Borrowing against your home to buy property abroad

Many Russian-speaking residents of the EU own a flat or house in the country where they live, with a mortgage partly repaid and a value that has grown. A common question is whether that equity can be used to buy property abroad, instead of taking a mortgage from a foreign bank as a non-resident. It can often be done, but it is a different product with different risks. This article looks at the logic, the limits and the points to check. For the other route, see mortgages for non-residents. We could not verify the terms of lenders in every country, so where a figure is not confirmed we say so.

The basic idea

You do not borrow against the foreign property. You borrow against the home you already own where you live and use the money as a cash payment for the purchase abroad. The lender looks at your income, your credit history and the value of the home in your country of residence, which it knows how to appraise and how to enforce a claim on. The foreign property is not part of the loan security.

In Poland, for example, banks typically do not give a mortgage for a property abroad, but a so-called mortgage loan (pożyczka hipoteczna) secured on a Polish property can be used for any purpose. Polish financial portals report a loan-to-value ratio of roughly 70 to 80 percent of the value of the pledged property and terms up to 20 or 25 years; these are reported figures from portals, not a bank's offer, and each bank sets its own conditions. For Germany, Czechia and the Baltic states we did not confirm comparable products. In general you should ask lenders about a loan secured on your home with a free-use purpose, a refinancing with a higher amount, or a second-ranking charge, and compare the offers. Ask in writing whether the purpose of the funds is restricted, because some lenders limit how a loan for housing purposes may be used.

Why people choose it

• A local lender, local language, local documents. No cross-border appraisal and no foreign notary for the loan itself.
• Some foreign banks lend to non-residents on tougher terms. Lenders abroad often ask for a larger down payment from non-residents, but this varies by country and bank; see our country guides on mortgages for foreigners for details.
• Speed. You can have the funds as cash, which sellers and developers often prefer, and which can strengthen your position in a negotiation.
• The collateral is in a legal system you know.

What it costs, in principle

Compare the full cost, not the headline rate. The things to put side by side:

• The interest rate and whether it is fixed or variable. Loans secured on a home for any purpose may be priced differently from a standard purchase mortgage, in either direction. We do not quote rates because they change and we did not verify current offers.
• Fees: valuation, notary, land registry, insurance of the home and of the borrower, early repayment charges.
• The currency of the loan and the currency in which you pay abroad. A euro loan used to buy in dollars, dirhams or lira creates an exchange-rate exposure; see multi-currency accounts and exchange rates.
• Tax effects. Interest on a loan used to buy a property abroad is usually not treated as housing-loan interest for relief purposes, and whether interest can be deducted against foreign rental income depends on the country; check this with a tax adviser. See rental income abroad: tax by country.

A non-resident mortgage abroad ties the debt to the foreign property: if the market falls, the loss is limited by the structure of that loan and its collateral, depending on the terms. A loan secured on your home carries a different risk, described below.

The risks to weigh

The main risk is that your home is at stake for a purchase you do not live in. If the foreign property does not rent as expected, loses value, or the purchase falls through, the loan stays and the repayments continue. Check whether you could service the loan from your salary alone, without rental income. For an example, with round illustrative numbers: a resident takes a loan of EUR 100,000 against a home worth EUR 300,000 and buys an apartment abroad for the same amount. If rent does not arrive for a year, the full instalment still has to be paid from earnings; if the apartment later sells for less, the difference is a personal loss. This is a hypothetical illustration, not a forecast.

Other risks:

• Interest-rate risk if the rate is variable.
• Currency mismatch if the foreign property is priced in another currency.
• Over-leverage: a high combined debt on the home may limit your ability to borrow later or to move.
• Lender conditions: some lenders require the property that secures the loan to be your main residence or to be insured in a particular way, and some may question the use of funds for a purchase abroad. Disclose the real purpose; a false statement to a bank is a serious problem.
• The bank will ask about the source of the funds you send abroad. A loan is a documented source, which helps; see what the bank asks before a large transfer.
• Tax: costs of the foreign purchase and later taxes on rental income and sale apply regardless of how you financed it.

When it makes sense, and when not

It may be worth comparing when you have a stable income, a clear equity buffer, modest leverage and a foreign market where non-resident mortgages are expensive or limited. It is generally harder to justify when the aim is to speculate on price growth, when the foreign purchase depends on rent to repay the debt, or when the combined debt would leave no reserve. A simple test helps: if you could not repay the loan from earnings in a bad year, the structure is too tight.

FAQ

Can I use a mortgage on my home for any purpose? In some countries a loan secured on property can be used for any purpose, as in Poland, but each lender sets its own rules. Ask the lender whether it accepts the purchase of property abroad as a purpose.

What is the usual LTV? In Poland, portals report about 70 to 80 percent of the property value for loans secured on a home. For other countries we did not verify figures; ask lenders directly.

Is it cheaper than a mortgage from a foreign bank? It depends on the rates and fees on both sides. Compare the total cost and the currency exposure of each, not only the nominal rate.

Does the foreign lender need to know about the loan? A foreign bank, if you also borrow there, will take your total debt into account. A foreign seller or developer needs proof of funds, not details of the loan.

Can I deduct the interest? That depends on the tax rules of your country of residence and the country of the property. Do not assume it; ask a tax adviser.

How we help

We are a trilingual platform that finds properties and coordinates independent local lawyers and tax advisers. We can help you compare financing routes and introduce a lawyer or a credit broker in your country. This text is informational and is not legal, tax or investment advice; terms, rates and rules change, so verify the current position with the lender and an adviser before committing.