More to overseas mortgages than just the rate

Monday, February 24, 2014

More to overseas mortgages than just the rate

The cost of borrowing in some of the traditional overseas hotspots may never have been lower, but there is so much more to a mortgage than just a good rate, says Clare Nessling, director at Conti, the overseas mortgage specialist.

It's a pretty good time to be buying property abroad, there's no doubt about that.

Bargain prices and a stronger pound are giving investors more bang for their buck, and there's also the opportunity for some price negotiation with motivated vendors.

Crucially, the cost of borrowing is at an historic low and it may never be more affordable to take out an overseas mortgage, particularly in some of the popular European locations.

Rates in France, for example, currently start from just 2.1 per cent, and from just 3.22 per cent in Spain.

That said, there is so much more to borrowing that just a good interest rate, and there are many practical benefits that come alongside an overseas mortgage which buyers are not necessarily aware of.

Currency & tax

If you're planning to rent out your property in one of the European hot spots, for example, the rent received can be held in an overseas bank account to service the monthly mortgage payments, thus avoiding the fluctuation in currency, and the associated cost, when transferring euros back to the UK each month.

In addition, some overseas lenders will take into account a percentage of the rental income when calculating how much they're willing to lend you.

There are also some potential tax benefits associated with overseas mortgages. In France and Spain, for example, it may reduce the buyer's inheritance tax liability as there is a debt on the home. And if the buyer plans to rent out the property, that income could be offset against the loan for tax purposes.

Proper title checks

One of the biggest advantages of financing your home overseas with a mortgage, however, is that the lender will carry out its own check 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.

The valuation will point out any problems such as subsidence, damp, wiring defects, and could also highlight any possible boundary disputes.

This will give you peace of mind as well as saving you the time, cost and hassle of having to arrange these checks yourself.

And despite the doom and gloom which continues to surround the eurozone, lenders are still willing to lend to foreign nationals, especially if you can demonstrate a sound financial profile.

See the best deals here.

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