Mortgages
There are two main ways of financing an overseas property purchase if you don’t have the cash. One is to remortgage your UK property, the other is to take out a mortgage on the foreign property. Several UK lenders offer overseas mortgages but mainly in the popular markets. Banco Halifax Hispania and Royal Bank of Scotland International, for example, lend on properties in Spain only; Leeds Building Society and Norwich & Peterborough Building Society lend in Gibraltar and Spain; HSBC in France only; while Barclays lends in Spain, Portugal, Italy and France, and Lloyds TSB in Spain, Australia, New Zealand, Canada and the US.
Learn more about Mortgages by Country
An alternative is to use a UK-based mortgage broker that specialises in international loans. Taking out a mortgage on your overseas property can have practical advantages. Interest rates on foreign loans may be lower and the lender will want to make sure the property is properly valued and offers adequate security. If you do pay with cash, you should try and act in the same way as a bank would do when lending you money on the property.
Remember that the rules you may have grown used to in the UK market may not apply in other countries. Self certification, for instance, is rarely an option. Overseas lenders almost all require proof of income. Additionally, the ratios of how much you can borrow in relation to your income will vary considerably from one territory to the next – a reputable specialist in this field will quickly be able to guide you as to what you can and cannot raise.
There are a number of bank and specialist currency providers, here are a few to choose from.
Banco Halifax Hispania; 01422 333868
Barclays, 020-8298 3223
HSBC, 0800 0858887
Leeds BS, 00350 50602
Lloyds TSB, 01624 638119
Norwich & Peterborough BS, 01733 372006
RBS International, 00350 44166
Conti Financial Services, 01273 772811, www.mortgagesoverseas.com
Propertyfinance4less, 020 7594 0555, www.propertyfinance4less.com
USHE Overseas 0845 2300 787 www.usheoverseas.com/index.php
Tax
The tax implications of a holiday home overseas are often neglected. Bill Blevins, of the chartered accountants and international tax specialists Blevins Franks, says: “People often overlook the fact that when they sell their overseas property it will be liable to capital gains tax in the UK, as it is not their principal private residence. There may also be a similar tax charge to pay to the overseas tax authorities.
Fortunately, the UK has double tax treaties with many countries, which means you won’t have to pay twice but you may have extra to pay if the amount charged overseas is less than in the UK.” Tax may also be payable on rental income; in countries such as France there may be annual wealth tax to pay on properties above a certain value. Inheritance tax also needs to be considered. Last but not least, says Anita Monteith, tax manager at the Institute of Chartered Accounts in England and Wales (ICAEW): “Prospective homeowners should find out about local taxes equivalent to our council tax.” UK accountants will be able to advise overseas homebuyers, and if they don’t know about a particular country they can access specialists through the ICAEW.
Blevins Franks, 020-7336 1022, www.blevinsfranks.com
Haines Watts, 020 7323 2131, www.hwca.com
ICAEW, 020 7920 8100, www.icaew.org.uk
Insurance
Taking out insurance locally may be your only option in some countries in Eastern Europe or farther afield; your local bank should be able to help. You may prefer to deal with an insurer in the UK, where you will also be covered by the Financial Ombudsman Service if something goes wrong. Most UK-based policies such as Saga Insurance tend to focus on popular areas such as France, Spain, Portugal and Italy. HIFX’s policy, underwritten by Norwich Union, extends to Greece and Cyprus, while Andrew Copeland Insurance’s Europlan includes Malta and Northern European countries such as The Netherlands and Denmark. Hiscox, one of the UK’s leading specialist insurers, offers holiday home cover throughout most of Europe and even allows you to pay monthly by direct debit.
Wherever you take out insurance, make sure it covers you for the periods when the property is unoccupied. Much of Saga ’s cover does not apply if you leave your property unoccupied for more than 60 days. Hiscox, in contrast, provides theft cover even when the property is left unoccupied for long periods.
Hiscox, 0870 084 3777, www.hiscox.com/homepage.aspx
Saga, 0800 0150751, www.saga.co.uk
HIFX, 01753 859159, www.hifx.co.uk
Andrew Copeland, 020-8656 2544, www.andrewcopeland.co.uk