Foreign Property
Buying property abroad can be a tricky business.
Living the holiday dream is one of the main reasons more and more Brits decide to buy a property abroad. There are a number of other reasons why so many of us are investing in homes abroad. “Lower interest rates, lots of media coverage, and those with UK buy-to-let experience now looking to other markets.
Financing
The first thing you should do is look at the finance. There are three options: buy outright from personal resources such as savings; release equity from a UK property, or take out an overseas mortgage.
If you release equity from your UK home by remortgaging, you have the advantage that your income is in the same currency as your debt; however, you could be missing a lower interest rate abroad. However, with an overseas mortgage in another currency, you are taking on exchange-rate risk.
The Professionals
The next thing to do is hire an independent, reputable solicitor to carry out a survey and check that the title is true and inherits no debts. The Law Society (020 7242 1222) or the embassy or consulate of your chosen country should be able to help you with suggested solicitors. It might cost a bit more, but nowhere near the cost of difficulties arising because of shortcutting the process.
No hidden surprises No two countries have identical property laws, so do not assume everything is the same as in the UK. Be aware of all purchase-related costs. There may be additional local property taxes, for example the plusvalia in Spain, payable on the increased value of the land since the last transaction. Find out your tax liabilities – you might have to pay income tax on any rental or your estate could be faced with inheritance or capital gains tax.
Follow the tips suggested in the box on this page and remember to approach a foreign purchase as prudently as you would a UK purchase and you could be joining the millions of other Brits walking off into the sunset.
Top tips for buying abroad
1. Never sign a contract you do not understand.
2. Seek specialist advice from independent solicitors, architects and surveyors proficient in your chosen country’s laws and home buying processes.
3. Ensure an independent valuation of the property is carried out prior to sale.
4. Ensure you do not inherit a debt on the property before you purchase (a solicitor should be able to check this).
5. Always give yourself a ’cooling off` period before buying.
6. If you are arranging finance on the property, ensure that this is stated in any contract and you have an ‘opt-out clause’ if the loan is not agreed to ensure any deposit paid is refunded.
7. Try to arrange your mortgage finance ‘in principle’ before agreeing to purchase the property.
8. Arrange your mortgage in the currency that you earn your salary in where possible.
9. Be aware of the costs charged by the legal and government authorities for property purchase in your chosen country.
10. Open a bank account in your chosen country and ensure you get a Certificate of Importation for the money you bring in from your home country.
11. Set up standing orders in a local bank account to meet bills and taxes.
12. Remember to add costs such as lawyers’ fees, taxes and insurance as well as the asking price of the property to the total costs.