Getting a holiday home abroad is a fantasy for many people, whilst for others it represents an attractive business proposition. However, few people have the funds to purchase a property outright and therefore need to look into acquiring a mortgage in order to make the dream a reality.
When considering a mortgage there are two main options – extending your existing mortgage or taking out a new one especially for the new property. The benefit of extending your existing mortgage is that it can be a cheap way of raising the money required, but you should seriously the consider the consequences of not being able to make the repayments, which are that you could end up losing both properties.
If you wish to take out a new mortgage for your holiday home abroad you can choose between a variety of lenders in your own country or take out a mortgage in the local currency. An obvious risk of taking out a mortgage in the local currency is that if the value of that currency loses ground on your home currency you could end up making higher payments. However, one of the upsides is that many foreign markets represent better value in terms of tax.
A deposit is a key aspect of any mortgage, but when buying abroad this applies even more as you generally become a higher risk to the lender, especially if the lender if overseas or if the holiday home is a second mortgage. Therefore, the more you can raise as a deposit the better, even if it means waiting a few extra years.
If you are going to secure a mortgage abroad you will need to ensure that you have sound paperwork which is in good order. The lender will want to see that you are a reliable investment, so make sure you have documented evidence of your accounts and your employment history. It also helps to have credible references from landlords, credit providers and current mortgage providers that you have consistently met your payments on time.
Being realistic with regards to the property you can afford is key if you are to be taken seriously as a potential client to a mortgage provider. A large villa with an outside pool may be out of your reach for now, so stick with a small apartment to start with and build your way up.
If you intend on buying a property to rent it out you will need to consider what the implications will be with regards to your mortgage as you could conceivably be considered a higher risk investment for the lender. If you do intend on lending make sure you have a realistic plan for doing so to prove that you will be able to make the mortgage payments.
A mortgage broker will have a much better understanding of the market within which you are looking to acquire a loan and will be able to guide your application process in a manner which will make your application more likely to succeed. This may cost slightly more but this will be outweighed by the potentially increased chances of achieving success. Many people prefer to hire the services of a broker who is local to them but also has a proven track record in the foreign property market as this will help to avoid language barriers. Hopefully you will be able to get a mortgage for a holiday home and enjoy many days in the sun.