How to avoid the pitfalls of buying a home abroad: From legal wrangles to currency worries, the eight key issues you need to consider
- While Spain and France are popular spots, other countries are more affordable
- Bulgaria and Brazil are among the most affordable places to buy a second home
- Each country will have a different legal system so it's important to wise up
1. Picking the wrong location
- Carry out exhaustive research. Attend international property shows and speak to experts. Subscribe to magazines and websites devoted to expats in your chosen country. Ask plenty of questions in the forums.
- When you have narrowed down an area, take trips out there to get an understanding of what life is really like – and the costs involved.
2. Legal lapses
- Before you buy, find a good, local, independent, bilingual lawyer with no ties to the vendor – or to the estate agent or property developer. You must find someone who will act in your interests.
- Never sign paperwork in a foreign language.
- Note that lawyers perform different functions in different countries, so do not assume they will do all the necessary background checks. Get to grips with their responsibilities – and yours.
3. Mortgage mistakes
- When budgeting for your deposit and mortgage, be sure to set aside sufficient money to cover agents’ fees, legal costs, survey fees, property registration, moving costs and insurance. Also factor in any tax on property transactions.
- Speak to a specialist overseas mortgage broker who can help you devise the best buying approach. They can also explain any tax implications.
- If you are buying a property with the aim of letting it, make sure you have done all the financial sums.
4. Currency calamity
- Do not make the mistake of going straight to your bank for currency. Try a specialist such as TransferWise, FairFX, Caxton FX, Moneycorp or Fexco, as they often offer lower charges and better exchange rates.
- Look beyond any upfront fee. Nilan Peiris, from TransferWise, says: ‘While most people concentrate on the upfront fee – with many banks advertising zero per cent commission to send money abroad – the crucial issue is the exchange rate.’
- Look at fixing an exchange rate in advance. That way, regardless of how the market moves, you can be certain of the price of the property. With a ‘forward contract’ you can lock in a competitive exchange rate for up to 12 months – so you will not lose out if the pound weakens.
- Check out tools such as the real time currency rate tracker from TransferWise. This sends live updates to your inbox when the rate for your chosen currency is favourable.
5. Forgetting ongoing costs
- Research all likely future costs related to a property purchase before you sign on the dotted line.
- When paying for ongoing costs, try to ensure you convert your pounds at the best possible exchange rate.
6. Underestimating how hard it is to move
- Make sure you use reputable destination agents.
- Do your research to avoid being faced with unexpected bills as you go through the process.
7. Pension pitfalls
- If the state pension is a significant part of your income, think carefully about any overseas move as you could see its value eroded.
- Remember to factor in any personal pensions. Patrick Connolly, of Bath-based adviser Chase de Vere, says: ‘You can leave this money in the UK or potentially transfer it to an overseas pension scheme. But you need to be careful because pension rules vary across countries.
- ‘Overseas pensions can be more expensive or less flexible than your UK pension and if you do not transfer to the right type of scheme, you could face a stiff initial penalty – in some cases 40 per cent or more.’
- Consider putting off your purchase until the position on Brexit is clear.
- If you are set on pushing ahead, keep abreast of all political developments.
- If you are worried about the impact on currency values, a forex specialist can help you reduce any risks.