The Costs of Expat Mortgages


There are numerous other costs which need to be considered and not just the interest rate. Here are just a few examples of costs to ask about before you commit yourself:

  1. What property insurances are required and are you restricted to a captive insurer of the lender or are you free to shop around?
  2. Is life insurance a condition of the mortgage being approved and if so, on what terms?
  3. What application fees are involved in submitting the mortgage application and how much, if any, will be refunded if the application is unsuccessful?
  4. Are there any fees or costs associated with the property itself such as management or homeowner association fees?
  5. What are the funds transmission fees upon completion of the contract or any other “documentation”, “handling” or “management” fees levied by the lender or its agents during the application and legal process?

Never be afraid to ask questions about any aspect of the transaction and application!

The most important questions are usually the ones which are never asked, whilst improving your knowledge will help with controlling worry and stress. 

Never accept an answer which you do not understand; your professional advisers are there to provide you with the ability to understand what is happening. You must understand the nature of the mortgage and the property transaction well enough to make an informed decision about what is in your best financial interest. Unless you are a mortgage professional, you will not be able to do this without asking a lot of questions and getting answers you understand.

It is difficult enough to navigate the mortgage market back home, but when you are considering purchasing a property overseas the issues become more complex, while the consequences for failing to choose correctly can be very expensive.

Which Currency Should Be Used?

The very first issue is to decide whether you want a mortgage denominated in the same currency as that of the country where the property is located.  If you choose to apply for an overseas mortgage, it is probable the domestic currency will be used but there are options. If you are applying back home, then you may find lenders who are willing to denominate the mortgage in a foreign currency, especially if you are originating from the UK or US.

The decision over which currency you should use ought to be determined by considering the following factors:

  • Availability of lenders prepared to lend on the property;
  • Which currency your earnings are paid in and the currency of your bills and mortgage payments; 
  • Your view of foreign exchange movements in the future.

If a lender in your home country will not lend on an overseas property, you are restricted to applications to domestic lenders where the property is located. If you have the choice, then a decision must be made as to which currency you will elect to use. For instance, if you are paid primarily in US dollars, it makes sense to denominate the mortgage in the same currency as you will remove any risk of adverse foreign exchange rate movement.

The Importance of Local Knowledge and Professional Assistance

At home, property buyers are by nature, cautious and conservative. They insist on appraisals and a detailed legal process which makes numerous checks, to ascertain they are buying full title to the property, frequently backed by lots of insurance.

Take these same home buyers overseas and the mentality changes. Usually cautious people throw caution to the wind and engage in buying activity which is brazen and downright ridiculous. Contracts are signed without understanding what the document states, without independent professional advice and with only cursory, or no inspection, of the underlying legal position to determine whether true ownership is being passed.

Overseas home buyers have experienced all forms of skulldruggery at the hands of unscrupulous developers and agents with little or no recourse.

Local knowledge and practice must be acquired by any buyer of an overseas property, which entails retaining independent, professional representation for both legal and financial aspects of the transaction.

Differences in Overseas Mortgage Practice

Before you enter into a mortgage or property contract, you must ensure you understand all the terms and conditions. In fact, you must completely understand what the costs involved are before you sign any document, and understand what your legal position is, from the moment you make an offer on a property.

Different legal systems and practices apply overseas, and in some instances, making an offer on a property will legally bind you to purchase the home, irrespective of the success of your mortgage application. Fees will significantly differ between countries and between mortgage lenders too; ensure you understand all of the costs involved and what you are getting in return. In some cases, you will need an appraisal or mandatory insurances, in others you can rely on your own discretion and take the risk yourself. Establish what fees are refundable in the event of an abortive mortgage application or property purchase, and this must include what happens to any deposit monies you put up as part of the deal.