Buying a property abroad is an exciting prospect, but one important rule applies – don’t let your heart rule your head. It’s crucial that the right advice is sought and that you don’t try to cut corners. The principles you would stick to in the UK also apply when buying overseas.
Follow these tips from Conti, the overseas mortgage specialist, to ensure that your buying experience is as hassle-free as possible.
Never sign a contract that you don’t understand. If two versions are provided, i.e. English and local language, ask your solicitor to confirm the English version is a true translation, as you need to ensure it doesn’t contain errors, omissions or extras.
Always read the contract. Ensure you are fully conversant with the terms and conditions you are about to agree to. Specific points to be clear about include:
• What deposit is required? Is it refundable and under what circumstances?
• For new properties, what stage payments are required and when?
• What is included in the price and what is the cost of the extras?
• Check the due completion date
2. Obtain an Approval in Principle
If you require mortgage finance, obtain an ‘Agreement in Principle’ for your mortgage before agreeing to purchase the property, or before signing any contracts and paying a deposit.
This will tell you exactly how much you can borrow and what price range you can realistically consider. It will put you in a much better position with agents and developers, proving to them that that you’re a serious buyer, and you’ll be better placed to negotiate price.
It’s tangible evidence that you can take along when house hunting and it can also lead to your application being fast tracked once you’ve chosen your property.
Before proceeding with the purchase (especially with a re-sale property, regardless of age), ensure an independent valuation of the property is carried out, which should point out any problems with the property – e.g. subsidence, damp, wiring defects – and could also highlight any possible boundary disputes.
4. Legal advice
Seek specialist counsel from an independent English-speaking solicitor who is not connected to your seller, estate agent or developer. If required, you can also consult valuers, surveyors or architects.
They should be proficient in your chosen country’s laws and processes and also know the specifics involved in buying a property there. It’s essential that they confirm to you that all required permissions, licences and planning consents have been obtained. In particular, your lawyer should check that you’re buying a property with the correct title. And that you are being registered as the official owner.
One of the biggest advantages of taking out an overseas mortgage is that the lender will do its own checks on the property, ensuring that a proper legal title exists, that the property is registered in the buyer’s name and that a valuation of the property takes place.
5. New build properties
If buying from a developer, what’s their track record and how long have they been trading? Are references available from previous buyers? Check comparable properties in the area and any re-sales offered on the same development.
If the developer mentions ‘rental returns’, what are these based on? Check they’re feasible and have been achieved in the past.
Before making any commitment, try to give yourself a `cooling off` period if you see a `must-have’ property and are tempted to put down a deposit there and then.
Conduct thorough research about local facilities and transport. People gravitate to locations with a nearby airport, especially if it’s served by a budget airline. But remember there are no guarantees that cheap flights will continue indefinitely in one location. Proximity to basic facilities like restaurants, shops and a beach are also important.
Talk to people who already live/own property in the area you like to get a better understanding of what it’s like to live there. And consider the property off-season – many resorts (beach and ski) are seasonal and practically shut down when the tourists return home.
7. Exchange rate fluctuations
Even small changes in exchange rates can make a big difference to the purchase price of your overseas property, your monthly mortgage payments or future rental income.
Consider the benefits of financing your property with a mortgage secured in the local currency – e.g. if you’re planning to rent out your French property through a local agent, the euro income can be used to service the monthly euro mortgage payments, thus avoiding any fluctuations in currency.
8. Local money
Open a bank account in your chosen country and, where relevant, ensure you obtain a Certificate of Importation for the money you bring in from your home country.
Set up standing orders in your local bank account to meet local bills and taxes. Failure to pay your taxes in some countries such as France, Portugal and Spain, could lead to action by the authorities.
Check the inheritance and capital gains tax laws of the country where you are buying. For example, it may be the case that your estate does not automatically pass to your spouse and you may, therefore, need to compile a separate will.
If you take a mortgage out on a property in France or Spain, it may reduce your inheritance tax liability as there is a debt on the property. If you rent out your property you will be liable for income tax.
Seek professional tax advice so that you’re fully compliant and to take advantage of all the possible deductions.
Bear in mind that bills don’t end at the asking price. Lawyer's fees, local and national taxes, insurance, etc must all be met in your host country and can often add at least a further 10% to your cost of acquisition. Ensure you are, therefore, aware of the costs charged by the legal and government authorities for purchasing a property in your chosen country.
Conti, the overseas mortgage specialist
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