Financing your property
Budgeting
When considering purchasing a foreign property the most important factor is to assess your budget. Set down the maximum amount you can afford (allowing approximately 10% of the property value for fees) and don't be swayed by properties above your budget. Never rely on a rental income to finance your purchase.
Raising a mortgage to purchase your property
For the majority of people, the whole house buying process abroad is a voyage of discovery. Few people are lucky enough to have the full amount of money required and need to arrange some form of borrowing. Many people assume that the mortgage process will be similar to that in the UK . After all, 95% mortgages are common in the UK , so why shouldn't they be elsewhere? The reality is somewhat different, from maximum loan to value that the lenders will consider, down to the way they calculate the maximum amount that they will lend you. There is also the consideration of borrowing money in another currency, which, if the exchange rates go against you, could work out more expensive than you had originally planned. However with the right advice, even the most inexperienced borrower can successfully buy their dream home.
Purchase
There are three possible routes available to raise the money needed for your purchase. One is to raise the money against an existing UK property (providing there is sufficient equity) Secondly raise a mortgage against the property in the foreign location or, thirdly, a mixture of both.
Raising money against UK property
This, for most UK residents, is probably the cheapest and most straightforward option. The funds required can be raised either by taking further borrowing on an existing mortgage or by remortgaging to another lender and increasing borrowings. The fees involved are comparatively small and the process is familiar. However, this relies on there being sufficient equity in the property and some people are uncomfortable with the idea of using their home in the UK as security for a holiday home.
Types of mortgages available
Mortgages are generally offered on a capital and interest method i.e. repayment. The maximum term is 30 years, however some banks will limit the borrowings to as low as 15 years. We are starting to see a shift amongst lenders to offer interest only as an option of reducing outgoings in the early years, however this tends to be limited to the first few years of the mortgage, reverting to capital and interest after this point. The market has also seen some " UK style" products appear, with some lenders starting to offer offset options.
Foreign Exchange
If you are buying a property overseas, whether as an investment, holiday or retirement home, or to live permanently, it is likely that you will have to pay for your property in a foreign currency. Given the sums of money involved in a property transaction and the associated additional costs, you will no doubt want to save money wherever possible. You will also want to ensure that the price that you have to pay for your property does not increase due to an adverse exchange rate movement. Property Investment works closely with Moneycorp one of the most respected foreign currency providers in the world to offer our clients total peace of mind with regard to removing the fear of currency fluctuations.
Legal Issues
It should be borne in mind that closing costs, legal requirements, fees and taxes etc vary from country to country, and it is recommended that you undertake research into these prior to committing to any overseas property purchase. Specialist advice should be sought from independent Solicitors, Architects and Surveyors wherever possible, who are proficient in the law and processes of the chosen country. Never sign a contract you don't understand, make sure it's been accurately translated into English, and don't hand over any money until you're totally happy with the contract. If you're using a mortgage to purchase a property, ensure that the contract is subject to you getting the finance, having arranged your mortgage in principle. If the property is still being built, make sure the price is guaranteed, and put your deposit into a bonded account, with a bank guarantee. It's also prudent to open a local bank account in the chosen country, and to get a certificate of importation for the money you'll be taking in.
Using Estate Agents
One of the most complex and important financial events in peoples' lives is the purchase or sale of a home or investment property. As a result, people usually seek the help of real estate brokers and sales agents when buying or selling real estate. Through our affiliate network we have access to selected estate agents, currently throughout Spain and in Dubai. This network is continuing to expand internationally.
