Thinking of buying a property abroad? In this article I will outline some of the things you will need to consider.
Location – where is the best place to buy?
We must remember that it’s not always beach holidays people crave. There are those of us who like adventure and outdoor activities, others who love good food and wine in a rural setting and those winter skiers who love the mountains and snow. There are also those of us who would love to retire abroad and enjoy the freedom to explore or relax as they wish.
Whether you want to live abroad or buy a holiday home in another country, location is important. You not only have to consider your own priorities, but the priorities of others. Like any location, if there is a demand for property, the competition will be greater and price is likely to be higher.
You also need to consider not only the resale value of the property but also the ease of sale in your country of choice.
Whilst most of us are familiar with the property sale and purchase process in the UK, the process abroad is most likely to be quite different. The most important thing you must do when considering buying a property abroad is to seek specialist legal advice.
Legal Advice when buying a property abroad
There are certain key elements of seeking legal advice when buying a property abroad. If you are not fluent in the language of your country of choice, it is essential to engage an English-speaking lawyer (or another language you are fully comfortable with) to represent your interests. Not only that, but the lawyer you engage should be completely independent of the seller. You must engage someone who:
- Is a property specialist;
- Can explain the buying process in detail;
- Represents only your interests;
- Provides you with clear, independent advice.
In other words, you are looking for a lawyer in your country of choice who has only your interests at heart and can explain everything to you in your own language.
The UK government provides a list of English-speaking lawyers you can find by country or location and with specific areas of legal expertise.
When buying a property abroad, you need to understand that the laws relating to property ownership are the laws of the country in which you are buying. You may be subject to foreign ownership laws, different tax rules, planning rules and restrictions and whether you can extract your money when you sell.
Financing
If you wish to buy a property abroad, you must be able to afford it. You have options, of course. You may decide to sell up your house in the UK and use the proceeds to fund your foreign purchase. Alternatively, you may decide to unlock the value of your UK home and either re-mortgage or look to equity release to fund your purchase abroad. Of course, you may simply decide to purchase your home abroad from your savings.
Whichever option you decide, make sure you document your financing plans and make provision for not only the purchase price but also the likely other costs involved.
Can you take out a mortgage to buy a home abroad?
You can explore the availability of mortgages to help fund the purchase of your property abroad. You can either arrange an overseas mortgage with your local bank or apply for a mortgage from an overseas lender. Each of these options are worthy of consideration.
Arranging an overseas mortgage with your local bank
Here are some things to think about when opting for this type of mortgage:
- The mortgage is arranged in your own language;
- You are less likely to run into translation problems;
- You will save money on translation fees;
- Your local lender will have immediate access to your credit history.
Thoroughly research this mortgage and compare and contrast it with a mortgage from an overseas lender.
Arranging a mortgage with an overseas lender
There are, of course, potential advantages of using a mortgage lender in the country where you are buying the property. Examples of these are:
- They will have greater knowledge of the local laws and mortgage market;
- They are likely to provide you with better access to more mortgage deals;
- Interest rates may be cheaper than a mortgage with your local bank.
Whilst these are potential advantages, you must remember that, unless you are fluent in the language of the country in which you are buying the property, you will need independent translations of the loan documents. This is essential to ensure you understand your obligations and, importantly, the rights the lender can exercise over the mortgage.
Choose your mortgage options carefully
Whichever option you choose, make sure you thoroughly research your options. Weigh up the pros and cons and do not automatically take on a mortgage recommended by the seller. Also, take into account how exchange rate fluctuations will impact on the mortgage repayments and check whether there are any penalties for early redemption.
Other costs
You need to meet a range of costs when buying a property in the UK. These will include legal fees, registration costs of your title, Stamp Duty and the like. It is therefore important to discover the full extent of the costs of buying a property abroad.
Ask all those involved to give you a detailed breakdown of all the costs involved for their services and all add-on costs and taxes.
Importantly, do not inherit the previous owner’s property tax debts. In some countries, the costs follow the property. That means if you buy a property with outstanding taxes or other charges you will inherit them. Insist that the seller clears all and any property charges before you buy.
Fluctuating exchange rates can also be challenging. You must factor these fluctuations into your calculations if you are exchanging sterling for the local currency either for the purchase price and costs or for any ongoing mortgage payments.
Off-plan purchases
If you are buying a new build property in the course of construction you must make sure it has all necessary permits, licenses and planning permissions. You also need to ensure that the contract you have with the seller gives you the option to reject the property if it has not been built to specification or there is significant delay in completion.
In all cases, not simply new build property, make sure you have the necessary rights to connect to the electricity, water and sewage supplies serving the property.
Again, you must ensure you fully understand the terms of any contracts or agreements or rights enjoyed by the property in English, or in a language you are completely comfortable in.
Language – do not get lost in translation!
I have stressed the need to ensure that you fully understand everything involved when you are buying a property abroad. That means you need to be either fully comfortable with the language in the country you are buying or have everything translated. Also, if you are having documents and correspondence translated, make sure the translator is independent from the seller. It is important that you engage someone to represent your interest and that there is no conflict.
If you attend meetings and are unfamiliar with or only have a passing knowledge of the language, take your own interpreter with you. You can search for translators and interpreters on the UK government website. They will be able to provide you with the help and support you need.
Finally – make a will
When buying a property abroad, it is important to check out the local laws of succession. They may not be the same as they are in the UK. As you now own an asset in a foreign country, take advice on how this will be dealt with on your death. Once you’ve found that out, make a will to ensure your wishes on death are fulfilled.
Enjoy your dream home in a foreign land
Having navigated your purchase abroad, you can now relax. Take time to explore the local area, meet the local people and, whether it’s a holiday home or a permanent relocation to a new country, enjoy it.
To speak with Nitasha about a residential property matter, please call 01483 887766, email info@hartbrown.co.uk or start a live chat today.
*This is not legal advice; it is intended to provide information of general interest about current legal issues.
