If you are a UK resident hoping to buy abroad, it’s good to know that the mortgage model in Europe is mostly long-term fixed options which provide security and protect against hikes for the lifetime of the loan. Most banks will not offer interest only so repayment of capital and interest each month is the norm. Interest-only mortgages are only available in France but on a case-by-case basis.

It may be possible to fix for 20 to 25 years depending on your circumstances. Loan-to-values (LTVs) vary but as a general rule, the maximum you can borrow in Italy is 50 per cent, rising to 70 per cent in Portugal and Spain. In France, 80 per cent LTV may be available.

All banks have similar affordability criteria, based on net income. Most take an average of the past three years as confirmed by P60s and/or tax returns. All debts are taken into account, including the monthly cost of the new mortgage and as a general rule these should not exceed 33 per cent of monthly income. This may present difficulties for the self-employed who receive dividends with significant variations year on year, or if they choose to reinvest in their business.

A specialist broker will know which lenders are more flexible on less mainstream income and high-net-worth clients may have other options worth considering.  

HNW individuals don’t often fit the rigid mould of European retail banks’ criteria so are more naturally private banking clients. These banks understand more complex revenue streams and may base lending decisions on assets rather than income. They are also more flexible when it comes to age and will accept a wider range of ownership structures.

Private banks usually offer five-year interest-only facilities (bullet loans) but it may be possible to get a longer term mortgage of up to 15 or 20 years. The private banks want to develop a relationship with the buyer, however. This usually means a minimum of €1 million being invested with the bank, so this model is really only suitable for property values of €3 million+. The nature of the asset requirement varies from bank to bank.   

Legal advice is essential as there are considerable differences compared with buying in the UK. You must also check the availability of credit early on so that you can establish your budget – best done before even viewing a property.

This is more important when it comes to European lending as it is usually not possible to remortgage or is expensive to do so. A broker should have access to a wide panel of lenders as many European banks do not have a good online presence and prefer working with specialist introducers rather than dealing directly with borrowers.

British banks can’t take a charge on property overseas so the pool of lenders is far smaller than in the UK. A decision-in-principle is advisable before making an offer. This is subject to valuation but shows a vendor the finance side has been properly researched.

Banks vary in terms of whether their staff are bilingual and if their literature is available in English so it is invaluable to go via a broker with the necessary language skills and familiarity with cultural differences for the whole process through to completion with the notary.

• Miranda John is Director of SPF Private Clients 

Further information

Contact Miranda John

Buying in Europe post-Brexit: a fast-changing mortgage landscape