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Information > Overseas Property
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Overseas: n. Somewhere beyond the sea

A vibrant lifestyle in a new city? Skiing to the doorstep of your log cabin in the mountains? A retirement home away from the UK? A Mediterranean holiday let? An executive golf lodge? A tropical paradise hideaway?

Buying property abroad is more popular than ever, with increasing numbers of people following their dreams and purchasing a holiday home, a buy-to-let, or moving lock, stock and barrel to the sun.

There are a huge number of reasons for buying a property overseas.It is now as easy to find and purchase property OVERSEAS as it is to buy in the UK. That said there are many legal and financial considerations that are applicable to different countries. With seeming no two country’s laws being the same, it may well be easier to use the help of a professional sourcing Company rather than going it alone. The laws dealing with non-residents buying property vary so much between countries, that you may need to research the requirements before you even start looking at properties. It's no good falling in love with a place only to discover you have to pay the debts of the last owner, or that you can't renovate it in the way you want to.

It is wise to use a registered and well-established estate or property Agent to help you purchase your property abroad.

Most will have properties or developments for sale that they package into a Ready Made deal or they may source properties that match your requirements to order. They can also recommend solicitors, notaries and other professionals who are essential for the smooth running of the purchase and may insist that you use their nominated suppliers if it is a ready made deal. You do not have to visit an investment property before you buy although it would be wise to do so it the purchase is for your residence. Many Companies offer fly and buy trips. This could be a good idea but you need to be fairly sure you are ready to invest before you go as there could be a lot of pressure to buy from the sales team - many of whom work on a commission-only basis and are very clever indeed.

Another key question when buying a holiday home or investment in another country is your financing method; should you take out a mortgage, use a foreign currency loan or pay cash. The answer is dependent on the individual circumstances and you should take advice before making the decision.'

Buying outright for cash has both advantages and drawbacks. You do not have to worry about outstanding debts or the impact of currency fluctuations; nor are you under pressure to generate rental income simply to pay your mortgage repayments each month. For someone who is heading towards retirement in the sun, it may be the best option; however, a lot of wealth will be tied up in one not very liquid asset. A cash buyer does not need an outside valuation, so they may be in danger of paying over the odds for a place they have fallen in love with.

Most Investors will take out a mortgage.

This way they commit less money to the Investment and gear up to purchase a larger or better property. It also provides a safety net, as the lender will require a valuation and will not provide the money if the property is overvalued. A further advantage is that you may be able to minimise the UK tax paid on rental income, depending on your circumstances

There are two types of mortgage options available; sterling and foreign currency.

For a Stirling mortgage, you would need to remortgage a property in the UK (usually the residential home) to release the capital that has accumulated as property values have gone up. This is down to the fact that UK banks will not lend directly on overseas properties, due to other countries' property purchase systems being outside their sphere of influence and understanding.

Remortgaging or extending a UK mortgage is pretty cheap; but UK interest rates are considerably higher than in many countries.

A foreign currency loan would be arranged by a specialist UK-based overseas mortgage Broker who will arrange an overseas mortgage, usually with a local bank. The Broker acts as a go-between, sourcing the best deal and ensuring that the papers are correctly presented.

A disadvantage to an overseas mortgage is that overseas mortgage Brokers are not regulated by the FSA so it becomes all the more important to go to a well-established firm.

Many brokers charge up to 1% brokerage fee, despite the fact that they generally get paid commission by the bank as well. 'There is also the added risk that the Broker is not well connected or doesn't speak the language fluently, making negotiation difficult.

Foreign currency loans may have high set-up costs as you typically need a deposit of 20%+. Although interest rates are usually lower then in the UK, they will be on a repayment basis over a period of 15-20 years. In general a foreign currency mortgage will work out cheaper over the years. A further considerations for UK-based buyers, is the issue of foreign exchange fluctuations which may effect and adjust monthly mortgage payments quite severely. This effect could be lessened by receiving rental or other income in the currency that the loan is in. For example, if you purchase in Europe using a local euro mortgage and rented out to European tenants in Euros, then the property might be self-financing in Euros, with no need for sterling input.

If you were worried about exchange rate fluctuations either during the purchasing process or the monthly mortgage costs, you could consider entering into a Forward buying contract. This enables you to fix the exchange rate for the purchase or sale of currency for delivery at a later date (up to two years) and may be able to lock into a favourable exchange rate.

If you own overseas property, you need to know about the tax implications! This great book will show you how to minimise your tax.



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