Non Standard Mortgages - Foreign Currency
Foreign Property Purchase Processes
If you do use a UK lender, it is usually best to use one
with a local operation in the country where you are buying.
Not only does this help with the practicalities of the valuation,
transfer of title, legal formalities, and the language problems,
banks with specialist local knowledge are usually more able
to assist in helping you understand the vagaries of the
purchase process in your destination country.
To give an idea of why you will probably need some expert
help, here are just some of the differences that you may
face:
The cost of buying abroad is often a lot higher than in
the UK, particularly in Portugal, Spain, Italy and France,
where you can end up paying 10 or 15 percent in estate agent
fees, legal charges, mortgage registration fees and VAT.
These higher purchase costs impact your total expenditure
quite heavily and you need to lower you budget for the property
accordingly.
Whilst negotiating is part and parcel of property transactions
in this country, the way we do it is not a patch on certain
parts of the continent. Vendors in the Mediterranean countries
in particular, incorporate a large portion of bluff into
the asking price and if you don't go in with a sufficiently
low offer, you may end up paying over the asking price.
In France you have to make a potentially non-refundable
10 percent deposit at the point the sale is agreed, so expert
legal advice is crucial to ensure that you insert the correct
clauses into the agreement document to make sure you don't
lose the deposit if the sale falls through.
Under Spanish and Portuguese law, any debts on the property
you buy automatically pass to you when you complete the
sale. This can include debts relating to any previous mortgage
on the property, making it essential that the legal work
is done thoroughly.
Tax considerations can play an important part in the way
the transaction is approached. Many European countries operate
a system based on Napoleonic law, which means that everything
is different when compared to the UK - inheritance law,
rights over property, court procedures and so on. When inherited
property is passed on in many European countries, in the
absence of a local will it is split pro rata between family
members, rather than all passing to next of kin.
Tax avoidance is endemic in Italy, so getting accurate
valuations can be tricky. The official valuation can be
50 percent of the purchase price in order that the taxes
associated with the sale are reduced.
Using offshore companies is the only way of buying property
with certain lenders in Portugal. The company owns the property
and shares in the company are passed from the vendor to
the buyer. Changing inheritance legacies is then a matter
of reallocating ownership of the shares. However, while
this is often the only way to do it in Portugal, it is an
extremely costly way to do it in Spain or Italy. Meanwhile,
France has the SCI - the Societe Civile Immobiliere, which
replaces this form of tax efficient mechanism.
These are just a handful of the many differences - there
are many more...
