How to buy your dream place in the sun
Owning a holiday home in the sun used to be seen as a luxury reserved for the rich. But more than 800,000 Brits now own a foreign property according to Mintel.
The world is your oyster
If you fancy a place in the sun, the first thing to decide is where to buy. "Spain and France remain the most popular destinations, and hence generally the most expensive," explains Denise Blackburn, marketing director at Moneycorp.
Portugal is another popular choice says James Robinson at MRI Overseas Property. "Property prices are high in the western Algarve. However, less established areas such as eastern Algarve and the Silvercoast, north of Lisbon are more affordable," he explains.
If you really want a bargain though you may have to head slightly further afield. Hot on the heels of the traditional favourites is Bulgaria - its popularity has risen substantially, but property remains affordable.
"Other up and coming areas at the moment include Croatia, Montenegro and Morocco," adds Blackburn. Much of Croatia for example, is in development at the moment, with the construction of lots of new apartments. This means some areas are pretty much a building site, but prices reflect this.
Despite lengthy flight times the US remains a firm favourite, particularly among families who continue to flock to Florida for Disney Land. "With the pound so strong against the dollar at the moment, and property prices in the US continuing to fall, we are seeing a lot of interest," adds Blackburn.
If you're viewing your holiday home as an investment too, it's worth seeking out areas that are on the up, so you can get in before it becomes too popular and prices rise. Look out for new airports and new budget airline routes.
Funding your purchase
Unless you're lucky enough to have enough savings to buy your home outright, the main options will be to take out an overseas mortgage or release equity from your UK home by remortgaging.
Borrowing more against your UK home is a popular option, but David Hollingworth of London and Country Mortgages, says you must be careful not to overstretch yourself. "Your monthly mortgage repayments will increase, so it's vital to consider whether you can cope with the added expense."
However, with interest rates rising here in the UK, overseas mortgages are looking very competitive at the moment. You will need a bigger deposit though. "You're looking at a minimum of 25% of the purchase price to put down as a deposit," Hollingworth explains. You also need to be aware that when you borrow in another currency, your payments could be affected by currency fluctuations.
Many UK lenders have subsidiary branches in other countries, which allows you to borrow in a different currency yet arrange your mortgage from the UK. Some will also lend in sterling. However, Simon Conn of Conti Financial Services, advises caution. "Buyers often go to familiar UK names, but they will rarely offer the best deal."
Conn advises shopping around for the best mortgage deal, as you would in the UK. Independent brokers can assist in finding the best one from a whole market of lenders in different countries.
Make the most of your money
If you're buying with cash or using your UK mortgage, you will need to exchange your pounds into the correct currency in order to carry out the purchase. Fluctuating currency exchange rates can directly affect the Sterling price of your property, so it's worth using a currency exchange specialist. Banks rarely offer the best exchange rates, so it's usually best to use specialists.
Currency exchange specialists will monitor the exchange rate for you and advise you when's the best time to buy - and secure that rate until you are ready to complete.
"On average it takes between six and eight weeks to complete a property purchase abroad, and currency rates can change dramatically," says Mark Bodega, director of HiFX.
Get the right legal advice
Wherever and however you buy, the most important advice for buyers of overseas homes is: get a good solicitor. Not only can language barriers stand to confuse you, but you'll discover that buying processes are very different to here in the UK.
Changing mortgages without moving home. Property owners chiefly remortgage to get a better deal but some do so to release equity in their homes or to finance home improvements, the costs of which are added to the new mortgage. Even though you’re not moving house, you still need to engage solicitors, conveyancing and the new lender will require the property to be surveyed and valued.
The difference between two currencies; specifically how much one currency is worth relative to each other. For example, if £1 is worth $1.50, converting sterling to US dollars, the exchange rate is 1.5. Converting dollars to sterling at those levels, the exchange rate is 0.66, so $1 is worth 66p. There are a wide variety of factors that influence the exchange rate, such as a country’s interest rates, inflation, and the state of politics and the economy in that country.