Homes away from home

The thought of organising a mortgage in the UK is enough to fill most people with dread, so you could be forgiven for thinking twice about buying a property overseas. Fortunately, finding finance on a foreign home is not as difficult as you might think - and you won't necessarily have to learn the French for "loan to value".

Can I use a British lender?

No. They only lend on properties in the UK. However, some have subsidiaries overseas: Halifax, for example, owns Banco Halifax Espania; Norwich & Peterborough Building Society has lending capabilities in Gibraltar and southern Spain; and Barclays has operations in France, Spain and Portugal.

Other UK banks, including HSBC, have relationships with overseas lenders. Alternatively, you could use a local lender. They will consider mortgages on local properties regardless of your nationality.

Are there advantages to using a British subsidiary?

"There won't be any language barriers," says Anna Guthrie, spokeswoman for Norwich & Peterborough. The building society has English-speaking staff at its Gibraltar branch, as does Banco Halifax at its nine branches across Spain.

Banco Halifax also understands the British attitude to mortgages, says their head of operations Ian Smith. He explains: "We draw upon our UK experience to offer mortgages. Spanish people have a totally different approach: their philosophy is to repay the debt as soon as possible." While some Spanish lenders restrict mortgage terms to 15 years, the Banco Halifax offers terms of five to 30 years.

If you use a British broker to arrange your mortgage the language barrier won't be a problem, even if your loan comes from an overseas lender. Firms such as Conti Financial Services and Property Finance 4 Less specialise in finding mortgages for Brits using local lenders and British subsidiaries. Conti Financial, for example, sources mortgages in 20 countries, including expat hotspots such as France, Spain and Dubai.

Does using a British subsidiary mean that I pay in pounds?

Not necessarily. Norwich & Peterborough prices its mortgages in sterling, but deals from Barclays' and Halifax's subsidiaries are repaid in euros. Making repayments in a currency other than the one you earn opens you up to a currency risk. As exchange rates alter daily, your mortgage repayment will effectively change each month. You need to consider whether you can cope with fluctuating repayments.

Does it matter where I make the application?

No. If you are still in the UK and hope to move straight into your new home, you can apply for a mortgage before you pack your bags. However, your chosen lender will ask for proof of income and there may be problems if you are not relocating with your existing employer.

"None of our lenders will help people who are going overseas to start a new job," says Simon Conn of Conti Financial. If you plan a new start, you may have to rent somewhere while you build up a track record.

In Spain, however, Banco Halifax may be able to help. If you have been offered a job and have a contract of employment it may accept this as proof of earning, otherwise you need to explain how you intend to make the repayments. For older borrowers, pension income can be taken into account.

How much can I borrow?

As in the UK, the amount you can borrow will be capped at a maximum loan to value (LTV). As a general rule overseas lenders require a large deposit - often 15-25% - but in some countries being a resident means that you can borrow more. In France, for example, residency papers can get you a loan of as much as 95-100% LTV.

While lenders in the UK tend to focus on income multiples, many of their foreign counterparts use a calculation of how much you can afford to repay. Simon Conn explains: "This is normally a percentage of your net income." In most countries, between 30-40% of your income after tax can be taken into account.

Any mortgage repayments on a property in the UK will have an impact on how much you can borrow, unless the property is being let. Where repayments on a British mortgage are completely covered by rental income from that property, the lender may ignore the outgoings. However, it will not consider rental profits as extra income.

What about remortgaging?

You could consider remortgaging your property in the UK to fund your overseas purchase. Simon Conn has helped many people to do this, including one client who was moving to Japan. She remortgaged her existing property in Japanese yen - the currency she was to be paid in - and paid for her new home outright.

If you are happy to repay your loan in sterling, you could approach one of the number of UK lenders who offer mortgages to expats. In this way, you could finance your overseas purchase with a (relatively) straightforward British remortgage deal.

And above all...

...enjoy your new house.