Mortgages for foreigners in Latvia, Lithuania, the UK and the Netherlands—all important information

The mortgage market is unpredictable, especially lately: home prices are rising, so are inflation and interest rates. But perhaps now is the best time to enter the «field» of housing — who knows what’s coming in the next few years. We’ve already written about mortgages in Poland, Germany and Spain, and today we’ll find out how to get a home loan in the UK, Lithuania, Latvia and the Netherlands.

United Kingdom 

The way things work

Foreigners can get a mortgage in the U.K., but it will be slightly more difficult than for residents of this country — lenders will check you and your capabilities much more thoroughly. 

There are two main types of mortgages in the U.K. — fixed-rate loans and variable-rate loans.

About 75% of mortgages in the U.K. are originated as fixed-rate loans. They are usually for two years or five years, and then the interest rate changes to a standard variable rate. The term is usually about 25 years, but another period can be agreed upon (for example, 15 or 35 years).

Variable-rate mortgages can fluctuate and depend on the underlying interest rate. This makes them more risky, but if interest rates suddenly fall, such loans can be profitable.

There are more than 100 lenders in the U.K., and they are all different. To find the right lender, you can, for example, contact an independent mortgage broker or financial advisor.

It usually takes about 18-40 days to process a mortgage application in the UK. In particularly complex cases, it can take longer.

Basic requirements for obtaining a mortgage

If you are a foreigner and want to get a mortgage in the UK, there are two ways you can do it — the first is easier, the second is a little more complicated.

1. Get a mortgage if you have a permanent or indefinite residence permit.

Lenders will pay attention to the following points:

• Time of residence in the UK. Preferably, it should be at least 2 years.
• Work. Lenders are usually happy to give mortgages to people who work permanently in the UK. Of the documents you will need to provide pay slips for the last three months, form P60 from your employer (if employed), if not employed — tax returns (for the past and previous years).
• Bank account. It is important to open a bank account in the UK as soon as you arrive.
• Deposit. If you pay a decent amount as a deposit (up to 25% of the purchase price of the property) — the lenders will be more loyal to you.
• Credit Score. When you move into the UK, you need to create credit scores from scratch. Basically, this means registering to vote and paying your bills on time. It’s also possible to get a mortgage without a credit history, but the number of options available will decrease and you’ll get a mortgage loan with a higher interest rate.

2. Get a mortgage if you do not have a permanent residence permit.

In this case, you will also need to meet all of the points listed above in order to apply for a mortgage. But in addition, you will need to have one of these visas on hand:

• Work Visa. This is essentially your permission to work in the UK. An example of such a visa is the Skilled Worker visa (until recently known as the Tier 2 visa).
• Family visa. This visa allows you to live with a family member (e.g. partner, child or parent).
• British Ancestor Visa. With this visa you can live in the UK for 5 years and then either extend it or settle in the kingdom permanently. You can get this visa if you are a Commonwealth citizen and can prove that one of your relatives (parents or grandparents) was born in the UK. 

Possible loan amount and associated costs

In June 2023, the Bank of England increased the key interest rate to 5%, and according to experts, this is not the limit. Two years ago it was 2.59%.

You can estimate the approximate amount of the loan by using a mortgage calculator.

In addition to interest rates on mortgage payments, there are additional fees to consider:

• Organization Fee. Lenders charge this fee for processing a loan. The amount varies from case to case: from a few hundred to about 2 thousand pounds sterling (about €2300).
• Booking Fee. This is a down payment for booking a mortgage of about £100. If you change your mind and don’t take out a mortgage, you probably won’t get that amount back.
• Property appraisal fees. Costs can vary greatly depending on the value of the property, but they usually range from £150 to £1,500.
• Fee for a mortgage broker. If you hire a broker, you have to pay about £500.
• Early repayment fees. Some lenders also charge a fee if you pay off your mortgage early. Generally, this is between 1 and 5% of the prepayment amount.

You can choose and buy housing in the UK with the help of Realting catalog.

Lithuania 

The way things work

Foreigners can buy any real estate in Lithuania (except for land), but Lithuanian banks do not arrange mortgages for foreign citizens. You can get a mortgage only if you have a residence permit in the republic.

Loans for the purchase of housing in Lithuania are issued by: commercial banks, credit unions and other legal entities from the public list of credit institutions maintained by the Bank of Lithuania.

You can get help from credit intermediaries. They can advise you on your mortgage and draw up an agreement on your behalf. But keep in mind that you will probably have to pay a fee for their services. A credit intermediary can be an individual or a company.

A home loan contract usually consists of a general and a special part of the contract. However, different rules of individual lenders can also be part of this contract. For example, they may prescribe there a fee for changing the contract, etc.

Once you receive a binding offer (a personal offer that a lender makes to a consumer after assessing his or her creditworthiness), you can make a decision within 30 days. Therefore, you will have time to compare standard information from several lenders.

What to compare: the type, amount, and method of calculating the interest rate; the total amount specified to be paid; the annual interest rate of the total cost of the loan; and any fees charged by the lender.

Note. The borrower may cancel the loan agreement within 14 days of its conclusion.

Basic requirements for obtaining a mortgage

So, you have a residence permit in Lithuania. What next? Next, you need to study the requirements, compliance with which will help you get a home loan in this country:

1. The down payment no less than 15%.

To get a mortgage, you need to immediately deposit at least 15% of the value of the selected property. It is important that it must be your own money — borrowed funds or those obtained by pledging other real estate will not be suitable.

2. At least 6 months of stable income.

The lender will assess your monthly income for at least the last six months, as well as the long-term viability of those earnings. It is up to the lender to determine what counts as a stable income. If your earnings are erratic or risky (e.g., income from dividends, stocks, etc.), your mortgage will be in question. But again, whether or not to apply stricter requirements to you will be up to the lender to decide.

3. No more than 40% of your income (must go towards the mortgage).

No more than 40 percent of your income should be used to pay the loan. If a home loan is taken out by a family, the lender will consider the income and financial obligations of both spouses. The lender may also estimate your current and possible future family expenses (housing, food, fuel, etc.).

4. Good credit history.

Your credit history is key in getting a mortgage loan. When evaluating your credit (and usually your spouse or other co-borrower), they will consider information about your existing loans, as well as your ability to pay bills on time. Lenders check all of this through databases. However, each lender may rate different aspects of your credit history differently — so it makes sense to contact more than one lender at a time.

In order to understand exactly whether you can qualify for a home loan in Lithuania, study the Responsible Lending Regulations carefully.

Possible loan amount and associated costs

Before applying for a home loan, find out what the average interest rates for these loans are. The Bank of Lithuania updates them on its website every month. For example, the interest rate for buying a home in Lithuania as of June 2023 was 5.58%, a year ago it was 2.74%.

Loans in Lithuania are divided into the two main categories we are already familiar with: with a variable interest rate (when the value of the rate changes regularly) and with a fixed interest rate (which does not change throughout the life of the contract).

Important. Each lender determines the interest rate individually according to its internal rules. The law does not regulate this. So be sure to compare offers from several lenders.

If you sign a contract in a foreign currency, remember that monthly payments can increase significantly due to fluctuations in the exchange rate.

Approximate calculations can be made with this mortgage calculator.

When processing a loan should be considered and the related costs: notary fees are usually about 0.45% of the value of the property, the minimum service fee (1 euro per month), the commission for the registration of the mortgage (about 8.60 euros).

You can choose and buy real estate in Lithuania with the help of Realting catalog.

Latvia 

The way things work

Both residents and foreign citizens can get a mortgage in Latvia. It can be done quite easily and quickly, but the rates here may not be as favorable as in other EU countries.

The demand for home loans in Latvia has increased significantly after the amendments to the Immigration Law adopted in 2010. What is the appeal of these amendments: foreigners in exchange for investment and purchase of real estate in Latvia can get a temporary residence permit for 5 years and a Schengen visa.

Important. Since September 22, 2022, the Latvian government has corrected the amendments regarding the Russians. Now they will not be able to extend a residence permit, if it was obtained through investment or purchase of real estate in Latvia. Existing residence permits were canceled on September 1, 2023. To get a residence permit again, it is necessary to confirm the knowledge of the Latvian language. The same rule applies to those receiving a residence permit for the first time.

Basic requirements for obtaining a mortgage

As a rule, Latvian banks issue mortgages for the purchase of apartments, houses or commercial property, but almost never for the purchase of undeveloped land for private development.

What requirements must be satisfied in order to get a loan from Latvian banks:

• provide documents proving your identity;
• confirm permanent income (if you earn on the territory of the Republic of Latvia — this will be a plus);
• show the notarized consent of a spouse to purchase an apartment or other type of real estate in Latvia on credit;
• open an account at the bank where the mortgage loan is taken out;
• fill out the bank questionnaire;
• provide documents with the results of the assessment of the object (conducted by a certified real estate appraiser).

What will affect the receipt of credit with the most favorable conditions: a good credit history, high monthly income, ownership of stocks and securities, the presence of a guarantor, the lack of other credit obligations.

Possible loan amount and associated costs

In order to get a mortgage in Latvia, you must already have on hand about 30-40% of the value of the object. Mortgage loans to foreigners are usually granted in the amount of 150,000 to 250,000 euros. Based on these two facts, we can conclude that in the mortgage can be taken objects worth 200,000 to 500,000 euros.

The annual loan rate for foreign citizens is now around 5-7% (for Latvian citizens it will be lower). In general, the rate will be set individually, based on your capabilities, especially financial. Also, the amount of the loan will depend on the type of object: if, for example, buying an apartment in a new building, but not in an old house, you can get a loan for a larger amount.

Mortgages in Latvia, as a rule, are issued for no more than 10 years, but there are cases where this period may be increased. It strongly depends on the age of the client: if the property is bought by a young person, he is likely to get the maximum period. It is possible to repay the loan prematurely, and by law there are no penalties. 

Additional costs when taking a mortgage: opening an account at the bank, where the mortgage is issued (usually not more than €200); payment of the bank commission for issuing and processing the loan (up to 2% of the loan amount); payment of state fees for registration of loans in the «Land Registry» (0.1% of the loan amount); real estate insurance for one year (it costs about €110).

Note. The Land Registry is a state agency that records the rights and obligations associated with real property.

You can use the mortgage calculator to make approximate calculations.

You can choose and buy property in Latvia with the help of a Realting catalog.

Netherlands 

The way things work

In the Netherlands there are no restrictions on the purchase of real estate by foreigners. However, in order to get a mortgage loan, you must live in the Netherlands and be registered in the municipality (gemeente). As for the job, your company can be abroad, but your salary must necessarily be in euros.

There are two main types of mortgages in the Netherlands: linear and annuity mortgages.

A linear mortgage is when the borrower pays the loan in equal installments. That is, each month a fixed portion of the principal is repaid, plus interest, which has accrued on the outstanding balance. Gradually, the outstanding debt decreases, and therefore the amount of the required payment also decreases.

An annuity mortgage is when the borrower pays the same amount every month until the end of the repayment period. But the nuance here is that within that amount, the proportion of the payment changes constantly in favor of the principal and interest on it. In the beginning, the interest is mostly paid, while the principal is almost never repaid. So, for a long time, interest is charged on a barely shrinking balance. So this option is likely to cost you more.

People usually choose one of these two types of mortgages because they are the only ones for which the tax deduction on interest is relevant, which, in fact, everyone in the Netherlands is striving for. Right now it is 30%. That is, the tax office will refund 40% of the interest you have earned on the loan. Thus, the amount of your income tax will «lose a lot of weight», and the total monthly cost of credit can be reduced by more than a third.

In the Netherlands, there is also such a thing as a National Mortgage Guarantee, or NHG. In short, it is your protection in case of an emergency, like forced unemployment or incapacity for work. So, if something terrible happens, the NHG will find some kind of solution or cover the remaining debt.

NHG will cost you 0.6% of the mortgage amount. However, this money can be paid back quickly, because lenders offer lower interest rates to those who choose NHG when they make a deal. Also, in this case, the tax office will give you a refund of 1% of the purchase price. It is also worth bearing in mind that NHG is only available for mortgages with a maximum amount of 355,000 euros. 

Basic requirements for obtaining a mortgage

The mortgage in the Netherlands is usually taken out for a maximum of 30 years. Here are the basic parameters that you have to meet when taking out a mortgage:

• A valid passport.
• BSN (Citizen service number).
• Residence permit (if you are not an EU/EEA citizen).
• Residency in the country from six months to five years (desirable). Your partner (if any) must also live in the country with you, even if you are relying only on your own money to buy the property.
• A good credit history. This will allow the lender to offer you better mortgage rates.
• Employment status. Ideally, you should have a permanent job in the Netherlands. If you are self-employed, you must have at least a three-year income history. Temporary workers or postgraduate students must submit a statement from their employer (werkgeversverklaring).

Remember that you can always contact a mortgage advisor. In addition to many Dutch advisors, there are also several foreign mortgage specialists in the Netherlands. If you do not speak Dutch, this option will especially help you out.

Possible loan amount and associated costs

When buying a property with a mortgage, the interest rate available to you will depend on the following factors: the size of your deposit and the period for which you plan to fix the mortgage interest rate. The standard mortgage rate in the Netherlands now ranges around 4-5%.

Curiously enough, in the Netherlands you can get a mortgage of up to 100% of the value of your house (but then the interest rates will be higher). Another nuance: in most cases you will be able to pay up to 10-20% of the total loan amount every year. If you repay more than that, you may have to pay a penalty.

You can use a mortgage calculator to calculate the maximum mortgage.

What extra mortgage costs to expect: 

• Assessment fee — currently costs about 300-500 euros.
• Mortgage consultant’s fee (can be from 1,500 to 3,000 euros).
• Life insurance and other administrative fees (costs start at 150 euros).
• The services of a notary will cost about 1,500 euros.

The good news is that the tax discount also applies to these extra expenses. That means that in a few months, a portion of the amount you paid will be refunded.

You can choose and buy a home in the Netherlands with the help of Realting catalog.