How to Get a Loan for Overseas Property – an Overview

If you are looking forward to buying property overseas, local mortgages will not be enough to finance the property. Even in places where mortgage lending does exist, the terms may not be in your favor, at least not what you would find at home. Based on the country, you may have to pay a higher rate of interest and a much larger down payment; this down payment can be anything between 30% and 50% of the property’s value.

Additionally, it is also possible that you will have to take out a life insurance policy for the foreign mortgages, with the bank being named as your beneficiary. Depending on the country and age, this could prove to be a deal-breaker since some nations place upper age limits on individuals who can take out a life insurance policy.

In this article, we will go through how to get a loan for overseas property. With the help of these methods, you would have a much better chance at buying properties in foreign locations with ease and convenience.

How to Buy a Home Overseas – Loan Options Available

While it is a dream to live overseas, there is a significant gap in buying properties abroad and back home. Without the facility for financing and gaining installment loans, options for buying property abroad become very limited. Here are some options that are available for almost every situation:

Bank Financing

This option is the most difficult to find internationally; however, it is often considered the best option when available. There are some aspects that you should remember:

In most cases, the loan-to-value ratio will be quite low; at times, you will see a 75% or 50% value. These numbers will not be more than what you are used to.

• The terms will be shorter; for instance, a 30-year loan is reasonably unheard of.
• The interest rates will not be fixed; instead, they will be floating.
• In some cases, the lenders may need life insurance as a guarantee for your loan; based on your age, it can also limit the term of your loan since most insurance companies only insure you after the age of 75 years.

For ex-pats, bank finance for overseas property generally falls under two categories – financing for residents (where the bank operates) and non-residents. For residents, the applicant will be treated like a citizen. However, you will have to show your proof of income. The requirement for the income amount will depend on different overseas money lenders.

As for non-residents, borrowing overseas loans is much tricky. However, it is not impossible in nations like New Zealand, France, Portugal, Dominican Republic, Panama, and Mexico are some countries where non-residents can get a loan for properties abroad.

Borrowing On Your Home Equity

One of the simplest ways of understanding how to buy a home overseas is to take out a line of credit from your home equity (or HELOC). There are certain advantages of using this method. For instance, HELOC’s interest rate will be lower than what you can get in other countries. In US-based banks, the intro period has a rate of 1.9%, followed by a 4.24% rate for the rest of the loan.

In the case of HELOC, you become a cash buyer. Therefore, you also have the benefits of all cash discounts and be better positioned for negotiation. Since HELOC is a line of credit, you do not even have to use it all at once. It’s quite advantageous if you want to make progress payments on pre-construction purchases. Until you use the money, you do not have to pay the interest.

A traditional loan for overseas property may also work for you if you know how much money you will require. Or, you could opt for mortgage refinancing. These options are great if you want to change the terms of the first mortgage loan or lower the interest rate.

Seller Financing

If you want to buy property from a private owner, some sellers may finance a bit of the purchase plan. You can choose the terms; however, it is uncommon to see a term of more than five years.

Generally, the longer the property has been on sale, the better terms you will be able to negotiate. Like overseas mortgage lenders, you cannot expect the seller to deliver the goods until you have paid up full.

What Are the Best Places For Buying Property Abroad?

Here are some countries where you can quickly get a loan to buy property abroad:

• Turkey
• Average Monthly Rent: $1,128
• Rental Yield: 3.62%
• Effective Rental Tax Income: 21.84%
• Canada
  • Average Monthly Rent: $3,740
  • Rental Yield: 3.98%
  • Effective Rental Tax Income: 25%
• Indonesia
  • Average Monthly Rent: $2,486
  • Rental Yield: 8.61%
  • Effective Rental Tax Income: 20%
• The United Arab Emirates
  • Average Monthly Rent: $3,070
  • Rental Yield: 5.19%
  • Effective Rental Tax Income: 5%
• The Philippines
  • Average Monthly Rent: $2,422
  • Rental Yield: 6.12%
  • Effective Rental Tax Income: 4.06%

Considerations for Buying Property Overseas

Here are some considerations before you try to get international mortgage loans for foreign properties:

• Do not go by the quoted price. It is recommended that you bargain hard, especially if it is a new property.
• Get the list of all charges and fees with a property transaction.
• Hire an independent property brokerage firm present in your home country and where you plan on buying the property.
• It is recommended that you consult an independent advisor to guide you through the legalities of property ownership in the destination country so that the transaction is hassle-free and smooth.
• Ensure that you are free to visit your foreign home as frequently as you wish. Check your residential status and visa periodically.

Final Thoughts

Overall, you can get international mortgage loans to buy properties overseas. However, ensure that you are ready beforehand to deal with some formalities. It would always be better to speak to an expert if you have no idea what you are doing related to personal loans.

References:

1. https://www.usa-mortgages.com/blog/overseas-property-loans-guide/
2. https://www.investopedia.com/articles/personal-finance/050815/how-finance-foreign-real-estate.asp
3. https://budgeting.thenest.com/loan-overseas-property-25124.html
4. https://finance.zacks.com/loan-overseas-property-11878.html