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Your Money > Mortgages Articles > The Dos and...
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By Sarah Modlock As we shake the sand from our swimwear and put our summer snaps in the photo album, it's hard to contemplate the shorter days and chilly nights without something to look forward to. Perhaps this why more Brits than ever are expected to purchase the Foreign property ownership has increased by 85% in the last ten years, as three quarters of a million of Brits own a property in Spain and half a million in France according to American Express. Click here to search for an international property on Yahoo! Property 'The TV shows that have helped fuel our obsession with overseas property make buying abroad look easy,' says Jeremy Davis, author of the Which? Guide to Buying Property Abroad. In reality finding, purchasing and owning overseas can be a time-consuming business, and turning a foreign property into a successful investment can be even more of a struggle.Get all this right and you could have a wonderful new asset which gives you and your family enormous enjoyment over the years, and greater wealth in the long run. Get it wrong and you could be risking a good chunk of your future security on a pipe dream,' With pitfalls galore, it's crucial to keep a cool head about your hot home. DO... Take your time. Rushing to grab a dream property or to tie-in the purchase with holiday plans will blind you to potential problems. Budget carefully. Think carefully about how much work the property needs on it and whether you plan to live in it full time or rent it out for most or part of the year. Remember that the rules and requirements will vary from one country to another. On top of the purchase price, expect to pay valuation and legal costs together with local or regional taxes and fees. These can be up to a total of 20% of the property price in Italy or France, 10% in Spain and Portugal and 4-5% in Florida. Be realistic about DIY. How much of the work can you do yourself? How much time and knowledge do you have to employ, instruct and supervise local tradesmen? Use qualified professionals to protect your interests and make the purchase as stress-free as possible. Property agents and other reputable experts can be found through the Federation of Overseas property Developers, Agents and Consultants (FOPDAC). Call 0870 350 1223 or find the full list of agents on the website: www.fopdac.com. Ensure you have a good lawyer with an excellent command of English and the native tongue, to deal with the endless stream of rules and regulations. For instance, did you know that if you're buying in Spain you'll need to make out a will in Spanish before buying, or that you can inherit debts from a previous vendor? Solicitors in some countries act for the buyer and the vendor so make sure you get independent advice. A British lawyer should check paperwork and make sure the deal is being handled properly before you sign anything - something which is crucial in foreign sales, where you may not pull out of an agreed offer without losing double your deposit. Avoid out-of-season blues. If you have only visited the area during the high season then spend some times there out of season to ensure you have a proper perspective. Make sure all the facilities and atmosphere you love don't disappear with the holiday crowds. DON'T.... Forget to consider the cost of travel if you don't plan to live full-time in your foreign property. Rely on a price increase. Foreign homes are unlikely to enjoy the same sort of property boom we have seen in the UK so beware of buying purely as an investment. Forget that if you need a mortgage you may be able to extend the existing loan on your UK property. Your lender will probably require a hefty deposit. Remember that both homes will be at risk if you cannot keep up the repayments. The other option is to take out a second mortgage. Several high street names and specialist lenders offer overseas property services. These include Charcol, Halifax, Abbey, Barclays and Conti Financial Services, based in Sussex. It is possible to take out a mortgage in the local currency, but this carries substantial risk. Currency fluctuations between the Pound and the Euro could leave you owing much more money than you anticipated. Some lenders offer Euro mortgages on the condition that your salary or pension is paid in Euros. Click here to visit the Yahoo! Mortgage centre Overlook the inevitable variety of ongoing local taxes and service charges. Utilities may only be connected if you can pay by direct debit from a local bank account but many familiar UK names have branches or affiliates overseas which may make the process easier. Forget to factor in any ongoing exchange costs. Ask your UK home insurer whether they provide overseas cover. If not, there are specialist companies in the UK which can help if you would prefer not to use a foreign insurer whose policies tend to provide more limited cover. Think you will be safe from the tax man. Any rental income from your overseas property will have to be declared in the UK. There may also be local tax implications if you rent or sell the house although many countries have reciprocal tax agreements with the UK so that you don't end up paying tax twice. Only your main home is exempt from capital gains tax in the UK so expect a bill on any profit you make when you sell your overseas property. Click here to visit the Yahoo! Tax section for more hints and tips You also need to make an additional will to dovetail with your UK will, as local inheritance tax laws may also come into play. For example, in France and Italy a property cannot be passed solely to a spouse, but must be shared among any children. Seek professional advice for all tax and inheritance planning. Useful links:
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