While no one is sure of the exact figures, roughly 5 million British citizens live abroad. Many of these have bought houses abroad, looking to take advantage of warmer weather and a lower cost of living.
Buying a house abroad, however, isn’t quite the same as buying on in the UK. And, if it’s something you’re thinking about, there are plenty of things you need to take in account before you make a final decision – not least of which is how to get your money abroad to make your property purchase.
Before you buy a house abroad
Before you decide to buy a house abroad, it’s a good idea to do some research. Think about:
- Where you want to live: Do you have a particular country in mind or the type of home you want to own. Where and what you decide to buy your house will have an impact on how much money you need, whether you’ll be able to get a mortgage, and your legal rights and responsibilities.
Each country has different rules, regulations and requirements when it comes to buying property. Make sure you do your research before you decide to buy or you could end up out of pocket, and without the holiday home you’ve always dreamed off.
- How much you have to spend: Do you have a fixed budget that you don’t intend to go over? And is this enough to buy the house for cash or will you need a mortgage? If you plan on taking out a mortgage to pay for your property, you need to understand any legal requirements and the size of any deposit you might need to pay.
In Spain, for example, you’re unlikely to get a mortgage for more than 50% of the value of a rural property as these are considered too high a risk to lenders.
Keep an eye on the exchange rate as this will have an effect on how much you can afford to spend, especially if you are taking out a local currency mortgage. Exchange rates are especially important to watch if you take out a local currency mortgage and are transferring money from the UK to cover your repayments; a fall in the pound could mean your payments increase significantly.
- The legal ramifications: Each country has different rules when it comes to buying homes. If you buy in a new development in Cyprus, for example, you generally have to start making mortgage payments even if the home is finished – not great if you are planning on making repayments from rental income. Make sure you take legal advice before making any purchase.
Unless you are fluent in the language of the country you’re moving too, find yourself an English-speaking lawyer. You might also want to speak to a solicitor in the UK as owning a home abroad may have tax implications you haven’t thought about.
When it comes to buying a house abroad, there are two main ways to transfer your money overseas:
1. Through your bank or building society
Using your bank or building society allows you to transfer large sums of money, something you’ll probably be doing if you’re buying a house. It is the easiest and safest way to send money abroad as you’re protected under the Financial Services Compensation Scheme (FSCS). However, it is also the slowest, with transfers taking up to six days, and the most expensive because banks don’t generally offer the best exchange rates.
You can potentially reduce these costs if your bank has overseas branches by opening a local account to sit alongside the one you hold in the UK. This way you can transfer money as and when needed, reducing or eliminating any fees or charges you might otherwise have had to pay (though you won’t get a better exchange rate, something you’ll need to keep in mind).
When you transfer money internationally, you’ll need to know the IBAN (International Bank Account Number) and BIC (Bank Identifier Code) for the account you’re transferring money too. You might need to know these numbers for your account as well as the one you’re transferring money into.
2. Through an FX Broker
Using an FX broker also allows you to send large sums of money abroad. Brokers are quicker and if you’re sending more than £3,000 at any one time. They are also cheaper because they don’t charge fees above this amount.
FX brokers also tend to offer better exchange rates than banks, meaning your money goes further – always a good thing. Unlike banks, however, brokers are not protected by the FSCS, meaning your money isn’t protected if they go out of business.
Another potential downside, if you want to transfer money quickly, is that if you don’t already have an account, setting one up can take several days.
Because brokers are not always as well known, it can be hard to know who’s best to use, especially as there are scams that aren’t always easy to detect. If you do plan on using a broker, do your research and choose on that is registered with the Financial Conduct Authority.
Both banks and building societies and FX brokers will let you set up recurring payments to cover the cost of your mortgage or regular expenses. The fees for these will vary, so it’s good to check these before setting up any recurring payments: if they are with an FX Broker and below £3,000 for example, the charges could be quite significant. Remember too, that because exchange rates go up and down, payments may be subject to lower rates than when you set them up.
If you are worried about the exchange rate falling, you could arrange to ‘forward contract’ your transfers. This locks in the exchange rate for a future transfer and is a good idea if you plan on transfer large sums overseas regularly.