3 ESSENTIAL SERVICES
MORTGAGES I
n the current climate the fast-changing mortgage market is hard to keep tabs on, but the key to buying abroad with a mortgage is taking steps to ensure you don’t leave yourself
fi nancially exposed in the future. In the wake of the fi nancial crisis, many banks catering for overseas property buyers have stopped lending, whilst domestic banks have either stopped lending to non-residents or have tightened their criteria. Now you can’t rely on lenders offering mortgages according to clear-cut criteria, and it’s certainly a good idea to talk through your options with an independent fi nancial adviser (IFA) and/or specialist overseas mortgage broker. So to avoid much wasted time – and disappointment – before you start seriously property hunting it’s a good idea to get an agreement in principle from a mortgage provider.
This will show agents and vendors that you are a serious buyer and can move fast to complete a sale, giving you an edge. As a general rule, when choosing your mortgage
always borrow in the same currency as the source of funds you plan to use to cover the repayments. Be especially wary of deals offered in a different
currency altogether, for example Swiss-franc mortgages for a Cypriot property. So, if you’re going to be paying with a UK salary, your mortgage should be in sterling, but if you plan to rent
out your property in France, you’d be better off with a euro mortgage. It is likely your chosen lender will require proof of deposit from you, including how the funds were accumulated (eg by savings, inheritance or sale of another property). Banks’ affordability criteria have also got much stricter in the last few years and lending varies considerably between countries. Whatever you might have seen advertised, most
lenders in Spain will typically offer foreign buyers a maximum loan to value (LTV) of 50 per cent, whilst in Portugal and Turkey the fi gure is 75 per cent, and in Italy you can get higher LTVs on properties worth €250,000 rather than €150,000. In France, there are currently some great long-term
fi xed rate deals available, but the LTV available can vary according to what type of property you’re trying to buy, with old, rural properties being seen as more of a liability by lenders. Beware though, that the cost of changing mortgage
provider is much higher in France than in the UK (around 2.5 per cent of the mortgage value), hence most French people don’t tend to switch lenders. Also, be wary of attractive fi nancing deals - 100 per cent mortgages - available from Spanish banks trying to offl oad repossessed properties that nobody else appears to want. Meanwhile, foreign buyers in Florida typically need a 30 per cent deposit, but there are now some long- term fi xed deals available.
MORTGAGE.. COMMONSENSE..
Do your homework.
The mortgage market is ever-changing, not to mention the exchange rates is in constant fl ux. Use a specialist
overseas mortgage broker - these routinely deal with a number of different banks. Get your fi nancing in
shape before you start shopping in vain. Weigh up using an
overseas bank in the country in which you are buying vs a large UK/international lender Be wary of generous
fi nancing deals on repossessed properties: tempting fi gures don’t always mean a good buy.
AIPP CONSUMER GUIDE 37
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