An introduction to international, foreign currency and offshore mortgages

by Barclays Wealth International on November 5, 2010

International mortgage | Offshore and foreign currency

What this international, foreign currency and offshore mortgage guide covers

International mortgages are most relevant to someone who wants to buy a property in a country in which they either do not live or are not a citizen.

Most lenders will not be equipped to deal with people wanting to buy property outside their home country. In this case a borrower would have to open new accounts in unfamiliar territories, and deal with new procedures and requirements.

The main advantage of an international mortgage is that it prevents the need for this extra undertaking.

Precisely which international mortgage is right for you depends on your individual requirements as outlined below.

We also have other guides including mortgage quote, foreign currency mortgages and investment mortgages.

Foreign currency mortgage

A foreign currency mortgage enables the borrower to take out a mortgage in the same currency in which they are being paid.

For example, by borrowing in Hong Kong dollars someone living and working in Hong Kong would match the currency in which they are being paid. The advantage of this is that they can avoid potentially costly movements in exchange rates between Hong Kong dollars and sterling.

For the same reason a person living overseas may want to borrow in their local currency in order to buy a property in the UK.

Investment property in the UK – buy-to-let mortgage

A buy-to-let mortgage is required if you intend to rent the property out for a profit. Provision of these mortgages is based mostly on the likely rental revenue of the property. This will need to be independently assessed.

Student moving to the UK

A student moving to the UK would struggle to get a normal mortgage because of their probably low income and lack of credit history in the UK. However, some banks will offer a mortgage tailored to such international students by taking into account the financial standing of both the student and their parents.

Types of mortgage structure

Having decided on the appropriate mortgage for the property you want to buy, you now need to select the structure that is right for you.

Fixed rate mortgage

Generally, a fixed rate is applied for the first two to ten years of the mortgage, although some lenders have shorter or longer terms. During this period the interest rate charged cannot change. The main advantage to the borrower is that they can budget ahead. However it is an inflexible arrangement.

When the fixed period ends the borrower needs to plan for the possibility of an increase in interest rate payments.

Variable rate mortgages

‘Variable’ is a generic term that covers standard variable rate, discount and tracker mortgages.

Standard variable rate

Most lenders have a standard variable rate (SVR). The SVR’s interest rate will be a few percentage points higher than the base rate of interest set by the Bank of England.

If the Bank of England base rate goes up by 0.5% then the SVR will almost certainly do the same. However, unlike a tracker, the lender has full control on the rate, and can change their SVR by any amount if at all.

It is worth noting that, after a fixed-rate or discount mortgage, the mortgage will revert to the SVR interest charges.

Discount rate

This is the SVR minus a discount and applies for a fixed period at the beginning of a mortgage. For example, if the lender’s SVR is the Bank of England base rate plus 6% then for the first two years the discount rate might be the Bank of England base rate plus 5% – a discount of 1%.

Tracker

The interest rate of a tracker mortgage tends to follow a national base rate more rigidly than an SVR. This is because the tracker is obliged to follow changes in the base rate (or whichever rate it tracks).

Offset mortgage

An offset mortgage is possible where all the borrowings, savings and investments are held by one bank. Where available the bank would work out the net borrowings and charge interest on just that amount. For example, if the borrower has a mortgage of £150,000 but also has savings of £30,000, then they will only be charged interest on £120,000.

This usually gives the borrower a great deal of flexibility in terms of the size and frequency of mortgage payments. However the borrower does need a clear plan for repaying the mortgage and, very often, a strong sense of self-discipline as there might be no imposed repayment schedule.

Repayment structures

The two main types of repayment structure that can be applied to most mortgages, are:

  • Repayment. This is where both the capital borrowed and the interest charges are repaid over the mortgage term.
  • Interest-only. With this mortgage the interest payments are maintained but the capital is not. This can help the borrower’s cash flow during the lifetime of the mortgage. However it does mean that the borrower must make separate provision to clear the capital at the end of the mortgage. This usually takes the form of investments.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

If your loan is denominated in a currency other than sterling CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.

For more information or to apply

To apply or find out more information, speak to a Barclays Wealth International Mortgage Adviser. They specialise in providing a residential and investment mortgages for property purchases in the UK, Jersey, Guernsey, Isle of Man and Gibraltar.

Call us on +44 (0)1624 684305

Visit the Barclays Wealth International website.

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Terms and conditions apply to all mortgage products. We strongly recommend that you obtain your own independent tax advice before proceeding with an offshore mortgage.

Barclays Wealth will require first charge over the property.

Barclays Wealth is a responsible lender and when considering your application for borrowing, your financial circumstances will be appraised. Remember should you run into difficulties please contact us immediately.

In all forms of advertising and marketing material where repayments are quoted, we will show clearly a typical Annual Percentage Rate (APR). We will also clearly indicate in all lending-related advertising issued in Jersey that we abide by the Code of Practice for Consumer Lending.

Lines are open 7am to 8pm weekdays and 8am to 5pm weekends and UK bank holidays, local time. Call charges may vary. Please check with your local telecoms provider. Calls may be recorded for training and security purposes.

The products and services described on this page are provided by the following companies, which are part of Barclays Wealth: Barclays Bank PLC in England and Wales, Barclays Private Clients International (Gibraltar) Limited in Gibraltar and Barclays Private Clients International Limited in the Isle of Man, Jersey and Guernsey. For further information on these companies and Barclays Wealth please read the Important Information.

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