Britons’ fixation with home ownership is well known, and millions of people up and down the country have trodden a well-worn path when it comes to saving up for a deposit and getting a mortgage.
But would-be buyers around the world face different rules and regulations when it comes to mortgages. And, of course, in some countries, renting rather than home ownership remains the norm.
According to the Statista Global Consumer Survey last year, Switzerland and Germany are firmly rental societies, with many residents not owning their own homes.
Buy or rent? Home ownership and rental statistics for different countries around the world
But, it is a different story in China and Russia, where property ownership is very much the norm, according to Statista.
Experts at Online Mortgage Advisor have rounded up some of the key details about how mortgages work in different countries.
The most pertinent points are covered, but, as ever, anyone wanting to take the plunge and buy a home in another country will need to do their own research and take professional legal advice.
According to the research, the typical mortgage term for properties in Canada is five years, and the maximum term is 10 years.
But interest rates are fairly low, hovering at around the 2.49 per cent mark at present.
At the end of the period, the mortgage terms are then renegotiated.
In France, the general rule of thumb is that a buyer can borrow five times their individual or combined income for a repayment mortgage, and when it comes to interest-only mortgages, up to 10 times their income.
But, borrowers must have net assets outside their main residence which are at least equal to the value of any interest-only mortgage.
For example, if a buyer wants to borrow €1million through an interest-only mortgage, they will need to have at least that amount stored away somewhere, the research suggests.
Rules: In France, the general rule of thumb is that you can borrow five times your individual or combined income for a repayment mortgage
The debt-to-income ratio is another important factor when it comes to getting a mortgage and buying a home in France.
Online Mortgage Advisor said: ‘Banks will look to see if your existing monthly payments for loans and mortgages exceed one third of your gross monthly income.’
However, one outgoing that French banks do not take into consideration is school fees.
So, if you have two children in private education, the term fees for the school will not be reviewed in your outgoings during the mortgage approval process.
When applying for a mortgage in Germany, banks will investigate an applicant’s financial situation thoroughly.
Part of the process is to obtain a ‘Shufa’ report, which is the equivalent of a credit report here in the UK.
The most common type of mortgage within Germany is a fixed interest loan.
This is where the borrower can set the terms for the rate of the balance repayment – usually paying between one to 10 per cent of the amount over the term of the loan.
They can also decide whether to make additional ‘principal-only’ balance repayments, up to 10 per cent of the outstanding amount.
However, for those wanting to buy a property to rent out, or for those looking for a buy-to-let property, interest-only mortgages are more favoured, the findings claim.
During the term of the loan, only the interest proportion is paid and the balance is due in full at the completion of the loan term. It is possible for German residents to deduct the interest payments from their annual income taxes.
The mortgage industry in Russia is still relatively young, so there are many variations depending on the bank or mortgage lender a prospective buyer is dealing with.
Currently, the Government is looking to boost the Russian property market by offering mortgage rate incentives for prospective buyers.
A big difference with Russian mortgages is that you have the freedom as the borrower to choose which denominating currency to use: you can opt for Russian Rubles, US dollars or Euros.
Therefore, the ‘felt cost’ of the mortgage is based on the prevailing foreign exchange rate and the currency in which you earn your income.
Therefore, as an initial step in applying for a mortgage in Russia, try to ensure you have at least a passing familiarity with foreign exchange rates.
Borrowers in Russia tend to have a consultation with their lender to decide the terms appropriate to their situation, rather than fitting into a particular product.
In Singapore, most banks offer mortgages at fixed or variable rates. In most cases they will offer loans of up to 60 per cent or 80 per cent of the purchase or valuation price, whichever is lower.
The buyer will then have to top up the remaining amount in cash from a Central Provident Fund account.
Buyers in Singapore will also have to factor in the total debt servicing ratio.
This limits the monthly debt obligations to 60 per cent of a salaried person’s income, or 70 per cent for self-employed or commission-based workers, including debts incurred from credit cards, cars or property loans.
Expensive: Property in Singapore can be extremely costly to purchase
Interest rates can often work in the favour of the borrower in Singapore.
Getting a mortgage pegged to a variable rate might be beneficial, as some of the variable mortgage options are based on the rate that Singapore banks exchange money with each other, which tends to be a more resilient option than the country’s equivalent of our base rate.
Due to Singapore being the second most expensive housing market in the world, 80 per cent of the country’s residents live in government-built and subsidised high-rise properties, with many residing in high-rise flats.
Generally, to secure a mortgage in South Africa you will need a minimum deposit of 50 per cent of the property’s purchase price.
Although lenders offer a choice of either fixed or variable interest rates, most mortgage lenders in South Africa opt for a home loan on a variable-rate basis, with a maximum of 30 years available, although the term is usually 20 years.
Fixed rate mortgages are much less common due to the uncompetitive rates offered by banks to offset the risk of volatile interest rates. A loan in South Africa generally has to be paid off by the age of 70, the findings suggest.
The lending regime in Sweden is partly regulated via legislation and partly determined by the banks themselves.
On top of having proof of a steady income, Swedish banks use a number of calculations to determine how much they will lend you via a mortgage.
One such calculation is known as ‘Left to live on’. In essence, the lender will calculate how much money the buyer would have left to live on once the mortgage and other bills were paid.
The usual income requirement for a family of four is around 23,000 SEK per month, which is around £1,830.
Swedish dream? The lending regime in Sweden is regulated partly via legislation and partly determined by the banks themselves
Sweden has also recently brought in tighter controls, so lenders cannot approve mortgages which exceed 85 per cent of the purchase price.
In certain cases, it might be possible to get an additional unsecured loan, but a higher interest rate would then be charged and the loan would have to be paid off in a short time frame.
New loans have to be repaid at the rate of 2 per cent per year until the loan is down to 70 per cent of the property’s value, and then at 1 per cent per year until it is reduced to 50 per cent.
A maximum mortgage of five times a buyers’ pre-tax annual income is seen as standard, which is slightly higher than the UK average of 4.5 times annual income.
United Arab Emirates
The UAE mortgage market is well-established, with international and local lenders offering home loans.
Both residential and buy-to-let mortgages are available, although their criteria may vary.
If you are taking out a loan to buy a property in the UAE, you will, according to Online Mortgages Advisors, typically need a deposit of at least 25 per cent for a property worth up to AED 5 million, which equates to just over £1million.
More expensive properties will require a deposit of at least 35 per cent.
Borrowing is capped in the UAE, so the amount being borrowed cannot exceed someone’s total anticipated earnings for the next seven years.
In Dubai, mortgage payments are capped at 50 per cent of the buyers’ monthly income.
Ratio matters: In the USA, a key calculation used in the mortgage application process is the debt-to-income ratio
In the USA, a key calculation used in the mortgage application process is the debt-to-income ratio, which will establish whether a buyer can maintain the mortgage repayments along with any existing loans.
This must not exceed 50 per cent of a buyers’ gross monthly income, meaning some lenders will be looking for very detailed information about a the applicant’s financial status.
Mortgages are available for up to 75 per cent of the property’s value, with most of them being on a repayment basis.
The maximum term is usually 30 years, and interest rate and loan terms will vary depending on location and property type.
How do mortgages work in the UK?
In the UK, homeowners can typically borrow 4.5 times their annual income as a mortgage. However, banks have the discretion to lend a small number of mortgages at up to 5.5 times the borrowers’ salary.
When considering whether the customer can afford a mortgage, banks will compare their income against their typical monthly outgoings, as well as looking at their credit history and any other debts.
Mortgages are available with deposits as little as 5 per cent, though the interest rate charged on these can be much higher than those with bigger deposits. The best rates are typically reserved for those with deposits of 40 per cent or more.
Mortgage terms commonly last 25 years, though these can stretch up to 40 years in some cases.
The interest rate on the loan is usually fixed for an initial period of two or five years, though a small number of products with 10 or 15-year fixed periods are available.
After that period, the borrower can remortgage on to another fixed deal. If they don’t, they will be put on to their lender’s higher standard variable rate of interest, which can change at any time.
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