Key Considerations when Buying a Property Abroad
12 August 2019

Whether you’re planning a retirement home, making a shrewd investment or you simply want a second property overseas for occasional visits, there are many factors to consider. Buying a property abroad is more complicated than making a purchase in the UK, but with the right planning and knowledge, it’s entirely feasible. Here are the key considerations you'll need to take into account.

Check the Laws on Ownership

Before you set your heart on owning a property in a specific country, you’ll have to check what the laws say about foreign purchases. It’s not as simple as just having the funds to buy a property; some countries are strict about the rights of non-nationals to make a purchase.

Making a property purchase within the EU was relatively straightforward before the threat of Brexit loomed. Once the UK has left the EU, you may face more challenges over acquiring property as Brits will have no more rights than citizens from other parts of the world. Of course, if an agreement is reached over Brexit, this could be more easier than many experts are currently predicting.

For example, EU residents wishing to purchase property on one of the sunny Greek islands will face no barriers. Those from outside the EU can still buy property but they’ll need to submit an application to the Ministry of National Defense and prove their intent for the use of the property and their connections to the country.

Every country has different rules so make sure you check carefully before paying out any money you can’t recoup.

Protect Against Currency Risk

When you purchase a property in the UK, you won’t have to pay extortionate bank charges to send the money, and the precise cost of the transaction will be agreed at the start. If you’re sending money overseas, you can’t take either of these things for granted.

Banks make significant profits on currency exchanges and charge heavily for sending money overseas. By choosing a personal foreign exchange service with someone else instead, you can make substantial savings on the transaction.

Currency fluctuations are another problem as a small movement in the exchange rate in the wrong direction can suddenly make purchases much more expensive. A forward contract provides the certainty that overseas property investors need, guaranteeing the exchange rate so that the property price can be accurately calculated. The same currency exchange companies that offer better prices for sending money overseas can also offer forward contracts.

Consider the Structure of a Mortgage

If you’re obtaining a mortgage to pay for your overseas property, you’ll need to consider the ongoing effect of currency fluctuations. It’s straightforward to protect your exchange rate when you’re paying a deposit or buying a property outright, but mortgages are a little different.

Changes in the exchange rate can make repaying a mortgage incredibly expensive, or, in the worst-case scenario, no longer affordable. If your mortgage provider is based overseas and you’re paying instalments in a foreign currency, it’s a factor you’ll need to consider.

If the property you’ve purchased is within the EU, you will have some protection. In 2014, a law known as the Mortgage Credit Directive was drafted which has since been enacted. This means that the lender must tell you if there’s more than a 20% change in the currency exchange rates. They are also obliged to allow you to repay the mortgage in a different currency, should you prefer.

Get the Best Property Insurance

Buildings and contents insurance for your home is easy to arrange when you’re in the UK, but when there’s a language or cultural barrier, it can become complex. Protecting your investment is vital, but you’ll need to do extra work to find the right property insurance provider when overseas.

If you can find a provider with a UK call centre and documentation in English, it will be of huge benefit if the worst occurs. Trying to navigate legal literature in a foreign language when there’s a problem with your property is best avoided at all costs.

Check the cover carefully; what might have been unnecessary in the UK could be critical overseas, such as earthquake cover. If you’re not going to be in the property full-time, choose insurance that still offers protection when left vacant for prolonged periods.

For overseas properties that are going to be let, liability insurance and lettings cover should be included.

Make your Move

The above tips run through the key information you need to consider when buying a property overseas. For personal advice about your individual circumstances and to discuss potential foreign currency exchange rates in more detail, contact a representative from Privalgo today.

Key Considerations when Buying a Property Abroad
12 August 2019

Whether you’re planning a retirement home, making a shrewd investment or you simply want a second property overseas for occasional visits, there are many factors to consider. Buying a property abroad is more complicated than making a purchase in the UK, but with the right planning and knowledge, it’s entirely feasible. Here are the key considerations you'll need to take into account.

Check the Laws on Ownership

Before you set your heart on owning a property in a specific country, you’ll have to check what the laws say about foreign purchases. It’s not as simple as just having the funds to buy a property; some countries are strict about the rights of non-nationals to make a purchase.

Making a property purchase within the EU was relatively straightforward before the threat of Brexit loomed. Once the UK has left the EU, you may face more challenges over acquiring property as Brits will have no more rights than citizens from other parts of the world. Of course, if an agreement is reached over Brexit, this could be more easier than many experts are currently predicting.

For example, EU residents wishing to purchase property on one of the sunny Greek islands will face no barriers. Those from outside the EU can still buy property but they’ll need to submit an application to the Ministry of National Defense and prove their intent for the use of the property and their connections to the country.

Every country has different rules so make sure you check carefully before paying out any money you can’t recoup.

Protect Against Currency Risk

When you purchase a property in the UK, you won’t have to pay extortionate bank charges to send the money, and the precise cost of the transaction will be agreed at the start. If you’re sending money overseas, you can’t take either of these things for granted.

Banks make significant profits on currency exchanges and charge heavily for sending money overseas. By choosing a personal foreign exchange service with someone else instead, you can make substantial savings on the transaction.

Currency fluctuations are another problem as a small movement in the exchange rate in the wrong direction can suddenly make purchases much more expensive. A forward contract provides the certainty that overseas property investors need, guaranteeing the exchange rate so that the property price can be accurately calculated. The same currency exchange companies that offer better prices for sending money overseas can also offer forward contracts.

Consider the Structure of a Mortgage

If you’re obtaining a mortgage to pay for your overseas property, you’ll need to consider the ongoing effect of currency fluctuations. It’s straightforward to protect your exchange rate when you’re paying a deposit or buying a property outright, but mortgages are a little different.

Changes in the exchange rate can make repaying a mortgage incredibly expensive, or, in the worst-case scenario, no longer affordable. If your mortgage provider is based overseas and you’re paying instalments in a foreign currency, it’s a factor you’ll need to consider.

If the property you’ve purchased is within the EU, you will have some protection. In 2014, a law known as the Mortgage Credit Directive was drafted which has since been enacted. This means that the lender must tell you if there’s more than a 20% change in the currency exchange rates. They are also obliged to allow you to repay the mortgage in a different currency, should you prefer.

Get the Best Property Insurance

Buildings and contents insurance for your home is easy to arrange when you’re in the UK, but when there’s a language or cultural barrier, it can become complex. Protecting your investment is vital, but you’ll need to do extra work to find the right property insurance provider when overseas.

If you can find a provider with a UK call centre and documentation in English, it will be of huge benefit if the worst occurs. Trying to navigate legal literature in a foreign language when there’s a problem with your property is best avoided at all costs.

Check the cover carefully; what might have been unnecessary in the UK could be critical overseas, such as earthquake cover. If you’re not going to be in the property full-time, choose insurance that still offers protection when left vacant for prolonged periods.

For overseas properties that are going to be let, liability insurance and lettings cover should be included.

Make your Move

The above tips run through the key information you need to consider when buying a property overseas. For personal advice about your individual circumstances and to discuss potential foreign currency exchange rates in more detail, contact a representative from Privalgo today.

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