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All You Need To Know About Expat Mortgages

Setting up a home in another country is a great opportunity to transform your way of life – but knowing where you can afford to rent and how mortgages work if you want to buy abroad is another story.

There are significant variances in factors like assessing affordability and average property prices.

This guide runs through some popular expat destinations to explain how buying a home works and what to expect when applying for a mortgage.

Expat Life: To Buy or Rent?

One of the big decisions is whether to purchase a long-term residence or rent somewhere to stay.

A lot may depend on your finances, whether you’ve chosen a location where you wish to live permanently or have accommodation allowances included as a perk if you’re moving for work.

Rental markets dominate some countries, and in others, almost everyone owns their homes, so it’s worth researching your prospective destination to get an idea of how it all works.

As a comparison:

  • Switzerland and Germany are rental markets, with 68 per cent and 64 per cent of people respectively living in homes as tenants.
  • France and the UK are split quite evenly. Around 47 per cent of French residents rent, and 56 per cent of households in Britain own their home.
  • Further afield, the stats change, with homeownership reaching 54 per cent in Canada, 61 per cent in Japan and 58 per cent in the United States.

If you move to Italy, it may be hard to find rented housing outside of short-term holiday lets since 71 per cent of people own a property, rising to 83 per cent of residents living in China.

You can review these figures in the latest Statista report, updated in March 2021.

Mortgages for Expats by Country

Next, we’ll look through a few high-demand locations to explain how mortgages work and where they differ from the UK system.

Expat Mortgages in Canada

Most Canadian mortgages work on a fixed-term rate, similar to Britain’s, but the terms vary.

A UK mortgage will typically run for up to 25 years (although you can remortgage after the end of a fixed-term period).

In Canada, the average property mortgage is agreed for just five years. However, the maximum term is ten years, so everyone renegotiates or switches to another product after that.

The good news is that interest rates are comparably low, currently available from around 1.3 per cent for a five-year variable mortgage in Ontario to 2.54 per cent for a fixed-rate product in British Columbia, per Rates Dot CA.

Expat Mortgages in the United States

Mortgages in the US rely heavily on debt to income calculations, working out if a lender believes you can afford to keep up with mortgage repayments and your overall debt levels.

You cannot get a mortgage if your debts add up to more than 50 per cent of your gross monthly earnings, and you can expect to undergo a detailed analysis of your finances.

Lenders offer up to 75 per cent of the property value, and most mortgages are repaid through a repayment product, with an element of capital and interest paid each month.

Maximum loan terms can stretch up to 30 years, but rates and property values vary significantly between states and cities.

Expat Mortgages in France

Affordability assessments in France usually allow you to borrow a maximum of five times your income – including both parties if you’re applying for a joint mortgage.

Eligibility factors vary between lenders but can be fairly strict:

  • If you go for an interest-only mortgage, you can borrow up to ten times your annual earnings. but you need to demonstrate you have net assets, aside from the property, worth at least as much as the value of your mortgage borrowing.
  • Debt to income checks (which assess other debts or obligations) are also rigorous, and you may be refused if your existing liabilities are over one-third of your monthly gross income.

One difference is that education fees are excluded, which is important for expats enrolling kids in private schools – mortgage lenders will ignore those outgoings when working out whether to approve your application.

Expat Mortgages in Germany

German banks rely on a Shufa report, equivalent to a credit report, to evaluate your finances and determine eligibility for a mortgage.

Most people go for fixed-interest products and agree on an interest rate that applies for the whole term, normally between one and ten per cent of the value of the property.

Another option is to make payments, up to ten per cent of the total borrowing, on a principle only basis, without making any interest payments.

Buy-to-let expats investing in a rental property almost always use interest-only mortgages, as in the UK, using the rent to cover the interest and either refinancing or selling at the term-end.

Note that if you are a resident in Germany, you can deduct mortgage interest paid on a rental asset from the income tax you pay.

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Expat Mortgages in Singapore

Most banks in Singapore offer a range of variable and fixed-rate mortgages and will lend up to 60 or 80 per cent (Loan to Value) of the property valuation or purchase price, whichever value is the lower.

The balance is paid as a deposit, and mortgage lenders will evaluate your overall debts before they lend.

Lending rules mean that your total debts cannot exceed 60 per cent of your income if you earn a salary or 70 per cent if you are self-employed or work on commission.

The housing market in Singapore is expensive, so although mortgage interest rates pegged to variable rates are usually preferable, around 80 per cent of residents live in subsidised apartment blocks or government-built residences.

Find out more about the Singapore Government Policies relating to housing allowances online – including contributions to help lower-income families purchase a home if they earn under $2,250 a month (about £1,260).

Expat Mortgages in the United Arab Emirates

The UAE is an incredibly popular destination due to business opportunities attracting professional expats.

Most foreign national applicants will need to:

  • Put down a deposit of at least 25 per cent of the property value if the home is worth up to five million AED (£1.04 million).
  • Make a down payment of 35 per cent on more expensive properties.
  • Borrow up to a cap based on your total projected income over the next seven years.

The rules vary between locations, but you cannot take out a mortgage that costs more than half of your monthly income in Dubai.

All You Need To Know About Expat Mortgages FAQ

Is it better to buy a home or rent as an expat?

It depends whether you’re planning to put down roots and stay in the same place long term or are open to exploring other countries.

In locations with a high influx of career expats, it’s common for employers to offer residential compounds with purpose-built housing for their international staff.

Renting can be cheaper and more flexible if you’re likely to move but may also be less cost-effective over time.

The best approach is to think carefully about your plans, research average rent and property prices, and check any mortgage conditions before you apply.

Is it worth buying a property in a different country?

Applying for a mortgage in another country may be advantageous if you plan to live there permanently.

You’ll find that interest rates and house prices can be very affordable in some locations compared to the UK.

If you’re unfamiliar with the area, it’s wise to scout it out beforehand, shortlist the places you’d like to live and consider security, value, transport links and amenities.

Where is the cheapest place to buy a house as an expat?

Every country will have expensive capital cities, high-value tourism areas, less expensive towns, and perhaps rural regions.

The cheapest country to buy a home is usually Spain (with the caveats above), followed by Italy, Romania, Ireland and Denmark.

Can I buy land to build my own home overseas?

Most countries have rules about property or land purchases, and you may discover that the terms of your visa place restrictions on where you can buy and to what value.

There are some initiatives where you can purchase land or property and qualify for residency if you invest over a minimum threshold.

How easy is it to get an expat mortgage outside of the UK?

You can sometimes take out a mortgage with a UK bank to finance an overseas purchase but should be mindful of currency exchange rates.

Several banks (such as HSBC, CitiGroup and CapitalOne) have branches in multiple destinations. They may be easier to apply through since they can access details such as your credit record easier than a domestic lender.

Be sure to seek professional advice before making any big decisions, as some lenders will charge higher interest rates and fees to foreign nationals.

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