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Getting your Dream Property – International Finance

Securing a property in a foreign country can be very difficult and involves overcoming various obstacles. There are all the legalities to consider and in addition there are other important factors to consider such as having different mortgages to compare and choose from, whether to deal with an estate agent or not and simply assessing the property you are looking to buy and weighing up whether it really is right for you.

For foreign investments, you will very likely need to go via a broker of some kind. It is these brokers that will work with local lenders and private banks in your location of choice to source you the best finance for the property in question (source: SPF Loans).

However, once you have your heart set on a property, you will need to arrange the relevant funding option that will suit your circumstances and equally important, will cover the costs of the property and this is where international mortgages come into play. There are many providers of these mortgages and finance arrangements from around the world, but finding a tried and trusted lender is more difficult than many may think.

There are a few options which should be considered; each having its own merits and pitfalls, but all of which should be considered.

Bridging Finance

This is a popular way to literally ‘bridge the gap’ between purchases. In the case of property financing, these loans are effectively short term loans that are secured on a property to speed up a separate property transaction and can be used to good effect to ensure you don’t miss out on your desired property. Say for example you own one property that you are looking to sell, but the property you want to buy (as your new property) comes on the market while you are waiting for a buyer to complete the purchase of your initial property.

If you wait for them to close on the property, by the time the sale is complete and you have access to the money from the sale, the property you want to buy will have been snapped up by another buyer. Therefore, bridging finance can be considered here.

Say your property is worth $500,000 and the property you want to buy is valued at $700,000, you would take out a bridging loan for the full $700,000. Upon the closing of the initial property, you would repay the lender $500,000 from that sale and then the remaining loan amount plus interest via the refinancing of the new property, paying off the loan in full. These loans allow you to secure properties you may otherwise miss out on in the short term.

However, for a bridging loan, you will likely need to own a property in the country you seek to buy a new property and so this may not be totally feasible for everyone.

With these loans, it is important that wherever possible, you have an ‘exit strategy,’ a strategy with which to repay the loan by a predetermined time.

International Mortgages

Usually secured through a broker, these are mortgages in the country of interest that are sourced from the best provider for your specific needs and requirements. For example, say you live in the UK and are seeking to purchase a property in Tel Aviv. Traditionally, you would need to shop around yourself, do all the legwork and go to numerous lenders and banks to compare what they can offer you and what you need for each.

However, nowadays with an international mortgage, things can be made a lot easier. With a range of lenders, banks and private banks available in most developed countries, going through a broker in your home country to get the best international mortgage is a popular funding option. The broker will present you with the options and will help you choose the best provider.

You will however need to consider a few criteria that you may not be accustomed to, but which are in use in foreign countries. These include ‘stress tests’ which will make sure you can cope financially with any currency fluctuations should they occur, property requirements, such as making sure the property is energy efficient with a good energy efficiency rating. This is the case in the UK (RJ Acoustics), where properties with better energy efficiency ratings are much more desirable.

Local tax arrangements should also be properly accounted for. Different countries have different tax laws and requirements and you should assess these so that you are not left surprised by any extra charges and so you understand the entire process of acquiring your new property.