If you are purchasing a property abroad and require a mortgage, there are several aspects that need to be considered.
There are many advantages in employing the services of an independent bank, rather than one that is connected to a developer or agent, as they will check the legalities and carry out the valuation of the property, although they will not carry out a full in-depth survey unless requested.
A lender will also make sure the property is a good security for the mortgage that you require and that it is has not been overpriced. When applying for a mortgage abroad there are many different underlying rules you may come up against:
Lenders check their calculation of how much an applicant can afford by only taking into account 30-35% of their total net personal income (after tax) in order to cover any existing liabilities plus the cost of the new monthly mortgage repayments. Liabilities include existing mortgages, bank and car loans, school fees, maintenance allowance payments and credit card balances, which need to be cleared, even if they are 0% interest deal.
Net income is normally calculated from employed, pension or sometimes investment income. In most instances, rental income on the new property will not be considered as part of the calculation. If an applicant has existing rentals, lenders may not take that income into account. However, if that rental income is from multiple properties and separate audited accounts are available, the net profit from that source may be considered. They are then likely to request a tax return to validate this additional income.
A lower LTV or a higher deposit will not affect the maximum amount you can borrow, it is down to affordability, but you may benefit with enhanced lending terms like lower interest rates, reduced setting up costs etc. If you are employed, it is ideal if you have been employed in that current job for at least 6-12 months. If it is shorter, a lender will need to know of any remaining probationary period, and you are likely to be asked for your latest CV showing your job experience/history.
If there is a bonus, overtime or commission to be included, it is only likely to be included if it is guaranteed, or proof of a long-term track record is available. If you are self-employed, you will ideally have at least three years trading history with a minimum of two years profitable accounts (confirming both gross turnover and net profit for those years). There must be a full explanation for any voids turnover/profit and any losses incurred.
If an applicant has more than 20-25% shareholding, then they are normally deemed by a potential lender to be self-employed. If the self-employed applicant is based outside of the UK, their accounts must be prepared by a recognised international firm of accountants to be accepted by a lender.
However, if a loan or other expense is paid for by a business, then any of these costs may not affect a personal mortgage application. In this case, you must show at least 3-6 months history of the business account paying these expenses, but if you have any defaults, missed payments or CCJs, you are not likely to be accepted.
The maximum age a mortgage can finish differs from country to country, However, most of lenders will ask for any proof of income to be received after the normal state retirement age.
Please note, that by applying for a mortgage, it could slow down the sales process and it could be beneficial to apply for an “Agreement in Principle (AIP)” before finding a property, should the lender offer this option. With an AIP in place, it could be advantageous when negotiating with a seller. There may also be additional bank, local taxes and legal costs applicable to the cost of raising a mortgage.