Which currency should my overseas mortgage be in – Sterling or local currency?
There is no simple ‘yes’ or ‘no, especially in these relatively volatile exchange rate conditions. There are considerable differences between markets so take independent advice from tax advisors and SPF as to the mortgages available and terms and conditions.
Generally, it is worth matching the currency of the asset and liability. If you intend to let the property this strengthens the case for the loan to match the currency as you will receive rental income in the local currency so you can minimize or completely avoid any exchange rate concerns.
Movements in the exchange rate will affect you. If you have a Euro mortgage and Sterling falls against the Euro, the outstanding debt equivalent in pounds increases and the Sterling equivalent of your monthly mortgage repayment also rises. But the value of the property increases in line with the Euro so if you were to sell the property you would have made a gain.
Can I get a self-certification or buy-to-let mortgage when buying abroad?
Neither self-certification nor buy-to-let have ever been a feature of international lending with the exception of the US. The US lenders are now in line with other International banks and always base lending on affordability. Borrowers must demonstrate they can easily meet the repayment of the loan in addition to their current borrowing and debt.
All international loans are full status with a requirement for full supporting documents proving income and outgoings.
What is the difference between the purchase price and valuation?
Lenders will carry out a valuation for their own purposes and depending on where you’re buying, you may or may not receive a copy of this. If you intend to carry out substantial work, or for any significant investment, consider instructing your own independent survey.
If you have agreed a reduced purchase price, the lender will base its loan-to-value on the lower of the valuation or the declared purchase price in the contract.
What taxes will I have to pay when buying abroad?
There are differences between countries and their tax systems but generally you can expect to pay local tax(es) on an annual basis (Council tax equivalent). In addition you may be required to submit an annual tax return, especially if you are letting the property or have set up a company to buy the property. Consulting an expert in both the UK and the tax system of the country you intend to buy in is advisable and could save you significant money in the long run.
How should I structure the ownership of my overseas property?
SPF is able to arrange mortgages for the majority of ownership structures and offshore vehicles. But this will depend on your financial situation and may have an impact on the number of lenders who would consider your application.
In some cases there may be legal considerations which determine that buying in the name of a company could be preferable to buying in your own name. Ask your SPF consultant what implications there are for lending options in this case.
It is important to marry any potential tax advantages and seek good advice to be sure you secure the ideal mortgage solution for your situation.