How to Finance an Overseas Property? A Guide for International Real Estate Investors
Suppose you are interested in buying a property in a foreign country as an investment, a vacation home, or even a future main residence. In that case, one of the questions you’ll probably have is: How to finance an overseas property? In this article, we’ll explore the main aspects of international mortgage lenders and real estate loans and the best ways to finance a property abroad.
But before we share our insight, let’s first discuss the most important thing about investing in real estate abroad.
First, Pick a Country to Invest In
For every international real estate investor, regardless of their location, the question of “Where should I invest my money?” is a crucial one. At first glance, this may seem straightforward, but upon closer inspection, you’ll discover that this seemingly simple query holds the key to your success or failure in international real estate investing. Why is this? Let’s delve into the intricacies.
Once you choose a country to invest in, you’re not only picking a location but also that country’s currency, economy, people (i.e., their ability and willingness to pay rent), political stability, etc. Most importantly, you’re also choosing the country’s financial system and the sort of financial services you’ll be able to access. You’re essentially betting that the said country will provide you with all the necessary elements for your investment to succeed.
For example, as a foreigner, let’s say you’re interested in buying a house in Canada. The country is known to be economically and politically stable, so investing there might be a good idea. There’s one problem, though: the Canadian government enacted the “Prohibition on the Purchase of Residential Property by Non-Canadians Act,” which completely bans nonresidents from buying property in Canada for two years between January 2023 and January 2025. What you should ask yourself here is whether you are willing to put your money in a country that can enact those types of laws. Are you willing to bet on Canada and trust their government that they won’t pass laws that will negatively affect your investment? The question is yours to answer.
On the flip side of that, and just in Canada’s neighborhood, there is the US — the most popular country for international real estate investors, according to the latest statistics from 2023. The country has strong property rights and welcomes billions of dollars in foreign real estate investment annually. It also has some of the best financial services an international investor could ever ask for. And, it is one of the rare countries in the world where foreign buyers are treated almost the same as domestic ones (the homeownership rights are the same, it just takes foreigners a couple of extra steps to get there). Are you willing to bet on the US?
We can help you get the best nonresident mortgage deals for international investors in the US. Book a free call or contact us to find out how.
How to Finance an Overseas Property?
There are many different ways you can finance an overseas property, with the most popular of them being:
Purchase in Cash
When in doubt, throw money at it. It’s not the most involved way to finance an overseas property, but it definitely works. The chances are, no matter where in the world you choose to invest your money, if you come up with an all-cash offer, you’ll probably be welcomed with open arms. Unless, that is, said country has certain restrictions that prevent foreigners from investing in real estate (for example, in Thailand, foreigners can’t own land).
Buying property with cash has one serious downside: You need to have a pile of cash to begin with and be willing to spend it on a real estate investment. And even then, you’ll have to consider things like the currency exchange rate or the strength of your local currency compared to that of the country you’re looking to invest in.
But maybe you don’t want to spend your hard-earned cash. Instead, maybe you want to increase your leverage and gain equity in a more expensive property that you wouldn’t be able to pay for with an all-cash offer. What you should be looking for then is a way to get a mortgage for foreign property.
Get a Mortgage Loan for Foreign Property in Your Local Bank
Depending on your local bank’s policies, you may be able to get an overseas mortgage loan for foreign property from them. The difficulty of this process, although high from the beginning, will largely depend on your country and bank. Most banks consider investing in foreign countries to be a high-risk investment, which can put you in a tough position when trying to get a mortgage loan from your local bank to finance a property abroad.
Another downside (apart from the aforementioned difficulty of this process) is that if you ever manage to get that loan, you’ll most likely get it in your local currency. This means you still need to deal with exchange rates to ensure you don’t end up on the losing side before you even purchase anything.
However, we also have to mention that there are certain benefits to trying to get a mortgage for foreign property in your local bank, such as:
- The entire process of getting a mortgage for foreign property will be done in your native language, meaning you’ll be less likely to encounter issues regarding translation.
- You won’t have to incur fees for translation of contracts, tax documents, etc.
- Applying for and getting a mortgage can be completed relatively quickly as long as the mortgage lender (e.g., your local bank) already has your financial information, credit score, etc.
Get a Mortgage From a Foreign Bank
This is easier said than done, as most banks are highly risk-averse. As most banks see it, giving a mortgage loan to a foreigner brings a risk not many of them are willing to take on. Now, there are obviously exceptions to this, and they usually involve highly reputable international business people (e.g., if you’re Elon Musk, you can probably get a loan in almost any country in the world). But if you’re a regular human being with no aspirations to one day walk on the surface of Mars, you might encounter problems when trying to get international home loans from a foreign bank.
Every country has unique requirements for mortgage loans that you must fulfill. For the most part, those will include providing the foreign bank with various types of financial information, such as your income, any assets or businesses you might own, the number of dependants (e.g., spouse, children, etc.), and similar. And, even if you manage to fulfill all the requirements, it’s not guaranteed you’ll be able to get an international mortgage loan from a foreign bank.
Connect With International Mortgage Lenders
International mortgage lenders are private lenders that will give out house loans to foreigners, but only if it makes sense from a business perspective. One of the most popular countries for international mortgage lenders is the US. This is primarily due to the country’s unique financial system and the many foreign investors purchasing US real estate each year.
As long as there’s a market for it and it makes sense business-wise, you can probably find it in the US. The same is true for international home loans.
Let’s say you’ve found what you think is a good investment property that you want to finance via international home loans. The only problem is you can’t get anybody to give you a loan. In a country like the US, for example, where business is king, not being able to get a loan from a mortgage lender usually means one of three things:
- You aren’t talking to the right lenders
- Your “good investment property” is actually not that good
- You don’t have enough cash to cover the down payment
The down payment is the most important thing and is the crux of the entire issue. It’s the key to this business model and is the main reason why it’s so easy for international investors to get a mortgage loan in the US. By charging you a higher down payment (between 15% and 25% of the property’s value), international mortgage lenders can mitigate the risk for themselves. They can ensure that you have enough equity in the property to keep you invested in it and continue paying out the loan in full.
Another key benefit of contacting international mortgage lenders, apart from getting a loan for a foreign property, is that they will know a lot about the local laws and the real estate market. After all, they specialize in dealing with international clients. And why is that a good thing?
It’s simple: you can apply for house loans to see what international mortgage lenders think about your investment property. This way, you can get an expert opinion and learn about the business potential of the property you’re interested in without actually having to spend any money on it.
If you are a foreign investor looking to purchase real estate in the US, we can help you get in touch with the best mortgage lenders. Book a free call to learn more.
4 Main Things to Consider When Financing Properties Overseas
Before embarking on a journey to purchase real estate property in a foreign country, there are some things you should definitely consider:
Mortgage Loan Allows You to Lower the Risk
Suppose you choose to finance an overseas property with an international mortgage loan instead of buying it directly with cash. In that case, you’ll be effectively lowering the amount of risk you’re taking on. By using the lender’s money to purchase a property, you’re increasing your leverage and can purchase more expensive real estate that would otherwise be outside of your price range. What you’re essentially creating is a “good debt” that, in the case of an investment property, someone else will be paying off (i.e., your tenants). And depending on which country you invest in, you can also expect to have certain tax benefits.
Make Sure to Take the Exchange Rate Into Account
Before making any decisions about investing in overseas property, check the exchange rates between your local currency and the currency of the country where you want to buy real estate. The last thing you want is to end up losing money due to unfavorable exchange rates.
Learn About the Property Rights of the Country You Want to Invest In
Learning about ownership rights can help determine how welcoming a country is to foreign investment. Here are some examples of property rights in different countries to give you an idea of what to expect:
- China has collective ownership, where property is not sold but is leased for around 70 years. This means that if you invest in China, you’re essentially getting into a long-term rental agreement.
- In the US, foreign investors are welcomed and have the same rights and tax benefits as the locals.
- Leaseholding is a legal system in the United Kingdom and Singapore. If you invest in a property in one of these countries, you own the property but not the land it’s built on. After a certain period (decades or even centuries), the property will return to the landowner (in most cases, the state).
Get in Touch With a Professional Consultant Who Works With International Investors
Getting in touch with a consulting agency is one of the best ways to gain access to any country’s real estate market. Apart from making it possible for foreign investors to get mortgage loans, these types of firms specialize in dealing with international clients and, as such, know everything about the most common issues foreign investors might and will encounter. By contacting a consultant, you can save yourself a lot of money and time.
Are You an International Investor Looking for Ways to Finance a Property in the US? NRI Can Help!
NRI helps international real estate investors get mortgage loans in the US. We are a one-stop-shop agency that can connect you with the best mortgage lenders with extensive international experience. Get in touch with us or book a free call to learn more about what we can offer.
