The thought of owning a second home in the sun or a ski lodge or mountain retreat where we can escape whenever the mood takes us is of course a commonly held dream.
And with the simplification of re-mortgaging facilities, the affordability of home loans and the growth in underlying equity many of us have enjoyed on our principal residences, there couldn’t be a better time to turn that dream into a reality than today.
Here’s how to buy a holiday home abroad and avoid all the common traps and pitfalls that people can fall foul of.
First things first you need to decide whether it make sense for you to release the equity that has built up in your principal residence to buy a property overseas, to raise a mortgage on the overseas property or to pay for it in cash.
Unfortunately there is no straight answer to this dilemma! The answer will lie somewhere among your own personal circumstances, your ability to afford an extension on your home loan or an overseas mortgage, the country in which you’re buying abroad and whether or not it offers good investment potential. However, there are two simple facts that the majority of financial advisers and mortgage lenders agree upon and these may help you make your decision: –
1) taking the money that has built up in equity on one property and using it to buy another property is probably the most sensible thing to do when releasing equity
2) over the medium to long term real estate as an equity class is one of the most consistent returning investment mechanisms.
The next issue relates to which country you should buy your holiday home in. You may have a very positive idea of which country you would most like to spend your holiday time in – if you have a country in mind it’s probably a country you know well and have had enjoyable times in before.
If on the other hand you’re unsure and are looking abroad for a holiday home as an investment property in an emerging market or a market with strong room for growth, you should draw yourself a shortlist based upon what you’re looking for in a holiday home – i.e., if you want a European beach house with 300 days sunshine a year you’re more likely to look at the Mediterranean region rather than the Ukraine or the UK!
Whichever country you’re considering, do research into the laws relating to foreign freehold ownership of real estate in that country and on the projected prospects for the property sector over the medium term – all this sort of information is available on the internet.
Once you have a country in mind you need to set yourself a realistic budget – realistic in that it is an amount you can afford and also that it is an amount that will buy you a quality property abroad. Going back to the Mediterranean region in Europe for a moment, those with a large budget could acquire a decent property on the Spanish coast, those with a small budget could only acquire substandard or renovation property on the Spanish coast but could purchase something far more substantial in the interior of Spain. Think about the amount you can afford and then look at the country you’re interested in – where will you get the most for your money?
Always employ independent legal representation to assist you in any transactions you enter into abroad. You may not fully understand the language or legal system of the country you’re buying your holiday home in so you need a lawyer who does! Furthermore you need a lawyer who is working solely for you and not representing your interests together with those of the vendor or property constructor as well!
Get any contracts or papers you sign officially translated into English before signing, have any promises made or deals verbally brokered written into the contract, make a will that includes your new property purchase and don’t rush into a decision because pressure is being put upon you or because your time abroad to organise everything is short. The world will not run out of holiday homes for sale in our lifetime. If you keep your wits about you and remember the golden rule – i.e., if something seems too good to be true it probably is – you’ll be just fine!
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