Where should I get my money for buying property abroad? |
Posted: January 23, 2018 |
If you’re thinking of purchasing a home abroad, it’s important to find out whether it’s more beneficial to get financial aid at home or abroad. Most people will need a mortgage in order to fund a property project abroad, but should you borrow within in the UK or in the country you’re looking to buy in? Both options come with benefits and risks attached, so it’s worth taking the time to research each choice carefully to avoid disaster down the line. Of course, finding financial aid within the UK is easier in terms of access, due to the fact that you will already have a history of domestic payments within the country. This will help a lender assess your ability to repay a loan. What’s more, your credit score is not measured internationally. Data protection laws make it difficult to share personal information with foreign countries, meaning a strong credit rating won’t mean as much abroad. There are ways around this of course. If you can obtain a copy of your UK credit report, you can present this to an overseas bank. This mayhelp them evaluate your application more accurately. However, this does not guarantee you the same treatment as a national applicant with a strong credit rating. You also won’t get the same protections as you would with a UK institution. This is mainly due to the fact that the Financial Ombudsman Service only deals with complaints regarding companies that operate in and from the UK. What’s more, the Financial Conduct Authority (FCA) only regulates UK businesses. This means that if something went wrong you would not be able to claim compensation when dealing with a mortgage abroad. But borrowing overseas can also offer benefits that you wouldn’t get from lending within the UK. Even if you’ll likely need a larger deposit abroad, you can still take advantage of lower interest rates. Eurozone interests are lower on average than those in the UK, especially considering the recent hike in UK interest rates. This could cost you less money over the course of your mortgage. It’s also important to consider the impact of fluctuating exchange rates on your mortgage premiums when deciding whether to borrow at home or abroad. Be sure to get familiar with the going market rate, as this will affect how much you actually need to borrow. Exchange rates have a big impact on how much a home abroad could cost you. Buying a €200,000 in Spain in March 2017 would require borrowing £175,746, while in May 2017 you could borrow just £169,204, reflecting just how big an impact changing rates can have on your finances.By borrowing abroad, you do not have to immediately think about exchange rates. However, you will have to consider how much fluctuating exchange rates will affect the amount of money you need to transfer from the UK to meet your overseas premiums. With rates moving by several percentage points every month, each month your premiums could be significantly higher or lower. So while buying abroad could benefit you in the long run by reducing the overall amount you have to pay in sterling, it could also see you paying more outright, whilst also making it harder to budget your monthly finances. So the real question you need to ask yourself in terms of borrowing for a property abroad is: do you want to risk currency exchange now by borrowing in the UK, or risk currency exchange rates down the line by borrowing overseas? Before making any final decisions about your property purchase, seek professional advice to give you a clear idea of your options. Find out more at Glenhawk
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