Buying overseas with a mortgage
A guide to Foreign Exchange
Do you want to buy a property abroad? You’re not alone. Around 35,000 Brits buy a second home overseas each year, whether it’s as a holiday home, rental investment or somewhere to retire or relocate to – or indeed a combination of all three.
The reality is, though, that many more people would love to take the plunge but don’t know where to start. After all, it can be intimidating transferring large sums of money into another currency and committing to a foreign mortgage, often in an unfamiliar language.
But with the right advice and expert guidance, getting a foreign mortgage is not as complicated or scary as you might think and currency exchange doesn’t have to be stressful or expensive. Here Alliance partners, Clear Currency, explain the different options for transferring your currency and using it effectively to buy the property you want.
Does why you buy make a difference?
In a word, yes. It’s important to decide exactly what you want the property for and then make the best buying decision based on that information. Do you want a mortgage or are you a cash buyer? Do you know what your budget will get you or what extras you could get by stretching it a bit? It’s a big investment, so doing your due diligence and researching the markets properly is a crucial first step.
Buying a holiday home or investment
If you’re buying somewhere as a holiday home or investment (or most likely a mix of the two), you’ll have different expectations and requirements than if you were buying a retirement home. Adding a mortgage to your down payment can give your budget the flexibility to include properties you may have thought out of reach, but which can give you a far better yield on your investment.
For example, adding a £50,000 mortgage to your buying price could put you closer to that key attraction – the beach, golf course or city centre – and mean you can charge higher rental prices to a wider range of renters. This can also help cover the inevitable ongoing costs an overseas property brings with it, from general upkeep to employing a local property manager to look after it in your absence.
Buying a retirement or relocation home
If you’re retiring overseas permanently, it’s much more likely you won’t want a mortgage and so will be paying in cash. Depending on your personal circumstances, that may or may not mean you can buy your dream home – but if not, you still have options. Start with finding out if you can get a mortgage and if you can, work out the cost-to-reward implications to see if it’s worth it and if your pension or potential rental income, for example, would be enough to cover the repayments and make it worthwhile.
Looking for an overseas mortgage?
Read our dedicated pages here with expert advice from AIPP member and expert international mortgage broker, Simon Conn
Know the risks…
Exchange rate changes
Currency fluctuations can be the one of the biggest factors to think about when buying abroad. Even a small change in the exchange rate can have a big impact on the value of the property you’re buying and make it, or your foreign currency mortgage payments, quickly unaffordable.
As with everything in life, there are costs that may not be immediately obvious so it’s important to research thoroughly – have you considered everyone and everything, from the lawyer to the broker? And of course, you should check the tax you may be liable for – both in the UK and the country you’re buying in.
People and paperwork
Taking independent advice from the right people at the right stages will help you avoid nasty surprises later in the process, such as making sure your paperwork is all in order and having the necessary licences and permits for any business elements, and the right planning consents if you’re building a new property.
Balance your debt against your risk
Leveraging the mortgage on your UK home to buy overseas is a risky proposition. If, worst case scenario, something does go wrong with your new property abroad and it leaves you in debt, that debt could put your home at risk. We’d never recommend it but if it’s your only option, be sure to speak to an international mortgage specialist first.
…And how to mitigate them
Foreign exchange can be confusing and intimidating, but is absolutely integral to making sure you maximise your overseas investment – whether you’re buying to make money or live the good life. Clear Currency has spent years working with people to make the best decisions, from once in a lifetime retirement buys to setting up overseas investment portfolios.
Our currency specialists can help maximise your mortgage currency exchanges to reduce your risk and save you money so you have more to spend on the things that count.