Posted on 1 June 2012 by Dan & Terry
I would like to purchase a property in Portugal my options are.
1. Get a Euro Mortgage in Portugal.
2. Let my current home getting a buy to let mortgage on it tin the uk and using the funds to purchase the portugal property, so my mortgage will be a buyt o let in the uk and not a duropean one.
3. sell my uk home and buy in Portugal without having to get any mortage.
Is is advised to get a mortgage in your home country currency uk sterling and use those funds to purchase outright a euro portugese property or th get a mortgage in the currency of the property you are hoping to buy?
Dan & Terry
It is possible to capital raise on your existing property by applying for a BTL mortgage and the advantage of this is that it leaves you as a cash buyer for a property abroad. The mortgage and the security it is on will both be based in the UK and the rental income will be in £ sterling and so they will be no worries about currency fluctuations. The amount you can borrow will depend on the anticipated rental income and you will be expected to have an earned income to make sure you are able to cover any rental voids. The monthly rent will need to be at least 125% of the monthly mortgage payment. The biggest problem you will face in getting a mortgage is the shortage of lenders willing to lend to someone who is then going to be living abroad.
If you are looking to raise a mortgage on the property in Europe you should be able to choose the currency it is taken out in. If you choose a Sterling mortgage secured on a property priced and sold in another currency there is a danger that the mortgage costs and debt will rise if the value of Sterling falls. Similarly, if you take a mortgage in the local currency and your income is in Sterling the same risks apply. If however your income is in, for example Euros and the mortgage and property are in Euros there is no currency risk. John Charcol do not advise on Foreign Currency Mortgages, but we have long standing contacts with specialist Mortgage brokers who do and can put you in touch with them.
I believe we can help you and that you would benefit from speaking to one of our independent mortgage advisers. Please call 0344 346 3672 and tell the consultant the date and title of your question, they will then be able to help you find the right solution for your individual circumstances..
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.