Check Out The Cars Near The Property
If you pull up to a gorgeous condominium development and there are only old rusty vehicles there, then you wont want to purchase a property there.
Areas with nicer cars are bound to be safer, and its a sign that the property is valuable. Remember, this is another country, and safety can always be an issue even if youre in your own home.
How Can You Finance A Foreign Mortgage
Securing a mortgage in Canada often requires you to save up for a 20% down payment. In some cases, Canadians can even acquire a mortgage with as little as a 5% down payment. This is not a reality for foreign investments, as many foreign mortgages will require you to have a much larger down payment. Many foreign investors, especially in countries with lower property sale costs than Canada, actually pay for the property in full. Nonetheless, paying for a property in full is not feasible for everyone, so there are a couple of other ways to explore financing.
Factors To Consider Before Buying International Property
Theres more to buying a house overseas than just purchasing the property. Here are other factors to consider.
Holding costs: Like any property, youll need to have funds set aside for upkeep and maintenance. These may be specific to the region youre buying in. For example, tropical regions require more outside maintenance than many are used to. If you fail to do that, it can result in a lot of damage, roof damage or tile damage, says Parker.
Security concerns: What security measures does the property have in place? Will you need to add bars or other security features? You should also consider who will look after the property when youre not there.
Short-term rental issues: In addition to needing someone local to manage short-term rental issues, youll need to comply with local and U.S. tax laws about rental income. Youll also need to confirm that youre allowed to rent out the property.
Taxes: Sales taxes could add to the cost of buying your property. Property taxes will likely also need to be paid. If you have a foreign bank account with a balance that exceeds $10,000 at any point, youll also need to report that to the IRS.
Exchange rates: Currency exchange rates are constantly changing. While the dollar is strong in many places, keep an eye on exchange rates and how they could affect buying property offshore.
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Borrowing From A Uk Bank To Buy Overseas Property
Some of the main UK high street banks have an international mortgage service, but you’ll need to find out which countries they operate in.
Banks tend to only provide mortgages for purchases in countries where they have offices.
While getting a mortgage in established overseas property markets such as France or Spain might be simple, it may be trickier if you’re looking further afield.
Although the mortgage may be set up through the UK bank, you would deal with the foreign arm of the bank once the mortgage had been arranged.
Should You Say Yes To Being A Cosigner
Whether youre about to be a cosigner or youre asking someone to cosign your mortgage, its important to assess the situation and think things over before signing any contracts. Similar to buying a home, cosigning a mortgage is a major financial responsibility, only without the benefits of being the propertys true owner.
Remember, as co-signer, youre also a partial borrower and if the primary buyer cant make payments or defaults, whatever debt and financial consequences that follow will become yours to deal with. Thats why many cosigned mortgages come from financially established parents who are helping their child purchase a home.
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What Other Mortgages Are Available For A Holiday Home Abroad
You also have the option of using a mortgage lender overseas and this can be an international lender or a local provider in the country you are buying in.
There are a few advantages to getting an overseas mortgage which include:
- Potentially better interest rates
- More choice of mortgage products
One thing to consider is the volatility of foreign interest rate coupled with the uncertainty surrounding Brexit leading to fluctuations in sterling which could lead to increased repayments.
How Can We Help You
José de BoerFinancial Advisor & CEO
José founded De Boer Financial Consultants 20 years ago and from day one the focus has been on helping clients from an international background with their financial issues here in The Netherlands. José holds a Masters in Financial Planning and is a Certified Financial Planner and Life Planner .
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Invest In Real Estate
If youre looking to invest in real estate given low mortgage rates and the desire for more stable assets, check out Fundrise and CrowdStreet. Both are my favorite real estate marketplaces. Fundrise offers diversified eREIT funds. CrowdStreet offers individual commercial real estate deals in 18-hour cities.
They allow you to invest in real estate across the country where valuations are lower and cap rates are higher. The work from home trend is here to stay. Both platforms are free to sign up and explore.
Personally, Ive invested $810,000 in real estate crowdfunding in 17 properties since 2016 to take advantage of lower valuations in the heartland of America. Further, Im earning income 100% passively, which is awesome as a dad to two young children.
Roughly $70,000 of my $300,000 in estimated passive income comes from real estate crowdfunding. My plan is to continue diversifying across America to take advantage of the strong housing market.
Readers, anybody successfully get a mortgage in one state to buy property in another state? If so, were there any hassles or hiccups along the way?
Filed Under: Mortgages
I started Financial Samurai in 2009 to help people achieve financial freedom sooner, rather than later. Financial Samurai is now one of the largest independently run personal finance sites with 1 million visitors a month.
Mortgage Credit Insurance Other Services
Mortgage credit insurance comes into play if you are faced with circumstances that prevent you from repaying your debt – for instance, in the case of death, illness or job loss.
Lenders can require that you buy a mortgage credit policy.
They may propose a policy to you in a package with your mortgage credit agreement but this cannot be made a condition for you to obtain the mortgage credit.
You are always free to look for better conditions from other insurers, as long as the level of guarantee offered by different policies is equivalent to what is required by the lender.
Lenders can, however, oblige you to open a payment or savings account with them, from which you will repay the loan.
Get To Know The Neighbors
Before buying a property, its important to understand the community and area you are buying in to. These factors have a big impact on whether your property value will grow as expected. So if possible, meet and greet the neighbors next door and ask them a few questions. They might have some valuable insights.
Pros And Cons Of Overseas Mortgages
- Having a foreign property could mean additional revenue if you rent it out whilst you are not using it yourself
- The minimum deposit in some countries can be a lot more than here in the UK.
- Beware of unexpected charges to transfer money abroad and shop around for the best deal.
- In some countries, you will pay the same interest rate for the whole term of the mortgage, rather than the short-term deals for two or three years you find here in the UK.
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Residential Mortgages For Expats Returning To The Uk
Residential mortgages are regulated by the Financial Conduct Authority, the UK oversight body which guarantees consumer rights across the country. This regulatory body safeguards homeowners who have a mortgage, and establishes several key ground rules that define the terms of a mortgage loan. However, because residential mortgage providers must receive FCA accreditation , not every lender offers it. Additionally, the fact that few mainstream mortgage providers are keen to offer mortgage products to overseas customers means that expats have a fairly limited choice when it comes to finding a mortgage lender.
Expats in need of a residential mortgage still have options though, and its by no means impossible to find a reliable, competitive lender in the mortgage market. Many specialist mortgage brokers such as Expat Mortgage source the best mortgage products for British expatriates, and help them to find the funding they need to buy a property in the UK.
For more information on how residential mortgages work please refer to our guide to UK residential mortgages, which covers everything from application to interest rates.
What Is An ‘overseas’ Mortgage
An overseas mortgage is a mortgage for a property that’s not in the UK.
You might want to consider taking out an overseas mortgage if you’re buying a holiday home, retiring to sunnier climes or – an increasing trend – buying your first property overseas because you can’t afford to buy in the UK.
You can arrange an overseas mortgage through a UK bank or an international lender. It’s also common to raise the funds to buy a home abroad outright by remortgaging your UK property.
Here, we explain the pros and cons of each option.
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How Do You Get A Uk Mortgage As An Expat
If you are an expat looking for a UK mortgage, you can consider standard UK mortgages, as well as exploring mortgages that are designed specifically for expats. While its not essential to specifically look for a mortgage product designed for expats, it can be useful if you have had or expect you will have difficulty getting a standard mortgage. If you do choose to look at expat mortgages, you can expect to face somewhat different criteria.
Some of the difficulties that you might have as an expat looking for a mortgage include a lack of UK credit history, income from overseas, and perhaps even being self-employed if you are a contractor. When you want to find a mortgage as an expat, our online mortgage brokers can help you to find the most appropriate mortgage deal. They can suggest mortgage products that work for you, even if you have a lack of UK credit history, or your income is earned outside of the UK.
Refinance Your Mortgage Today
If youre looking to refinance a mortgage or get a new mortgage, check out Credible. Credible is a leading lending marketplace where lenders compete for your business. You can get free, no-obligation real quotes in minutes. Get a mortgage at some of the lowest rates in history.
Take advantage of record-low mortgage rates. The 30-year fixed and 15-year fixed rate mortgages are look especially enticing! But mortgage rates are finally ticking up due to expectations of a strong economic rebound and higher inflation.
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Should You Get A Second Mortgage
Many people consider getting a second mortgage to buy another house. This would mean they are not yet ready to sell or move out of their current home, but would like a second home they can eventually move into or use as a holiday retreat.
In some cases, they may want to rent out their first or second home read the section, ‘Buy to let or consumer buy to let’, further down to learn more about this.
Advantages of taking out second mortgages:
If you can afford it, a second mortgage is likely to be a cheaper loan than a secured loan or second charge mortgage
Disadvantages of second mortgages:
Is expensive to pay for two mortgages at the same time
Stricter affordability checks
Puts your current home at indirect risk
A second mortgage, despite not being linked to your current home or existing mortgage, still poses an indirect risk to it. If you are unable to repay your second mortgage, then you may look to your existing property as a financial back up plan by selling it off.
However, this last resort is not as bad as it sounds because your 2nd mortgage means you are the owner of a new property, which you could move into in the event that you had to sell your existing home.
Apply For A Mortgage From An Overseas Lender
Another option is to arrange a mortgage from an overseas lender through a foreign bank or a specialist broker.
An overseas lender may:
- have greater knowledge of the local laws and mortgage market
- provide you with better access to more mortgage deals and, therefore, cheaper interest rates
However, it can be very difficult to get a mortgage overseas, especially if you’re a foreigner. And if you do manage to get one, the interest rates could be much higher than if you were a local. If you take out a mortgage with an overseas lender, your payments are likely to be in a foreign currency, which might help if you want to manage foreign exchange fluctuations.
Your money will go further if your home currency is strong relative to the local currency overseas. But, if there are fluctuations and you see your currency fall, your payments could become more expensive if you’re converting your devalued currency into the local the overseas currency to cover them.
If you use an overseas lender, it’s recommended that you use your own, independent lawyer and translator to protect you from fraud.
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Buying An Energy Efficient Home
If you are buying a home in the UK with an EPC rating of A or B, you may be eligible for our Green Mortgage.
To apply you must be 18+ and resident in Jersey, Guernsey, Gibraltar or the Isle of Man or one of our listed countries and purchasing a home in the UK with a valid Energy Performance Certificate rating of A or B. Product fees may apply. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
How Much Can Expats Borrow For A Uk Mortgage
As with any mortgage application, you’ll need to prove the affordability of your repayments. The majority of expat mortgage lenders work on a loan-to-value ratio of 75%. Some will go to as much as 95%.
The actual amount you can borrow will of course depend on other factors such as your employment history, any other debts, your total outgoings, and your number of financial dependents.
An independent expat mortgage broker is best placed to advise you on the best lender to approach, based on your individual circumstances and based on how much deposit you have.
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Getting A Mortgage In The Uk To Purchase A House In Another Country
Most high-street banks in the United Kingdom sell mortgages for homes in other countries. For applicants who do not know the native language, this may be beneficial. For example, Santander has a sizable presence in Spain. Not only can this help you prevent document translation problems, but it will also save you money on translation fees. Buying foreign property via a UK bank, on the other hand, could prove to be more costly. Furthermore, mortgage lenders in the United Kingdom can lack market knowledge of the local market. This can lead to erroneous valuations and, as a result, lower loan-to-value yields.
Tips For Buying Foreign Property
Now that weve covered your financing options, lets consider a few other tips before taking the plunge and buying foreign real estate. Generally, a 20% down payment is sufficient for a cross-border mortgage from a Canadian bank, but some countries may expect a much larger down payment, close to 30 or 40% in some cases. Regardless of the route you choose, here are some helpful tips to consider before purchasing property abroad:
- Make sure you speak with a financial advisor and a real estate agent
- Research general laws and cultures of the country you want to invest in
- Inform yourself about currency exchange rates
- Research the rules and laws of owning property in another country
- Type of foreign property you can buy
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The Ease Of Money Flow
Most people are tied to their jobs. They cannot just get up and relocate to another city and state. However, as the work from home trend increases, it is logical for more people to consider relocating to a lower-cost area of the country. Or to an area that provides for a higher quality of life.
Ive discussed this multi-decade migration trend in my post, Why Im Investing In The Heartland Of America. The nationwide lockdowns are only going to accelerate this trend. Real estate is the obvious beneficiary. The difficulty is figuring out the right real estate investment and the best way to invest in real estate.
If you have a family and earn $300,000+ in most big cities, the quality of life is fairly good. You can own a modest home, afford to raise a couple kids, and max out your 401 every year. Heck, you can even take some nice family vacations once in a while.
However, even if you earn multiple six figures in the SF Bay Area, it doesnt mean much when the cost of living is so high here. Youre squarely in the middle class. In order for us to boost our standard of living, we should move.
Relocating to Honolulu will stretch our dollars by ~30%. Therefore, our $250,000 in estimated passive retirement income would grow to roughly $325,000 in buying power. You can get a mortgage for a low rate and live in a different state to save.