Many consumers are drawn to warmer climates and the search for a suitable property begins. However, before buying a dream home abroad, you should find out about the risks. The right financing can help to find the dream home abroad.
Buying property abroad is not only for those who dream of a holiday home. Consumers have long since started to live abroad permanently. Often the purchase of a property abroad is also intended as a retirement home.
General possibility of financing abroad
If prospective buyers do not have the equity to buy a property abroad, there is the possibility of financing abroad. Loans can be taken out with UK banks. However, a foreign credit institution can also offer financing in the corresponding location. It is also possible to commission domestic financial intermediaries to take out loans abroad. Financial intermediaries and UK banks offer foreign financing in Belgium, Italy, France, the Netherlands, Spain and also in Switzerland, for example.
Cheap loans in Switzerland such as eckokredit.ch are particularly popular with interested parties. In the meantime, however, there are also UK banks that specialise in financing abroad. Not only UK but also foreign real estate is accepted as loan collateral. It can also be interesting for buyers if a residential priest contract can be brought in as part of their retirement provision.
Are there any risks with foreign financing?
If you want to acquire a property abroad, you should know that this is not free of risks. This can lead to communication problems, which can have considerable consequences. If you do not have a perfect command of the language of the country, you should take an experienced interpreter with you to discussions and negotiations.
If this precautionary measure is not followed, one can reckon with the fact that not only are different conditions assumed, but important and fundamental things can be misunderstood. This can lead to a contract that is disadvantageous for the acquirer.
Observe right of withdrawal
If you decide to purchase a property abroad, you should in any case agree on a right of withdrawal. This right should be established in such a way that a withdrawal from the purchase contract can be made if, despite contractual assurances, the property is nevertheless encumbered.
Buyers should have all the contractual documents that characterise the purchase of a property, including the financing, checked by a local notary or lawyer. A notary or lawyer will also carry out the notarisation obligation of the purchaser. If the purchaser decides against this protection, he could suffer a high financial loss. Even the inspection should only be carried out with expert assistance. For this purpose an independent expert should be commissioned on site.
Advantages of foreign financing
Basically, buyers should assume that buying a property abroad is more expensive than here in UK. The interest rates will be in the euro zone, with contract-dependent differences due to the loan amount, creditworthiness, contract term and collateral. For this reason, interest rate advantages can normally not be granted, neither in the case of foreign financing with the involvement of a UK bank. Exceptions are foreign currency loans, which can also be used for financing abroad. Thus, the financing and acquisition of a foreign property can often be carried out with low-interest foreign currency loans, such as Swiss francs.
Conclusion: More risk with foreign financing
The desire for a property in your favourite country is often associated with greater risks. For example, foreign financing is more expensive than domestic financing. Although an approximation in the EU has brought about a so-called approximation of laws, buyers should know that national law applies abroad. It is not only the respective legal system that can face solid foreign financing. If possible, buyers should give priority to a German lender if possible. Anyone who now relies on expensive foreign financing should only tackle the project with comprehensive preparation.