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Are you looking to invest in overseas property in 2016? Chances are it will be difficult for you to finance the deal unless you can afford to pay in cash for 100% of the value of the property. Since most overseas properties, especially in Europe, cost between 100,000 to 250,000 Euros, not many people can afford an all-cash purchase.
Even if you were to secure a mortgage locally, you would have to pay a higher interest rate, as it would be difficult for you to get the same favourable terms extended to locals. Also, you might have to pay 30% to 50% down payment on the property’s value, which is on the high side.
Not just that, many countries require you to take out a life insurance policy for the amount of the mortgage and name the bank as the beneficiary. This is not easy to get as many insurers place an upper age limit on those applying for the insurance policy.
So what are your options?
Let’s begin with cash. Cash is king when you are buying an overseas property. Cash helps you close a deal much faster, and gets you the best price in a negotiation as well.
You should opt for an all-cash purchase only if the property has already been built, not one that is still under construction. Never buy cash for something that hasn’t been built yet. There’s a possibility that the developer wouldn’t be able to complete the project because of various reasons and maybe run away with your money.
Your next option is to get a mortgage on the foreign property. You can arrange for a mortgage through a British bank or from an international lender. You can also raise funds by remortgaging your property in the UK.
Remortgaging your home in the UK to buy overseas property is a good option. It gives you the cash injection you need to make an offer outright. However, this can work for you only if you have a decent credit rating and your existing mortgage has been fully paid off. Also, mortgage advisers in the UK are generally inexperienced at offering assistance with overseas property deals.
How about taking a loan from a UK bank to finance the overseas property? This can work, but UK banks only offer mortgages for a property purchase in countries such as France and Spain where they have branch offices. It might be difficult for you to get a mortgage from a UK bank for a property in Malta, Cape Verde or Barbados for his reason.
Can you get an overseas mortgage from a lender abroad? Yes, we have already discussed this earlier in the article. You can certainly get a loan to finance your overseas property from foreign lenders, but the terms aren’t likely to be as favourable as those given to the locals.
This puts you at a distinct disadvantage. Also, borrowing in a foreign currency may or may not work out well, as this depends on the exchange rate fluctuations in the currency market.
We have discussed the options available to you, including their advantages and disadvantages. Think through each one of them carefully and arrive at a final decision keeping your financial situation and personal circumstances in mind. Make no mistake – investing in overseas property will be one of the best decisions you can make, but only as long as you can afford it.
If you need to get cash for overseas property contact the experts in resales today.