Buying abroad as an investment

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Buying abroad as an investment

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Buying abroad as an investment - 9/6/2007 7:25:02 PM

karyllemia

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Joined: 9/3/2007
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Reference: http://www.thriftyscot.co.uk/Mortgages/092007/buying-abroad-as-an-investment.html

Buying abroad is a popular option for Britons, and France and Spain remain top of the list. On further shores, Florida is favourite.

To finance the exotic lifestyle, most people who have a decent amount of equity in their home choose to remortgage. This keeps people on familiar territory and saves concerns about currency fluctuations. Of course, there is an element of risk if you overreach yourself.

There is a two-year tracker remortgage deal available at Halifax at 0.16% below base rate. This makes the current rate 5.59%, but it comes with a sizeable fee of £999. Woolwich has a two-year fix at 5.89% with a fee of £995.

An alternative option is to take out a mortgage in euros. This service is offered on French and Spanish property by Halifax, Barclays, Abbey and Norwich & Peterborough.

Mortgages from banks in the Eurozone can be cheaper than in the UK. In France, a variable rate mortgage comes at around 4%, and 4.4% for a five-year fixed. Spain is a bit more expensive at around 5% on a variable rate and 6% on fixed rates. Lenders in Europe also usually want a hefty deposit of around 20 to 30%. In the United States dollar interest rates are higher at around 8%, but deposits are usually lower at 10%.

Lenders take into account your income rather than the prospective rental income when checking your viability of covering the repayments for the mortgage.

The costs associated with buying a property are generally higher abroad than they are at home. In Spain, legal fees, land registry, transfer taxes and VAT will all add around 10% to the price of a property. If you’re looking at an off-plan property, check whether VAT is included in the sale price. Another crucial point is to check that the developer really owns the land, as parts of Spain have had problems with land grab, mainly in the regions of Valencia and Andalucia.

In France, you should allow for a staggering 24% for costs in addition to you purchase price for new properties, to include fees and taxes. VAT at 19.6% makes up the lion’s share of the problem. There is a way to escape VAT, and that is by using a leaseback scheme, in which you let the property back to the developer for some months each year for 20 years, but if you sell within that time, some VAT will become payable again. Older properties in France will have fees of about 9%.

Other real estate investment abroad:
Costa del sol property for sale
investment property on Italy