It probably goes without saying that buying a property overseas is even more complicated than buying in the UK – and that’s saying something!
Many potential buyers may be worried about the impact Brexit has had on the buying process, and whether it will be more difficult for them to obtain a mortgage now that the UK is no longer part of the EU.
Whether you’re thinking about buying in Europe or further afield, you’ll need to think carefully about the pros and cons of buying abroad, and unless you can afford to purchase a property outright, how you’ll get a mortgage in another country.
We’ve put together this introductory guide to take you through the basics of buying a property overseas.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
What do I need to think about when buying property abroad?
There are several things you’ll need to consider if you want to purchase a property overseas, either to use as a holiday home yourself, or to rent out.
Tax rules
Most foreign countries will tax you at their local rate for purchasing, letting, and selling a property. You may also have to pay additional annual taxes on your property even if you’re not renting it out.
If it looks as though you’ll be taxed on income from a foreign property both by the country you’re buying in and by the UK, it’s worth checking whether the UK has a ‘double taxation agreement’ with that country. This should state which country is responsible for collecting tax on different types of income, so you don’t pay it twice on the same income. Make sure you seek professional tax advice so that you have a firm grasp on the rules for property taxation in the country of your choosing before you proceed with your purchase.
Exchange rate
Keep an eye on the exchange rate in the country you’ve chosen to buy in. Small fluctuations can have enormous consequences for your purchase, such as affecting your ability to make mortgage repayments. Some foreign currency specialists offer you the chance to lock into favourable exchange rates ahead of your purchase so you can protect your budget, but make sure you only ever deal with companies that are authorised by the financial regulator the Financial Conduct Authority (FCA).
Paperwork
There’s bound to be plenty of paperwork to get through, even before signing the final contract, though this will of course depend on the country. It would be wise to seek legal advice from an expert, ideally one experienced in property laws in the country of your choosing. If you are going through a mortgage broker, they may be able to help you find legal help.
Foreign market
It could be worth your time to consult with a local property expert where you want to buy, or to try to speak to other British property owners. There might be certain property laws, market trends, or other factors that you aren’t aware of which they can tell you about.
What impact will Brexit have on my plans to buy a property in Europe?
The actual process of buying a property in Europe hasn’t changed much as a result of Brexit, but it might be trickier to get a mortgage, as lenders are likely to be more wary about lending to non-EU residents. You might therefore be required to put down a bigger deposit than you might have pre-Brexit, sometimes as much as 50% of the property value.
However, as long as you can prove that you’re financially stable and that your income both now and in the future can cover your mortgage payments, you should be able to get a mortgage on an overseas property, whether it’s in the EU or further afield, but it can be considerably more complicated than doing so domestically and will depend on your individual circumstances, . You should seek the help of a professional broker who specialises in overseas mortgages.
Another option you may want to consider is remortgaging your current property so you can buy a property overseas outright. Again, it’s a good idea to seek professional advice so you can find the best mortgage option based on your individual circumstances.
If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
Bear in mind that whereas prior to Brexit Britons had the right to visit, live and work anywhere within the European Union for as long as they wanted without a visa. Now they can stay for a maximum of 90 days out of any 180 day period and will usually need a visa to stay longer, so make sure you’re clear on the rules before you make your purchase.
Finally…
If you’re interested in letting out a property either abroad or in the UK and would like to know more, take a look at our guide Is buy to let a good investment?. If you’re buying a holiday home in the UK and want to find out more about the differences between holiday let and buy to let mortgages, read our guide Holiday let or buy to let: which is better?.
Alternatively, if you’re looking to purchase the home for yourself, try our guide 11 common mistakes homebuyers make (and how to avoid them) for some essential dos and don’ts.