How to Get a Loan for Overseas Property

Regardless of whether you’re purchasing a property for investment purposes or personal use, buying real estate in a foreign country can be a complex process. In some cases, you may be able to get a loan from a domestic lender if you can provide domestic collateral (like a property you own free and clear in the States). Short of that, domestic lenders typically will not mortgage a foreign property because they do not have the ability to foreclose on that property in the case of default. That's why you will likely need to be financed by a foreign lender.

Large Down Payment

In the United States, it’s possible to acquire a mortgage for as little as 3 percent down, for a primary residence, through an FHA or VA loan. But you won’t find mortgage programs like these on overseas properties. Instead, you can expect to pay at least 20 percent of the purchase price as a down payment on a mortgage. Depending on where the property is located, you may be required to pay 50 percent or more of the price upfront.

Local Customs

Finding a real estate broker who specializes in foreign mortgage transactions -- preferably one who lives and works in the country where your property is located -- can help you close the mortgage transaction more efficiently. A foreign country likely has real estate practices and laws that differ from those in the U.S., including lending regulations and requirements of which you may be unfamiliar. A broker who can walk you through each step in the financing process can be a helpful asset. A local broker may also be able to direct you to certain lenders or loan products for which you might qualify. If you need help finding such a broker, call a local chapter of International Consortium of Real Estate Associations.

Life Insurance

Securing a mortgage in the United States usually doesn’t require a life insurance policy, but that’s not the case with most overseas mortgage transactions. Many foreign lenders will require you to have a life insurance policy that names the lender as your beneficiary in the event that you die before the mortgage debt is paid off. Your mortgage term will correlate with your life insurance policy. For example, if you’re 75 and your life insurance policy covers you only until you’re 85, the lender will give you only a 10-year loan.

Foreign Bank Account

Some countries, including Australia, New Zealand and many countries in Western Europe, more readily offer mortgages to foreign property buyers In some areas of the world, however, you may need to establish a relationship with a local lender before that lender is willing to offer you a mortgage. You can establish this relationship by opening a bank account with the lender and keeping it in good standing.