The economic catastrophe that Europe is facing hasn't put a damper on British buyer's enthusiasm to purchase property on the Continent.
According to World First , the expert on currency exchange, holiday home purchase sales in Spain have more than doubled over the summer.
Italy, Greece and Bulgaria are also places of interest to British buyers who are in search of a bargain. However, no matter the location, buyers should heed to the same advice and do your research to avoid any pitfalls.
Due to the effects of the global banking crisis, banks are less apt to lending money, making mortgages more difficult to obtain. Home buyers who need to borrow money from the bank in turn have to place a larger deposit just to get a loan from overseas banks.
The growing debt crisis has intensified in recent months, especially in Greece and Italy and several Greek banks have stopped lending money. Overseas property experts have said that banks are still lending mortgage funds to borrowers even in Greece, however, a deposit of approximately 30 to 40 percent will be required.
Banks in Spain and France are more lenient at present lending borrower's money with only a 15 or 20 percent deposit. However, if the financial crisis takes a turn for the worse, these figures could be tightened.
In Britain, some lenders allow homeowners to refinance their mortgage to fund holiday home purchases abroad however it's based on the individual's criteria. Most borrowers still need to have substantial equity in their British home even after funds have been released in order to qualify. If you haven't got enough equity in your UK property and are not prepared to sell a house to raise the funds then an overseas mortgage may be the best option for most.
Watch Out for Currency Risks:
Buyers need to keep in mind that due to the turbulent economic climate, Euro loans will present a currency risk for many British buyers if they are paid income in sterling.
The majority of overseas mortgages are on variable rates, instead of fixed, so it's imperative buyers are aware that their monthly repayments could go up.
Mortgage rates in Spain and France are frequently between 3 and 4 percent variable, however the rate may fluctuate depending upon the borrower's circumstances.
Planning Problems, Overvaluations and Dodgy Developers:
Numerous British buyers have become unfastened over the years by falling prey to planning restrictions and other laws that were broken unbeknownst to them before the purchase of their dream home.
Getting an accurate property valuation is imperative and in most cases, it's best to get a second opinion. By taking the word of the developer, you leave yourself open to a world of problems that may arise.
If you are purchasing from a developer, do your research. Get them to include a work history of how long they have been in business and past customer reviews. Check out the work that they have performed and see how well it has stood the test of time.
Language barriers could compromise British buyers, so beware to never sign any contract that may be written in a foreign langue without proper translation. Buyers should make sure there is an accurately translated original foreign contract into the English version.
The Legal Obligations
Research and comprehend what tax, if any will be applied to your purchase and what capital gains tax could be applied on the final price of the home. In most instances, you can figure adding 10 to 15 percent of the purchase price of the property which covers fees for the agents, legal fees and taxes.
Investigate rules and restrictions of letting property if you are planning to have your purchase be used as a holiday let. Certain areas have specific restrictions, so know which rules apply in the area of your newly purchased home.
Find out why an owner is selling and have your lawyer investigate to ensure that all planning, building and habitation licenses are in order. An example of this could be a newly built development may have been repossessed due to licensing not being granted, thus it could not be sold originally.
Never make a decision in haste. Many buyers have been burned because of their passion for the particular property, or have fallen in love with the neighbourhood and never did adequate research before placing an offer.
Another common mistake happens when buyers are under a specific time limit or are under pressure from an agent or developer and need to make a quick decision.
While there may be some fantastic bargains to be had when it comes to purchasing property, make sure to take your time, do your research and get a legal property expert to inspect all transactions.
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