If you are currently an expat, then one assumes you will probably have a place of residence already organised. This may not be the case if you have only just made the move, perhaps you are in temporary accommodation and still looking for that place of your own, and similarly if you are a UK resident that is planning to move abroad, then finding a new home will be a top priority.
Why buy a property abroad?
Many countries have far lower property prices than in the UK, which can tempt would be homeowners and investors alike. If you plan to leave the UK or stay in your destination of choice for only part of the year, you may wish to set up a permanent base in your new country of residence.
Rent or buy a house abroad?
One of the first fundamental decisions to make is whether you will rent or buy a house abroad. The vast majority of first time expats will rent to begin with as this offers sufficient flexibility should the move not quite work out as planned, it also allows you to get to know a region for a fixed amount of time and to then be in a more informed position in terms of specifically where in the region you would like to live long term (if the move is planned to be long term).
In some countries you may simply not be allowed to buy property straight away, leaving renting as your only option.
Financially, buying a property may simply not be feasible for you at the point of moving. Perhaps you have a house back in the UK that, once you have settled in your new country, you plan to sell to finance a new house purchase. Again in this situation renting temporarily at least would be the answer.
If you have decided to go ahead and buy a property in your new location, then this brings with it a whole new set of considerations – particularly from a financial perspective.
It is also important to highlight that in many parts of the world, and significantly this is the case in most parts of western Europe, there is very much a renting culture in polar opposite to the ‘get on the property ladder’ culture that exists strongly in the UK.
House property market abroad
Quite simply, the market for buying or renting a property is going to differ greatly from place to place. You will also have your own set of requirements that you wish your next home to fit of course.
You should do as much research as you possibly can to establish your best options.
Relocation companies are an option, and if you are being relocated by your employer then there is a good chance that services such as this are being provided. If not, then you may want to consider finding a relocation expert to help you with the process.
Expat mortgage advice
It is not uncommon for Expats to think that there is a shortage of lenders to match your expat mortgage requirements.
While it can be a complex situation and take time to get the agreement in place, there are a number of mortgage products and lenders that are specialists when it comes to helping with your borrowing requirements and circumstances.
We have connections to independent financial advisers who have access to UK and Overseas mortgage lenders for amounts starting from £50k for buy to let, property investment and primary UK or overseas residences.
If you would like to speak to a local British independent financial adviser complete the form on the right and we will arrange for an adviser to get in contact with you directly who will be able to discuss your own circumstances and requirements with you in a no-obligation initial conversation and from there establish what your best options are and whether they can help you going forward.
Funding an overseas property purchase
You have a number of options when it comes to raising the money for buying abroad.
If you have a lump sum available, buying for cash may be realistic, especially in a country with significantly lower property prices such as Greece or Spain.
- Remortgage a UK property
You may be able to remortgage your current home (i.e. borrow more money against it), especially if your property has risen in value since you bought it. However this is a significant risk, so consult a mortgage adviser.
- Get a mortgage from a UK bank
If you can find a UK mortgage provider that also has offices in the country where you’re buying, you may be able to obtain a mortgage from them. Your mortgage broker can help you find one.
- Use an overseas mortgage provider
If you can’t get an overseas mortgage through a UK-based bank, your final option is to find an overseas lender. Some specialist mortgage brokers offer this service (and may also be able to advise you on which estate agents and legal advisers to use in your destination country).
Taking out a mortgage overseas
If you opt for a mortgage provider based outside the UK, there are a number of things to bear in mind.
The good news is that you might be able to find lower repayment rates than in the UK, especially in some parts of the Eurozone. This could result in a cheaper purchase overall. That said, if your mortgage is in another currency (e.g. euros) then your repayments will be at the mercy of the exchange rate, so if the pound weakens you will end up having to pay more.
Your lender has a duty to tell you if the exchange rate fluctuates by more than 20 per cent, and must give you the option to repay in another currency if this is more affordable for you.
Remember that property transactions outside the UK are not regulated by the FCA. This means that if something goes wrong it may be much harder to obtain compensation. To minimise your risks, always try to use a UK-based mortgage broker who knows the overseas market well.
You often need a bigger deposit for a property overseas, as a percentage of the total price. However, if property prices are significantly lower than in the UK, the actual sum may be similar or even less. But it is important to find out whether this deposit is refundable or not (in some countries it isn’t). Therefore be careful when and how you pay your deposit: only pay it to a bonded estate agent or lawyer, and only once you have the initial contract.
The risks of buying property abroad
A property purchase is always a major financial commitment, so all the usual risks apply. And if you’re buying in a country with different laws, regulations and language, you need to be extra careful. Here are the main pitfalls and how to avoid them.
Exchange rate changes
What if you have agreed a price in euros, for example, only for the pound to fall significantly against the euro before the buying process completes? If you are already stretching your funds, such a change could make your property too expensive. Talk to your mortgage adviser in advance about the best ways to safeguard against this.
When it comes to the laws of a foreign country, take nothing for granted. Some countries or regions may have laws that seem bizarre or unfair (such as the Land Grab laws in some parts of Spain) and these may catch buyers unawares. Engage an independent lawyer (a fluent English-speaking if you’re not fluent in their language) who is qualified and experienced in international transactions and the law of the country you’re dealing with. Check they are also registered with the Law Society in the UK and that they have professional indemnity insurance.
Poor or biased communication
If you’re not fluent in the local language, use an interpreter whom you trust (preferably one who is also your legal representative). This may sound paranoid, but avoid using any interpreter or lawyer who is recommend by your seller or their estate agent, as they may not have your best interests in mind. Even if there’s no deliberate deception, a simple misunderstanding can be very costly.
Distance can also be a problem with overseas transactions. Do as much as you can in person, rather than over the phone, as this can minimise communication problems. An extra plane ticket will cost less than a botched property deal.
Extra costs and taxes
In any property purchase, there are additional expenses on top of your mortgage and deposit. When buying abroad, there are often several more, including:
- shipping costs
- international bank transfer fees
- translator fees
- additional legal fees (e.g. to make a will, which in some countries is compulsory)
- refuse collection and drainage fees
- community fees (if you’re buying on a large development)
There may also be extra taxes to pay, such as:
- annual property tax
- income tax (if the property generates income)
Hidden issues with the property
Even if your purchase seems to be problem-free, prevent any nasty surprises by double-checking the following:
- Does the seller really own the title deeds to all the property/land they are selling?
- Are there any outstanding bills or tax demands on the property?
- Are all the necessary utilities connected and working well?
- Are there any local issues to be aware of (e.g. flooding, droughts, unreliable utilities, crime)?
Buying a property overseas can be significantly cheaper than buying in the UK – but as you can see, you need to work quite hard for those savings. A good specialist mortgage broker and solicitor can make the task a lot easier.
**By Nick Green. Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.