For decades, buying a second home abroad has been the dream of many UK residents. From a villa in Spain’s Costa del Sol to a ski apartment in the French Alps, international property has long been a mix of lifestyle purchase and smart investment.

In 2025, however, the financial environment for overseas buyers has shifted significantly. Higher interest rates, tighter international lending regulations, and evolving tax rules have added layers of complexity. Yet demand remains strong — particularly among UK-based professionals and high-net-worth individuals who want to diversify assets, secure rental yields in prime holiday markets, or establish a foothold for retirement.

The challenge today isn’t the dream. It’s the structuring. How do you finance a property abroad efficiently when navigating two sets of tax regimes, cross-border lending restrictions, and fluctuating exchange rates?

Financing Options: Where Do UK Buyers Start?

Most clients begin by considering whether to borrow in the UK or arrange finance in the country where the property sits. Both approaches remain viable in 2025, but each has its nuances.

UK-Based Lending Solutions

Some UK private banks and specialist lenders are prepared to offer finance against overseas properties — but typically only for high-value purchases and well-qualified borrowers. These loans often require substantial deposits (sometimes 40% or more) and strong provable UK income.

Where private banks are most competitive is when the property forms part of a wider wealth relationship. For example, a high-net-worth client with existing assets under management may unlock favourable loan-to-value ratios and interest rates.

Local Mortgages Abroad

Arranging a mortgage through a lender in the country where the property is located is the more traditional route. In France, Spain, and Portugal, this remains common for UK buyers. However, post-Brexit, lenders have tightened affordability checks. Many now apply stricter stress-testing for foreign borrowers, and maximum loan-to-value ratios are often capped at 60–70%.

Borrowers should also be aware of differing legal systems. In France, for instance, a compromis de vente (sales contract) commits the buyer early in the process, and mortgage approval must align with strict timelines. For UK buyers unfamiliar with continental procedures, this can be daunting without the right guidance.

Cash and Refinance Strategies

Some investors sidestep local borrowing altogether by releasing equity from UK property portfolios. In many cases, remortgaging a buy-to-let property or even a main residence provides the liquidity needed to purchase abroad in cash. This avoids navigating foreign banking requirements but shifts the leverage back to the UK.

For landlords already exploring this route, our blog on remortgaging buy-to-let properties in 2025 offers a deeper look at how equity release can be structured efficiently.

Tax Considerations for UK Owners of Overseas Property

Buying a second home abroad isn’t just about arranging finance. Taxation — both UK and local — can significantly impact the viability of the purchase.

UK residents remain liable for worldwide income tax. That means rental income from a Spanish villa or French chalet is taxable in both jurisdictions, with double-tax treaties often determining reliefs. Capital gains tax also applies on sale, with some countries imposing withholding at source.

Inheritance planning is another key issue. In France, forced heirship rules dictate how assets pass to beneficiaries — a structure that can clash with UK inheritance plans. Financing decisions must therefore align with broader estate planning strategies.

For clients navigating these complexities, we recently explored inheritance tax planning with whole of life policies — an increasingly relevant solution for cross-border property ownership.

The Role of Currency Risk

2025 has seen continued volatility in GBP/EUR exchange rates. For buyers financing a French or Spanish purchase, this directly impacts affordability. A mortgage of €500,000 may fluctuate in sterling terms by tens of thousands of pounds within months.

Specialist lenders and private banks often recommend currency hedging to protect repayment affordability. Forward contracts and FX solutions are becoming increasingly common, especially for landlords planning to service overseas mortgages using UK rental income.

For more on this theme, see our guide on currency risk and income verification — a critical consideration for any UK buyer with euro-denominated borrowing.

Practical Example: A UK Buyer in France

Consider a UK-based family buying a €320,000 house in the Haute-Garonne. Local French lenders may offer 65% LTV, meaning the buyers must contribute €112,000 cash. Affordability will be assessed against their UK income, typically using stricter criteria than a UK lender would apply.

Alternatively, by remortgaging their UK investment property, the buyers could release £150,000 — covering the French deposit and legal fees, with the balance arranged locally. This hybrid approach often provides flexibility while keeping borrowing costs under control.

This case mirrors real scenarios Willow sees regularly, where careful structuring of both UK and local finance delivers smoother outcomes than relying on one system alone.

How Willow Can Help

At Willow Private Finance, we work with clients who want to make international property ownership a reality — whether it’s a holiday home in Europe, a villa in the Middle East, or an investment in an emerging market.

Our role is to simplify the process:

• Assessing whether UK or local borrowing is more cost-effective
• Introducing trusted local lending partners across Europe and beyond
• Coordinating tax, legal, and inheritance planning considerations
• Structuring UK remortgages to release equity efficiently
• Advising on currency strategies to protect affordability

For clients at the high-net-worth level, we also work with private banks that can finance multi-jurisdictional portfolios under one relationship.

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