It is usually the case, understandably, that buying a property overseas is going to be more complicated than simply buying locally. If you are looking to acquire a property abroad, you may be wanting a holiday home situated in the sun or may be looking to actually completely relocate outside of your domestic country.
Second properties abroad are great for saving money on holidays in the long-term, as you never have to worry about finding and forking out for accommodation when you can simply just jet off to your own private home which is self-catered – no need to seek out an all-inclusive deal!
Plenty of people choose to find a home in a different country as part of their retirement plan and live out the rest of their lives in luxury, soaking up the sun after years of hard work.
There are a number of things which you need to consider when aiming to purchase property abroad. These include certain risks as well as working out how you are going to get a mortgage overseas.
In this guide, we will explore the difficulties you may face when buying abroad and provide advice as to how to overcome these potential barriers in your way, including:
- Getting to know the risks of buying abroad
- Getting a mortgage for your property based overseas
- Making sure you’ve researched the area
- Consider a time-share or joint ownership
Get to know the risks of buying abroad
Tax
Make sure that you are aware of how much tax you will be required to pay. You need to account for this when deciding if you can afford to move abroad or take up a second home overseas. If you have two properties, you will be paying tax on the one in the UK and the one in the country which you have opted to purchase a property in.
Check the paperwork
Be sure to acquire all the necessary paperwork beforehand. This includes permissions, licenses and planning consents – these should be in place before you sign any kind of contract or agreement which binds you to the property.
You also need to know your Visa rights. In most countries, you are not allowed to live in your property for the whole year if you are on a standard Visa. You will have to see what the rules are in the country which you are choosing to buy in before you look to buy at all. It may be that you can only stay for a few weeks or months at a time.
Exchange rates
You need to be aware of the risk of the exchange rates of any given country. Even just a small shift in the exchange rate can have a profound effect on the value of your property. The exchange rates changing could even mean that your property and/or your mortgage repayments practically unaffordable overnight.
Getting a mortgage for your property based overseas
If it is the case that you have a mortgage where you are going to be making the repayments in a foreign currency, it is compulsory for the lender to make you are of the exchange rate if it fluctuates by more than 20%. Any fluctuations can seriously affect your ability to meet any future mortgage commitments which you have signed up for.
Therefore, in order to protect borrowers from falling victim to this, lenders must offer the borrower the option to repay the mortgage in a different currency to the one it is currently being paid in.
If you do not have time to get a mortgage sorted before completing on a property, consider a bridging loan. If you are wondering what a bridging loan is, essentially, A bridging loan is a type of short-term finance which basically acts to ‘bridge the gap’ between you and the mortgage, allowing you to obtain the property without a mortgage being cleared. Rather than losing a potential property, you can apply for a bridging loan and receive the money in one lump within a few working days. Once the property has been purchased and has access to more finance, you will be required to repay the loan.
Make sure you have researched the area
You may be set on a particular country, but are you clued up about the area you are looking in? It may be time for an excuse for a quick holiday to explore the area! You will want to look at the local facilities; is it close to a food store? Are there nice places to eat and drink around, if that is important to you? What things are there to do in the area? And what are the transport links like?
If you are not set on a particular country but just know you want to buy abroad, look at the cultures, safety and economic and political stability of a territory before you make the jump into signing anything. It is not wise to look at getting a holiday property in somewhere which is known for acts of terrorism, war and political unrest. Not only will you probably feel less safe visiting your property and therefore it might not make the purchase worth it in the long-term, the value of the house will be low due to these factors. So yes, you may be able to buy it for a cheap price, but when it comes to selling it you are likely to make a loss.
Consider a time-share or joint ownership
If you are not going to be in your overseas property all of the time, why not consider saving some money and partaking in a timeshare or joint ownership. Buying with friends, family or finding people through an organised group is sure to open the door to plenty more opportunities as to the type of property you can realistically afford to buy, as well as a more premium location.
The way this works is that you have joint-ownership of the property, all parties having full use of the home. You can arrange to book it off for yourself or you can all enjoy it together. This way, you can have a private holiday home for a fraction of the price and it is still being used, cleaned and maintained when you are not there if someone else is from your agreement.
