Can You Use a Home Equity Loan or HELOC for a Foreign Property?

Are you in the market to buy your dream foreign property? Using a HELOC or home equity loan for foreign property to fund your purchase may be more convenient, offer better terms, and allow you to purchase property in areas where local lending isn’t strong. It also essentially makes you a cash buyer, strengthening your negotiating power. 

We’ll take a deep dive into your options to help you make the right decision for your situation. 

Can you use a home equity loan or HELOC to buy a foreign property?

As long as you meet the lender’s home equity loan or HELOC requirements, you can use a HELOC or home equity loan for a foreign property in many countries. However, not all countries or territories allow you to purchase a home if you’re a nonresident. 

For example, New Zealand doesn’t generally allow nonresidents and noncitizens (with certain exceptions) to purchase a home. Vietnam, Thailand, Singapore, and The Bahamas are also some countries with specific criteria, requirements, or restrictions on buying residential property if you’re not a legal resident.

Check with your mortgage lender to see whether you can get a home equity loan or HELOC in the country where you wish to purchase a property.

How does using a HELOC or home equity loan for a foreign property work?

A HELOC and home equity loan are based on borrowing against the equity in your current home. However, there are important differences between these two types of home equity credit.

Home equity loan

A home equity loan lends you money against the equity in your home. The lender assesses your home’s market value, equity, debt-to-income ratio (DTI), and credit history to determine how much you can borrow. The loan often offers a fixed interest rate and has a predictable, stable repayment schedule. 

Home equity loan funds are disbursed in one upfront lump sum. So a home equity loan for foreign property may allow you to purchase the property with cash.

HELOC

A HELOC is similar to a home equity loan, but the amount you borrow is more flexible. With a HELOC, you get approved up to a certain amount, and the line of credit often has a variable interest rate. HELOCs sometimes offer low introductory APRs or a draw period with interest-only repayment. With many HELOCs, you can withdraw money as needed. 

To help you decide between a home equity loan and a HELOC, ask yourself the following questions:

• Do I know exactly how much I need so I can get a lump sum with a home equity loan?
• Would I prefer the flexibility of a HELOC?
• What are the maintenance costs of a foreign property if I plan to use a home equity loan or HELOC for those charges?

To help you choose which home equity option is best for you, the table below shows important differences between how these two types of home equity credit work to buy a foreign property.

Home equity loan	HELOC
Lump sum disbursed all at once	Flexible amount to borrow, up to an approved amount
Most have fixed interest rates	Many have variable interest rates, sometimes with low introductory rates
Repayments start immediately	Only pay when you borrow
Uses home as collateral for the loan	Uses home as collateral for the loan

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Can I use a home equity loan to buy another house? 

Should you use a HELOC or home equity loan for overseas property?

Using a HELOC or home equity loan to acquire property overseas has several benefits. For example, you may get more favorable financing terms, such as a lower interest rate and the ability to keep your current home. Using your current mortgage lender, you won’t need to figure out another country’s banking system.

Cash buyers may be able to negotiate from a position of strength, allowing them to close the transaction faster or get a better price for paying cash. Getting a mortgage from a foreign bank can be challenging. You may also find it difficult to protect yourself from fraud. 

However, using a HELOC or home equity loan for overseas property may not be the best option under certain circumstances outlined in the table below.

When to consider a HELOC or home equity loan	When to reconsider a HELOC or home equity loan
✅ You can get better local finance terms	❌ Local mortgages for a foreign property are easy to get
✅ You want to keep your home	❌ You have insufficient equity in your home
✅ You don’t want to navigate another country’s banking system	❌ You don’t want to put your home at risk for foreclosure
✅ You want to use the funds to pay cash for the property	❌ The country restricts sales of property

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Home equity loan and HELOC requirements

How to get a home equity loan or HELOC for foreign property

The steps to obtain a home equity loan or a HELOC will look like this:

1. Obtain loan estimates from several lenders to compare them. 
2. Go through the home equity loan or HELOC application process.
3. Get a property appraisal.
4. Get approval from underwriting.
5. Close on your loan and get the funds.

Lenders may ask for the following when you apply:

• Your name, Social Security number, and date of birth
• Estimated value of your home and amount owed on the mortgage
• Assets and income information
• Permission to pull your credit report to determine credit history and eligibility

Your chances of approval are better if you have substantial equity in your home, a healthy credit score, and adequate debt and income levels. The approval process can take anywhere from two weeks to two months in the U.S.

Applying for a home equity loan or a HELOC is essentially the same. Before applying, you should know which is best for your needs.

Alternatives to a HELOC or home equity loan for overseas property purchase

Consider your other options if you’re unsure about using your home equity to finance an overseas property. 

Method	Best for
HELOC or home equity loan	Potentially better financing terms, greater flexibility, avoiding foreign banking systems
Overseas mortgage with a local lender	Avoiding foreign banking systems
Overseas mortgage with a foreign lender	Buying property in countries where you may be able to get a lower interest rate and better terms
Cash payment	Negotiating to get the best price, saving on interest, and faster closing period
Personal loan	Using funds to pay cash for a property to speed up the closing process
Seller financing	Faster closing, more flexibility with terms
Retirement savings	Avoiding taking on more debt

Obtain an overseas mortgage with a local lender

A lender in your own country may be able to provide a mortgage for an overseas property. However, it may not offer a loan in certain countries and territories. So first, check whether your lender can give you a loan in the location where you’re buying the property. Also, make sure the lender understands the location’s local customs and regulations, foreign ownership rules, tax laws, and insurance. 

Obtain a mortgage from a foreign lender

A lender in the country in which you’re purchasing the property may be able to help you buy a home. The lender might be more familiar with the market and help with local laws and customs.  

Pay cash

Paying cash for an overseas property can eliminate hassle, offer more room for negotiation, and quicken the closing. If you’re considering this direction, a cash-out refinance on your primary residence may get you the money you need to buy a foreign property and leave you with a single loan. 

Use a personal loan

Using a personal loan to pay for foreign property may come with a higher interest rate. However, unlike a HELOC or home equity loan, your primary residence doesn’t secure this type of loan, so you won’t lose your current home if you default. You may be limited in how much you can borrow with a personal loan. 

Seller financing

You may find opportunities to take advantage of seller financing in foreign countries—in particular, from developers looking to sell properties to overseas buyers. 

Retirement savings

Using retirement savings to pay for real estate is possible by taking a loan against your retirement account or withdrawing money and accepting the penalty. 

However, you may face the following:

• Reduction in tax-deferred compounding savings or growth in withdrawals
• Tax consequences for withdrawing from your retirement account
• Immediate repayment schedule in an employer’s plan (and subject to full repayment if you leave the job for any reason before repaying the loan)
• Potential waiting period before you can contribute again if you take a loan from your employer’s plan and are still working
• Risk to your retirement income