Buying property abroad is increasingly attractive, whether it’s a holiday home, an investment rental or a full-blown development project. But arranging the money to do such a move can be tricky if you’re UK-based and using equity or borrowing against your UK property. If you’re a UK homeowner that wants to invest in a property abroad, here’s everything that can help you do it correctly.
Start by assessing what you already own
If you own a UK property and have built equity, you have a powerful asset. A homeowner loan (sometimes called a second-charge loan) or a property bridging loan means you can borrow against that property to fund a new venture abroad. For example, you refurbish or develop overseas property, or just buy the overseas asset outright and hold it as an investment.
When you borrow against your UK property, the loan is secured on your UK asset. That means your UK property is at risk if you fail to meet repayments. So: very real risk. (Any borrowing must factor this in.) Source: UK secured-loan guides highlight this.
Goldhill Finance is one of the lenders in this space, but remember, the loan may be secured on UK property even if the target property is overseas.
Using your property to finance abroad
Let’s look at routes:
- Using your UK property equity: You borrow against your UK home, get cash, and use it to buy or develop overseas. Advantage: you already have UK security; you may get faster approval.
- Traditional overseas mortgage / overseas lender: You go to a lender in the country you wish to buy in (or a UK bank with international mortgage arms) to finance the purchase directly.
- Cash purchase: If you have enough to pay with cash you can simply avoid mortgage/loan approvals.
- Hybrid: Release equity, borrow short-term bridging, then refinance via overseas lender or local bank.
Each has trade-offs. For example, financing via a UK home means you remain liable for the asset; using an overseas lender may mean foreign currency risk, different laws, and more deposits.
The point: using your UK home to raise funds gives you a practical “entry point” into overseas property and/or development, especially for UK homeowners who already have equity.
Laws, tax and risks to be aware of
Since you’re borrowing money to invest abroad, you need to properly cover your bases.
A. Local laws & title deeds
The Foreign, Commonwealth, and Development Office’s (FCDO) guide reminds you to check title deeds, outstanding debts, utilities, and local legal protections when buying abroad.
Every country is different: local planning, building regulations, development permission, property-use restrictions, leasehold vs freehold, etc.
B. Currency fluctuations
If you’re borrowing in £ sterling and converting to foreign currency (or borrowing in foreign money), then the change of rate at any time can severely hit your pocket hard.
C. Tax liability problems
You can face tax in the local country (purchase tax, stamp-duty equivalent, yearly property tax, rental income tax) and also be subject to having to pay your UK tax (for example, if you rent to a UK tax resident) or when you dispose of the overseas asset.
D. Considering how to repay your loan
You will need to have a credible route to repay such as a longer-term sale overseas, refinance via a long-term mortgage, convert income received towards the loan and so on. Without a sound exit in place, you risk your UK property being taken to repay the borrowed capital.
E. Risks with building or developing abroad
If you intend to develop or refurbish overseas property (not just buy and hold), there are additional risks: contractor reliability, project overruns, local building regs, cost blow-outs, local labour, and planning. So you’ll want an extra budget, contingencies, and a clear action plan you can adhere to.
F. The viewpoint of the UK lender
Your UK assessed your UK property value, any equity you hold, your repayment ability, any debts currently held, and how you intend to repay the loan.
How to structure the deal:
The below checklist is a good starting point to use or advise people of:
- Ascertain UK equity: You own your UK home; you know the current value, outstanding mortgage, and available equity.
- Assessing and choosing the right overseas property or development: Consider the country, type of property (purchase only, refurb, full development,), local costs, timeline.
- Check if you meet the criteria to borrow money through a UK homeowner loan or a bridging loan from a lender based in the UK.
- Use borrowed funds to purchase overseas property: Ensure funds are transferred, that you have arranged legal representation in the country, local language translation if needed, and local property checks all done and completed properly.
- If you are developing or refurbishing, carry out the necessary works, whilst making sure that your budget doesn’t get exceeded and keep an eye on the timeframes closely.
- Refinance or exit: Once the overseas property is either established or renovated, you could refinance (e.g., through an overseas mortgage or sale) to repay the UK loan, or you could choose to hold it as a rental and repay over time. You always must consider what happens if this fails (plan B).
- Future management: On-going costs can include maintenance, insurance, local taxes, currency movements and more. Be sure that you have properly accounted these into your plans and have the budget for them.
For bridging loans in particular: if a UK homeowner uses bridging to buy or develop abroad, providers emphasise that the UK security must be sufficient and a clear exit must be defined.
Advantages
- Enables access to overseas property/development opportunities, not readily accessible via other lending routes
- Tap into your UK equity rather than relying purely on an overseas lender.
- Potentially benefit from growth in overseas markets
- For development cases: opportunity to add value by making improvements which boost future returns.
What to look out for in a UK-based homeowner loan for overseas property/development
If you’re a homeowner in the UK contemplating this route, check:
- Does the lender allow you to use the funds for overseas property/development? Some homeowner or bridging lenders may restrict use.
- What is the security? Usually your UK property acts as collateral. The overseas property may not be acceptable security for most UK lenders. For bridging abroad: “must be secured against UK property, and the overseas property cannot be used as collateral.”
- The loan-to-value (LTV) limits: Combined with your existing mortgage, how much additional borrowing can you have?
- Your repayment term and exit strategy: Especially for development projects, you’ll want a loan term that aligns with your project timeline.
- Interest rate and costs: Bridging tends to cost more; homeowner loans may be cheaper but longer term.
- Affordability: They will still verify your ability to repay; you must assess how you will manage repayments if the overseas project takes longer or underperforms.
- Legal/regulatory risk: Ensure you understand what happens if you default; UK security means UK repossession risk.
- Tax and cross-border advice: Seek local counsel in the overseas country and a UK tax advisor.
If all goes well: your overseas property will see an upturn in value as well as brining in income on a regular basis. If things go wrong: delays in works, lower income, currency slides, the UK loan still needs paying, and risk of the UK home being seized grows. A balanced decision is required before committing to anything.
Final thoughts
Essentially, you’re combining two markets: your familiar UK property & finance market (homeowner/bridging loans) with an overseas property market (which may be less familiar). Each has its own rules. If you understand both and build in contingency, it can work very well. If not, you risk overextending yourself.
Borrowing secured on your UK property to invest abroad can unlock great opportunities; just make sure your homeowner loan (or bridging loan) is matched to your project’s timeline, the local target currency and risks associated with your project.