 |
 |
|
|
|
||
 Overseas understood from Complete guide to Homebuying July 2002 If your summer holiday has convinced you that you want to put down roots in sunnier climes, it may be possible to find a mortgage. But behind the dream there's a lot of hard graft, says Hilary Osborne Thanks to Stelios and friends it is now as cheap to visit Europe as to travel almost anywhere in the UK. The no-frills airlines have opened up new horizons and Britons who once dreamt of buying a chalet in St Ives are now turning their thoughts to gites in Saint Tropez and other exotic places. In France, for example, Abbey National reports that demand from across the UK has fuelled a 66 per cent increase of home purchases in the last year. House prices abroad are almost as attractive as the weather. In January this year a beach hut in Dorset sold for £120,000. In Spain the same money would buy a four-bedroom townhouse on the Costa del Sol; in France, an old school house in Brittany could be yours. If you're looking for a destination for holidays or retirement you could get more for your money overseas. Covering the costas Buying a property abroad may not cost the earth but likely as not you will need to borrow money somewhere along the line to pay for it. Grant Holmes, an IFA at broker Alexander Hall, assists people who want to purchase homes in Spain. He says there are several ways to achieve funding. "If somebody's buying a holiday home and they can borrow money in this country then we will always try to do that," he says. This usually involves remortgaging the property in this country to release the equity that has built up. This is then be used to buy the foreign property outright. The advantage of this route is that you are taking out a mortgage you understand, you have a wide choice of loans and you will pay it back in the currency you are paid in. However, your circumstances may dictate a different approach. "If someone is looking to move to Spain and they are going to be earning money in euros we will usually go for a local mortgage," says Holmes. "Or if they haven't got any equity here but they want a second home then again we will look at a lender in Spain." Using a local lender means the mortgage can be secured on the foreign property so if you don't have a home over here this is your only option. Although Holmes is talking specifically about Spain, your options are the same in most counties you are likely to consider buying in. In Spain you will be faced with a choice of lenders. As well as the native mortgage companies, several UK lenders have operations based in Gibraltar or Spain. These are: Abbey National, Barclays, Newcastle Building Society, Norwich & Peterborough Building Society and Royal Bank of Scotland International. These are all effectively Spanish operations but usually have English speakers who can offer advice. Not all these offer loans for Britons who want holiday homes. Newcastle, for example, deals only with borrowers living in or moving to the area. A specialist broker can put you in touch with other lenders. Simon Conn of Conti Financial Services deals with lenders based all over the world in countries as far afield as Ireland and New Zealand. "Where it's very, very busy there's a lot of competition," he says. "In countries like Spain and France, for example, there are a lot of lenders but in places like Malta there may only be one." Only lenders based in the country where you want to buy - whether they be arms of high-street names or unfamiliar operations - will be able to offer a mortgage secured on a property in that country. Currency affairs Taking out a mortgage in another country doesn't necessarily mean dealing in a foreign currency. It depends where you intend to buy the property. According to Simon Conn, mortgages in France are only currently available in euros, but in some countries - and even with some lenders - you have a choice. Abbey National, for example, offers purchasers in Spain and Portugal the opportunity to deal in euros or sterling. Choosing which currency to use shouldn't be a problem, says Conn. "If someone's buying a property in Spain, France or Portugal they will usually be doing so to let out," he says. "They'll be doing that in euros so if they take the mortgage out in euros they can offset the rent against the repayments." If you are not letting the house and your main income is in euros, it makes sense to take a euro mortgage, and likewise if your salary is paid in dollars, rands or whatever. And if you are earning in sterling, a sterling mortgage is usually your best bet, otherwise you need to worry about the exchange rate. Whatever currency you opt for, the mortgage will be run in the same way. Most overseas mortgages are repayment mortgages and many have shorter repayment terms than we are used to. Grant Holmes explains: "We are very unusual in the UK in that we tend to take as long as possible to repay a mortgage." In Spain, Norwich & Peterborough's loan has a maximum term of 20 years while RBS International expects repayment in 15 years or by retirement, whichever comes first. Terms are shorter in other countries too: Simon Conn can source a maximum 20-year term in Greece or France and just 10 years in Cyprus. This is something you need to bear in mind when working out how much you can afford to spend because monthly repayments are going to be higher than on a 25-year mortgage. However, maximum LTVs are lower so your borrowing will be limited. Norwich & Peterborough recently increased the amount it would lend on a property in Spain to 75 per cent LTV, Barclays will lend up to 60 per cent, and 65 per cent LTV in France. Deals with smaller deposits can be negotiated by brokers, says Grant Holmes. In The USA most mortgages are long-term fixed rate deals, but in Europe short-term fixes and tracker deals are on offer. The UK lenders who operate overseas tend to have similar products to those on offer in this country. Norwich & Peterborough, for example, offers a variable rate deal, a two-year fixed rate and a fixed-year fixed rate. And Barclays has even launched Open Plan in Spain. However, the bank's spokesman Andrew McDougall points out: "Open Plan is for local people. If you're moving out to Spain you could take an Open Plan loan but you probably wouldn't if you were living in this country because you would be getting paid in sterling so wouldn't have a current account to offset." Borrowers living in the UK are offered a discount mortgage tracking the Euribor. Arrangement fees on all mortgages for foreign properties tend to be high - it is not unusual to be charged 1 per cent of the amount you want to borrow. Buying a property abroad isn't necessarily as complicated as it sounds but it isn't something to take lightly. Your sun tan will probably have faded before you find the right property and the right deal. Contacts Abbey National: 0800 449090 Alexander Hall: 020 7499 4999 or www.alexanderhall.co.uk Barclays: (French) 0800 917 0157 Conti Financial Services: 01273 772811 or www.mortgagesoverseas.com First National: 020 8909 7600 or www.britishmortgagesabroad.com Norwich & Peterborough BS: 01733 372006 RBS International: 01534 285535 
DECEMBER MORTGAGE FEATURES
PREVIOUS Complete guide to Homebuying FEATURES
|
|