Over the last ten years there has been a huge increase in British and Irish buying a property abroad. Datamonitor, the market research company, found that the British alone own 3.81 million properties outside the UK. This figure is forecast to double by 2012, equating to 88 million gbp in monetary value.Whether you are buying a Trulli in Pugli or a Finca in Granada there are some general principles that are instrumental for a trouble free purchase.
Calculating your Budget
Only you know the answer to this! Firstly when apportioning money for an overseas purchase, ask yourself what you want to achieve IE. Primary Residence, a second home, rental or capital investment.
Please be aware that when purchasing abroad buying costs vary from country to country, additional expenses include transaction costs, purchase taxes and lawyers fees. Please consult our individual county keys for country specific information.
There will be residual costs when owning an overseas property, even if there are no mortgage repayments to make. Insurance, maintenance charges (the splitting of the cost of gardening, pool maintenance, lifts etc between residents in an apartment complex) and yearly taxes will be payable.
Your Financial Advisor can assist you in planning for these ongoing costs.
Viewing Trips
Calculating your budget provides the foundations for your overseas purchase, but visiting your target country will give you a “feel” for the area. Understanding the current market value and overall suitability of the destination can all be ascertained by being on the ground.
Please be aware if you consider yourself a “pioneer” and are buying in an area where there have been few foreign purchasers, you are considerably increasing your risk.
Testmonials of people who have bought provide a great insight for you and show you exactly what you should expect and also the quality of the professional services they received.
Seasoned investors who have done significant research into a specific area and have done exhaustive “due diligence” on the development may proceed without a visit, often likening the purchase to that of stocks and commodities.
One of our regular, big investors states “When investing in a company, if the balance sheet looks strong, the market sector is enjoying growth and we like the management, I would not need to view the Head Office.”
This approach should only be adopted by those looking for pure investment and whose understanding of economics and markets allow a calculated decision to be made.
Financing Your Purchase
There are a number of ways to raise finance for your overseas purchase using both domestic and international lenders. Given the sharp increase in house prices over the last few years, many people choose to pull the equity out of their homes. This is a simple process that requires a familiar application process. Please be aware that failure to meet payments on this equity release places your home at risk, so careful examination of your finances is very important. Currently interest rates from equity release are amongst the least competitive in Europe.
Alternatively you could apply for a mortgage in your chosen country (where possible), competitive rates at present make this attractive, but be prepared for bureaucracy and in some cases less sophisticated products.
Lawyers
Employing a lawyer with an understanding of your chosen destinations property law is absolutely essential.
Title deeds, developers financial security and many other key issues require a lawyers knowledge. Many horror stories all stem from the fact a competent lawyer was not involved in the purchase. You would not buy a house in your home country without hiring a lawyer, so why would you do it in an unfamiliar country.
Taxation
Buying overseas can have tax implications in both the country of purchase and the UK, you can get details of how your purchase would affect you specifically. The Institute of Chartered Accountants (ICAEW) will give you details of specialists who can advise you accordingly.