Financing the purchase of an overseas property, whether for investment or as a second/holiday home, has become considerably easier over the last few years.

Many banks and financial institutions have expanded their sphere of operation from domestic mortgage products to varying offshore options, even opening branches in emerging market countries bringing greater competition to the market place and thus increasing the flexibility and widening the choices open to the property purchaser.

With most property sales in emerging markets coming from an off plan scenario, the option of a deposit (usually 20-40%) with a mortgage granted for the balance on completion has been the main trend, with many banks offering competetive interest rates comparing favourably to the buyers domestic rate.

Alternatively a second mortgage arranged against the buyers principal residence, subject to sufficient equity holding is sometimes more suitable where the purchaser has a good relationship with their own bank, and /or may not wish to have the vagaries of currency exchange rates to contend with. In fact this equity release option has proven to be widely used due to large amounts of equity built up during the rapid rise of property values, particularly in the U.K. and Ireland over the past decades.

Many property investors, whilst able to purchase outright, will often use a mortgage faclility if a rate lower than they potentially can earn from traditional sources is available or negotiable with the lenders, however this will depend on the particular strategy of that investor, be it buy to sell or buy to let, and forecast growth projection periods.

The recent shift in established markets such as Spain, towards resale/ second hand property , which banks will lend  from 50% to 70% of the valuation, not the asking/purchase price, has prompted the property buyer to combine the equity release method with a foreign mortgage, especially in Euros as the lending rate has been consistently lower than UK rates, however the possibility of currency exchange rate fluctuation should always be taken into account.

Our advice is to consider your borrowing requirements and what you can comfortably afford to repay, without relying on any additional income from the potential rental of the property. Factor in  the costs of owning that property, rates, electicity etc and set yourself a realistic budget, then shop around the lenders for the best deal for you. Once you have a firm offer that suits your requirements and you know what you can spend, go house hunting with a reputable international agency, who can suggest suitable properties within your budget!!!