Bridging Loan For Overseas Property

Looking to buy a property overseas? Whether you're buying for business or personal use, you're in good company - the English Housing Survey found that 2.1 million households reported having a second property - 40% of which were overseas. 

Buying property abroad is different to in the UK and lots of standard options like mortgages won't be readily available. 

A bridging loan may be able to help you get the property you want – but only if you take the time to learn how bridge finance works and what impact it has when buying a property in another country. 

When you’re waiting for capital but need to make a purchase, a bridging loan may be the ideal option. Bridging loans are short-term financial products designed to "bridge" the gap between the purchase of a new property and the sale of an existing one.

Because bridging loans are short-term and come with higher rates, you need an exit strategy to either repay the loan or refinance to a different option. 

If you have assets you're waiting to sell and want to secure an opportunity in a foreign market, a bridge loan may help. If you're already involved in overseas property, however, it pays to be aware that you can't use overseas property as security in a bridging finance agreement. 

Choose Rangewell for overseas bridging finance

Lenders may hesitate to offer bridging loans due to the complexities of foreign property transactions. Rangewell can help you navigate the challenges associated with buying abroad and find a lender who will provide a bridging loan for overseas property at more competitive rates. 

What is a bridging loan?

Bridge loans are short-term finance agreements meant to 'bridge the gap' in funding, such as when a property investor needs to buy at auction whilst awaiting the sale of other properties. As a short-term option, bridge loans are usually only available for 12 months and tend to be expensive. 

Some bridge loans are 'closed' and have a fixed repayment date. Others are 'open', which means you've got more flexibility but you'll also face higher rates. 

Benefits of bridging finance for overseas purchases

Bridge loans may be more expensive than other finance products, but the benefits can be compelling. The key advantages are:

• Fast applications: bridge finance is the fastest form of loan. Though lenders need to perform background checks and investigate your securities, the process is usually far quicker than in other loan agreements. 
• Rapid access to cash: once a lender makes a decision, they can release funds quickly. In some cases you can have funds within 48 hours, which makes it perfect for opportunistic purchases such as securing an auction listing. 
• Flexibility: bridge loans can be used for a variety of needs, whether that’s buying overseas property at auction or refurbishing an existing foreign home to sell on for profit. 
• Higher credit: bridging finance is usually available between £50,000 up to £10 million, which makes it a more compelling option for property investors when compared to a personal loan or similar lower-limit lending. 

How does an overseas property acquisition impact the loan?

Compared to buying properties in the UK, buying overseas adds new complexities and complications that can make lenders wary. There are currency exchange and legal risks associated with buying property abroad and your finance agreement will depend on how you can manage those risks. 

Some lenders won't finance an overseas property acquisition at all, because the regulatory framework that can govern foreign property might limit the lender's ability to enforce loan terms or fail to offer the right legal protection to the borrower. 

For the lenders who are willing to provide overseas bridging loans, the increased risk profile that comes with buying overseas often means you'll need to provide additional collateral to act as security. 

Key considerations when buying overseas property

Buying a property overseas can be risky, so it pays to plan your purchase carefully and know the risks. Here are some key considerations when buying a foreign home or commercial property.

• Learn local laws: investigate property laws in your target country to make sure it’s legal for you to buy it, as some territories restrict foreign investment. If it is legal, you should also take the time to learn about local property laws so you know which legal protections are available and how they may or may not apply. 
• Consider currency: buying property in foreign currency can lead to issues caused by exchange rate fluctuations. This may affect your ability to repay your loan and some lenders may even avoid funding you if the property is in a country with a volatile currency. 
• Assess the property: the value of an overseas property can be subjective. Make sure you obtain an independent valuation accepted by UK lenders before you commit to any purchase. You need to look at the property market in your target country to make sure there’s enough liquidity – if properties aren’t selling, you may struggle to sell yours to fund an exit strategy. 
• Plan for differences: overseas property transactions can be more complex due to time zones and language differences. You’ll need to accommodate for delays and potentially the added cost of translation services. 
• Arrange insurance: buying overseas is riskier than in the domestic market, so it’s no surprise that securing insurance for foreign property is harder. Make sure you have a clear path to insure the property before you buy it.

How to apply for an overseas bridging loan

If you want a bridging loan, you’ll need to find a lender and apply. Finding a lender for bridging loans on overseas property isn’t always straightforward. Some lenders refuse to finance an overseas property acquisition due to the complexities of the international property market and differences in currency, timezones and language. 

Don’t feel disheartened – there are also lots of lenders both mainstream and independent who will support your application, provided it meets their lending criteria. Due to the added risks involved, it pays to take extra time and find a lender that actively specialises in overseas finance.

Once you find a lender, you’ll need to prepare an application. Before you apply, you need the following:

• Proof of identity and income: Provide documentation to prove your identity (passport, ID) and your financial status (bank statements, proof of income, tax returns).
• Property information: Lenders want to see detailed information about the overseas property, including its valuation, title deeds, and any legal checks or surveys conducted.
• Security/assets: Bridging loans are always secured, so you’ll need to tell a lender what you are offering as security and provide proof of ownership. 
• Exit strategy: Lenders usually want to know how you intend to ‘exit’ the loan by either paying it off or having pre-approval for a longer-term loan. 

Work with Rangewell if you’re unsure about an exit strategy. We can help you raise a bridge loan now and then refinance to a longer-term, lower-rate product before the loan term ends. 

When you apply to a lender they’ll perform due diligence to check your background and investigate the property. Lenders have their own risks to consider when it comes to overseas property. These include: 

• Legal complexities: each country has its own property laws, regulations, and practices, which can vary significantly from those in the lender's home country. Lenders may find it difficult to navigate these legal systems and may be unable to repossess property if you default on the loan. Some countries even place regulations or restrictions on foreign investment, which may make the lender unable to secure the loan against the property. 
• Currency: lenders who issue finance in one currency for you to buy property in a foreign currency understand that there’s a risk due to currency value fluctuations. If your property value falls in its local currency you may be unable to repay your debt. In some cases a lender may try to issue funds in your intended local currency, but this isn’t always possible. 
• Political/regional/market volatility: whenever you’re buying abroad, a lender has to accept an increased level of risk due to the political, economic and regional changes that can happen overseas. 

• Timezones & languages: buying overseas means documentation and contractual information can become obfuscated or confusing due to local languages or laws. If a lender needs to engage in any direct communications with parties in your intended country of purchase, these issues add more risk and complexity.

Refinancing a bridge loan for overseas property

Once you’ve successfully received the funds and made the purchase, you need to consider how to either repay the loan or switch to a new product. You can’t use a UK mortgage on an overseas property, so you may be more limited in what long-term options you can choose. 

If you work with Rangewell, we can help you not only raise your initial bridging loan but also rebridge or refinance to a longer-term alternative to spread the cost. We’re experts in foreign property investment and can advise on the most appropriate finance at every step of the journey. 

Arrange overseas bridging finance with Rangewell

Ready to purchase property overseas and need a bridging loan to do it? Speak to Rangewell now and our team can help you secure a specialist lender that will fund your purchase. With our help, you can invest in overseas property and then either repay your bridge loan or switch to a longer-term option. 

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