directly buy a home abroad. If this is a wise option for you, it will depend on your personal circumstances – including the amount of your current mortgage that you have paid and your existing creditworthiness – as well as factors such as interest at the time you apply.

Borrowing from a British bank to purchase property abroad

Some of the major UK banks have an international mortgage service, but you will need to know in which countries they work. Banks tend to only purchase mortgages in countries where they have offices. While getting a mortgage in real estate markets located abroad such as France or Spain can be easy, it can be more complicated if you look further. Although the mortgage can be established through the UK bank, you would deal with the foreign branch of the bank once the mortgage was established. You can read more about getting a mortgage in Spain at Valuvillas.com.

Organising a mortgage abroad

It is possible to coordinate a mortgage with a foreign lender with the help of a specialized broker. These brokers can provide you with personalized information, including a list of brokers or lawyers to use in the chosen country. Mortgage rates are much lower in some parts of Europe than in the UK, especially in well-known real estate markets with a wide array of mortgage lenders, so you could get a better deal by borrowing overseas. However, foreign mortgage brokers are not covered by the Financial Conduct Authority, so you might have trouble getting a fee if you gave bad advice. You must also take into account the consequences of borrowing in a foreign currency. If you do that, currency fluctuations will impinge on your repayments.

Deposits in foreign property

The deposit required for a mortgage abroad tends to be greater than you would need for a typical UK mortgage. In Spain, it is commonplace for foreign buyers to pay between 30% and 40% of the price of the house as a down payment. In some countries, the deposit is not refunded, so do not deliver without money for the negotiation of a first contract, and then only to a lawyer or broker.

Loans for Consolidating Debts

Taking actions before your debts become a serious issue is an essential part of debt management. Often, people think that there is no solution to their debts, and they ignore them instead. However, this can lead to further problems in the long-term. Fortunately, there are options available to help you cope with your debt. One option that is available is debt consolidation. The following is some important information about how debt consolidation works and how it can impact on future credit applications.

What is Debt Consolidation?

Some people have several different types of debts, such as loans, an overdraft, and borrowing on credit cards. Debt consolidation involves taking out one loan to repay all your existing loans. This means you make one monthly repayment instead of several, which many people find easier to manage and keep track of their debts.

What Are the Pros and Cons of Consolidating Your Debts?

To decide whether debt consolidation is right for you, it is important to consider all the pros and cons of this decision. The main reason that many people choose to consolidate their debts is so that their monthly debt repayments are reduced. The other major reason is that managing and tracking one debt repayment is so much easier and less stressful.

However, not all debt consolidation repayments are less than the total repayments for several debts. Therefore, it is important that you add the repayments of your existing loans to check the repayment of a consolidated loan is lower. If not, it is possibly not worth you considering debt consolidation.

Another reason debt consolidation is an option worth considering for some people is the lower interest rates. It is important to note that lower interest rates are not always available for everyone as several factors are considered, such as your creditworthiness. Also, although lower interest rates can lower repayments, there are other factors involved in the cost of repayments.

The repayment period is also a significant consideration. Even if the monthly repayments are lower, you will ultimately pay more if the repayment period is longer. Any fees can also impact on the monthly repayments and the total you will repay. It is vital to check if there are any upfront or hidden fees attached. If there are, the loan is potentially more expensive than you had expected.

There are different types of debt consolidation loans available, one of which is a form of secured loan. This means that the lender uses your assets as a form of security against your debt. If you own your own home, it is usually your house that is the asset used as security. If you fail to make your loan repayments, it is possible that your home could get repossessed. Those who intend to take out this type of debt consolidation loan should get expert advice before proceeding.

The Alternatives to Debt Consolidation

Debt consolidation is not the best option for everyone and its possible that some people do not qualify for a consolidated loan if they have a poor credit history. Likewise, taking out another loan to pay off debt is not always advisable as it can encourage more borrowing. However, there are other options available.

A Debt Management Plan is one alternative that is suitable for some people. This is an agreement between lenders and borrowers regarding how debts are repaid. A third party usually arranges this, and it may involve a handling or set-up fee. There are some third-party agencies that do this for free. This is an option that can help people with short-term difficulties meeting their repayments.

Insolvency procedures, such as Individual Voluntary Arrangements and Debt Relief Orders, are an alternative that is sometimes suitable for people with more serious debt issues. These are formal procedures that can stop creditors from taking legal action for a set period.

An important point to note is that consolidated loans leave a footprint on your credit report called a credit search. Taking out different loans in a short period is an indicator to lenders that you rely on credit, and this can negatively impact on the likelihood of you getting credit in the future.

QROPS Freedom of information Budget Uncovers Significant Fall in Pension Transfer Charges

In the financial year 2018/2019, the Freedom of information request revealed 24 overseas transfer charges that were paid to HMRC. The total amounted to £760,846. On a comparison of these figures to the financial year before it, there was a decrease in 20% for the transfers. There was also a 46% decrease in revenue. It also revealed that there were 0.5 less QROP transfers.

The above statistics indicate the HMRC pension schemes used by expats moving abroad when transferring their pension from the UK. QROPS in full is the Qualifying Recognised Overseas Pension Schemes. The above release was to show the impact of overseas transfer charges that are applied to the above schemes.

The charge in the 2018/2019 financial year saw the charge levied on 24 transfers that cost £760,846 in tax. This was back in March 2017 when the budget was introduced. It was a reduction compared to previous years. For instance, during the last year, there were 30 transfers which attracted a tax of £1.4 million. This amount was below the government’s expectation.

The QROPS transfer charges only apply for non-residents, if you happen to be a member of the country that you are moving, you won’t be liable for any payments. Please be informed that QROPS is established in a particular European Economic Area (EEA).

What Andrew Tully, the Technical Director at Canada Life had to Say about These Transfer Charges

According to Tully, he said that the QROPS charge had done a commendable job at reducing the movement of pensions outside the UK other than the specified EEA. It has also reduced the number of QROPS transactions by improving the flexibility of how individuals can access their pensions in the UK.

He also observed that the number of pension transfers attracting charges is minimal compared to the number of QROPS. This leads to the raising of a low amount of tax. Nonetheless, the closure of this tax loophole has greatly helped the government prevent another tax leak.

The QROPS Transfer Charge Explained

In March 2017, there was an introduction of a 25% tax charge by the Budget, which was under the chancellor Philip Hammond. The reason for this introduction was to curb the rates at which people were moving their pensions from the UK to other areas. At that moment, the government expected to raise at least £65 million from this move in the current financial year 2017/2018. The stipulated tax charges were specified only for QROP for people living outside the EEA.

The only time when the HMRC observed the highest number of pension transfers was in 2014/2015. This year alone had 20,100 transfers, which attracted a value of £1.76 billion. Thanks to the above regulation, this number has gone down over the years. And in 2018/2019, there were 5,000 transfers which were worth £640 million

If you are a UK resident and are considering a move to another country and wish to move your pensions. You need to consider QROPS. Not unless you are moving within one of the countries in an EEA, your pension might have to be taxed. There are also some scenarios when you might qualify for a waiver. Getting in touch with a financial expert can help clarify what you can do with your pension.