Mortgage Problems

There can be all sorts of different reasons why you may take out a mortgage when buying a property abroad. Your funds could be tied up in another venture and taking out a mortgage may allow you to buy now rather than later.

Unfortunately, many people who take out mortgages in order to buy property abroad may later experience problems making the required repayments to the lending bank.

This may be because your personal circumstances have changed; for example, the loss of a job or a reliance on rental income which never materialized are common reasons overseas property owners become unable to maintain their mortgage.

Alternately, you may have been given bad advice about investing in overseas property, or in relation to which currency your mortgage should be taken in. In extreme cases, fluctuations in exchange rates can cause property owners to owe more to the bank than they originally borrowed. This is particularly relevant to Cyprus and loans taken out in the Swiss Franc denomination.

Our specialist overseas property law team provide advice in relation to all kinds of mortgage problems which can arise when you buy property abroad. Whether you’re facing problems with mortgage arrears and repossession, you’re being pursued for overseas mortgage debt in the UK, or you want to make a financial mis selling claim, we can provide practical advice on your options and the best way to proceed.

For further information about mortgage problems abroad, get in touch with a member of our team by giving us a call today.

How to get an overseas mortgage

There are two ways you can get a mortgage to finance your overseas property purchase – using a UK lender or using a lender in the country you are buying.

There’s a number of positives to using a UK bank to finance your overseas property purchase. For example:

  • There is no risk of important legal information being lost in translation as the documents are all written in English
  • Obtaining UK finance is relatively easier due to your domestic credit record
  • You’ll have the protection of UK financial regulations if you need to make a complaint or claim against your lender
  • Your monthly payments will be in the same currency as your income and therefore not subject to currency fluctuations.

The disadvantaged of using a UK bank include:

  • The property value is in a different economy to that which you borrowed in and therefore the house value will work independently of the interest rates, exchange rates and the economy where you borrowed
  • Your main home will be at risk if you can’t maintain the repayments rather than your holiday home (assuming that you aren’t moving abroad)
  • Tis option is not available if you are selling your property in the UK and moving abroad

The other option is to obtain a mortgage from an overseas bank. The advantages of using an overseas bank include:

  • Local mortgage lenders may offer cheaper rates
  • Financing your purchase in foreign currency could be a financially better decision, depending of the relative strength of the pound
  • Local mortgage lenders will have more expertise in the market
  • The mortgage will be in the same economy as the property and therefore interest rates and property prices are likely to move in the same direction.
  • You are keeping your main home in the UK as free from mortgages as possible

The disadvantaged of using an overseas bank include:

Exchange rate problems

Without specialist advice, it’s easy to make mistakes in the complex area of exchange rates and currency transfer. If you’re making mortgage repayments and the exchange rate fluctuates even slightly, this could affect your ability to maintain the mortgage.

Important things to consider when taking out a mortgage to purchase an overseas property include:

  • Going to your normal bank to transfer currency is likely to be expensive due to mark-ups and fees.
  • Don’t be duped by upfront fees – although many banks advertise 0% commission to send money overseas, this may not make their rates better than other lenders. The actual exchange rate is the main thing to focus on.
  • Check if you can lock in an exchange rate for a period of time so you won’t lose money if the pound gets weaker.

Negative equity

If you’re struggling to pay your mortgage abroad, you may want to sell in order to pay off the remaining debt. However, what happens where the property has fallen into negative equity?

Negative equity means where the value of the property has fallen below the amount still outstanding on the mortgage. Where this is the case, it may be possible to negotiate with the mortgage lender to allow you to sell, for example, by settling the debt for a lower figure, temporarily renting the property out, or exploring other options for financing the shortfall.

We can talk you through your options as well as consider whether there is any legal action you can take, for example, if you’ve been mis sold the mortgage.

Mortgage repossession

If you’re facing repossession abroad, stepping away from the issue may be more complicated than failing to engage and simply handing the keys back to your bank. As well as arrears on the mortgage account, you are likely to incur hefty late fees and legal costs when the bank takes steps to repossess the property. The bank may also continue to pursue you for any outstanding debt, particularly if the property is in negative equity.

By engaging with your bank, you’re much more likely to achieve a positive outcome. For example, in Spain, it may be possible to come to a “Dación en pago” agreement whereby you can hand the property back to the bank as full and final settlement of the mortgage you still owe.

Mortgage shortfalls

“Running away” from mortgage problems abroad is never an option that is recommended. Many people who move back to the UK with the expectation that their bank cannot follow them often find themselves facing legal action in the UK for their overseas mortgage.

If your bank can successfully prove to a UK court that the debt exists, they may be able to get a charging order over any property you own in the UK and could even force you to sell to repay your overseas mortgage. This situation will not change after Brexit, even if there is “No deal”.

Why choose Judicare for advice about overseas mortgage problems?

If you’re facing problems with your mortgage abroad, our specialist overseas property law team can help you explore your options, including negotiating settlements or variations to the mortgage with your lender, taking steps to sell or rent out the property, and considering whether taking legal action (such as a mis selling or professional negligence claim) is viable.

At Judicare, we are dedicated to providing bespoke overseas property law advice and representation to clients across the globe. Below are just some of the reasons our clients instruct us:

  • Our legal team understand UK law and have in-depth knowledge of the law in a number of countries overseas
  • We’re regulated by the Solicitors Regulation Authority (SRA) and have extensive Indemnity Insurance giving you vital protections and redress in the unlikely scenario something goes wrong
  • We’re fluent in English – using an overseas lawyer can be risky if they don’t speak sufficiently good English to explain the legal implications of your property purchase. We are native English speakers but we also understand the law and local property market in the country in which you want to buy
  • We’re members of the Association of International Property Professionals and devote ourselves to promoting principles of good practice within the international property market

Need advice about mortgage problems abroad?

For further information about mortgage problems abroad, get in touch with our team of specialist overseas property law team by giving us a call today.

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