<< Back to Articles Print this article Overseas Mortgages Cash purchase or mortgage … Mortgages In most countries it is possible to arrange a mortgage between 70 and 85% of the property’s value through a mortgage broker or bank either in the UK or in the country where the property is located. In some cases it best to use a bank in the same country as the property you wish to purchase, as they may have more favorable interest rates. At the moment it is advisable to take a mortgage out in Euros as the rates are currently around 3.25% compared to 5.5% for a mortgage in Sterling. Cash Purchases Another option is to release equity from your UK property, which has been more and more popular in recent years due to the increase in house prices in the UK thus increasing the equity people have in their homes. If you have cash to invest it is not always necessarily wise to tie it up in property, you may find that you can get a better rate on it in a savings account compared with the Interest rates you will pay on a mortgage. If you are seeking to purchase a property in Spain in cash then you also need to take into consideration Inheritance Tax – this is based on the net value of the property – the value of the house minus the mortgage, so you could leave someone a hefty bill along with the property. Securing the price of your property – buy now, pay later! The actual cost in Sterling will be determined by the timing of your currency purchase. You will have to complete one or more transactions when buying your overseas property, and a lot of people do not take into account exchange rate fluctuations which can have a significant impact on the purchase price, be it positive or negative. This can be very problematic especially if your budget is tight. Exchange rate fluctuations can alter the price you ultimately pay in Pounds, even though you have agreed the price in Euros. Although the changes in the exchange rate may seem very small, it could cost you thousands of pounds extra when transferring large amounts of your money. To avoid this risk you can set up a 'forward contract' which you means you agree and book an exchange rate in advance and pay for it later, which is ideal if you need to make staged payments if you are buying off-plan. This option protects you from currency-risk and the biggest benefit is that it leaves you knowing exactly what your financial commitments would be in the future. Should you choose to take out a forward contract a 10% deposit is the minimum required to be lodged with the forex broker (HIFX, Moneycorp) with the balance payable prior to the maturity of the contract. Any money deposited with the broker will be placed in an ESCROW account, effectively a protected customer account held at the broker’s bankers. Customs & Excise certification gives the consumer added guarantees that their money is safe and secure. Buying Off-plan Buying off-plan is common practice in Spain and increasingly in other European countries. If you are purchasing a property in this way, it is the normal procedure to make staged payments, usually in three parts. You will be required to put down a small deposit to secure the unit (usually this is non-refundable, but do check!) and the payments will vary from one developer to another. It could be 20% on signing your Private Purchase Contract which is usually a month after paying the deposit but this can be flexible, 20% six months later and 60% on completion. If the payments do not suit you, or makes it impossible for you to purchase the property then these may be negotiable, so it is always worthwhile to ask! Back to Articles Print this article Written by: Ben Saxton From: http://www.quicksaleproperty.net Date written: 30/05/2006

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Overseas Mortgages

Cash purchase or mortgage …

Mortgages

In most countries it is possible to arrange a mortgage between 70 and 85% of the property’s value through a mortgage broker or bank either in the UK or in the country where the property is located. In some cases it best to use a bank in the same country as the property you wish to purchase, as they may have more favorable interest rates. At the moment it is advisable to take a mortgage out in Euros as the rates are currently around 3.25% compared to 5.5% for a mortgage in Sterling.

Cash Purchases

Another option is to release equity from your UK property, which has been more and more popular in recent years due to the increase in house prices in the UK thus increasing the equity people have in their homes. If you have cash to invest it is not always necessarily wise to tie it up in property, you may find that you can get a better rate on it in a savings account compared with the Interest rates you will pay on a mortgage. If you are seeking to purchase a property in Spain in cash then you also need to take into consideration Inheritance Tax – this is based on the net value of the property – the value of the house minus the mortgage, so you could leave someone a hefty bill along with the property.

Securing the price of your property – buy now, pay later!

The actual cost in Sterling will be determined by the timing of your currency purchase. You will have to complete one or more transactions when buying your overseas property, and a lot of people do not take into account exchange rate fluctuations which can have a significant impact on the purchase price, be it positive or negative. This can be very problematic especially if your budget is tight. Exchange rate fluctuations can alter the price you ultimately pay in Pounds, even though you have agreed the price in Euros. Although the changes in the exchange rate may seem very small, it could cost you thousands of pounds extra when transferring large amounts of your money.

To avoid this risk you can set up a 'forward contract' which you means you agree and book an exchange rate in advance and pay for it later, which is ideal if you need to make staged payments if you are buying off-plan. This option protects you from currency-risk and the biggest benefit is that it leaves you knowing exactly what your financial commitments would be in the future. Should you choose to take out a forward contract a 10% deposit is the minimum required to be lodged with the forex broker (HIFX, Moneycorp) with the balance payable prior to the maturity of the contract. Any money deposited with the broker will be placed in an ESCROW account, effectively a protected customer account held at the broker’s bankers. Customs & Excise certification gives the consumer added guarantees that their money is safe and secure.

Buying Off-plan

Buying off-plan is common practice in Spain and increasingly in other European countries. If you are purchasing a property in this way, it is the normal procedure to make staged payments, usually in three parts. You will be required to put down a small deposit to secure the unit (usually this is non-refundable, but do check!) and the payments will vary from one developer to another. It could be 20% on signing your Private Purchase Contract which is usually a month after paying the deposit but this can be flexible, 20% six months later and 60% on completion. If the payments do not suit you, or makes it impossible for you to purchase the property then these may be negotiable, so it is always worthwhile to ask!

Back to Articles Go back to off plan property articles.

Print this article Print this article.

Written by: Ben Saxton

From: http://www.quicksaleproperty.net

Date written: 30/05/2006