Buying a property abroad is an exciting prospect, whether it’s a holiday home, a retirement retreat, or a permanent move. But the process isn’t the same as in the UK, and there are pitfalls that could cost you dearly if you’re not prepared.
From legal quirks to inheritance rules and exchange rate risks, here are ten essential things to know before you buy overseas.
You can buy in most countries with no restrictions
The good news is that in most popular European destinations – such as Spain, France, Italy, Portugal and Ireland – there are no restrictions on foreigners buying property. Whether you’re a European Union or non-EU national makes no difference; Brexit has not changed your right to buy in these countries. Moreover, in most countries international buyers pay the same property tax rates as local buyers.
However, there are things to beware as an international, non-resident buyer. It’s especially important to ensure your legal position is protected when working in an unfamiliar legal system, language and, of course, currency.
But some countries restrict foreign buyers
Surprisingly, Commonwealth countries that Brits might think of as more pro-UK are less welcoming to property buyers. There are strong restrictions on foreign buyers in countries such as Australia, New Zealand and Canada. In these cases, purchases may require government approval, be limited to new-builds, or be completely off limits. Always check local rules before committing.
Owning property doesn’t grant you a visa
One of the biggest misconceptions is that buying a property overseas automatically gives you the right to live there. This is generally not the case. While schemes such as Portugal’s and Spain’s “golden visas” once allowed residency through property purchase, these are now closed. Currently, only a handful of countries – such as Greece – maintain property-linked visa options.
Think about ownership and inheritance
When people reach an age where they can afford to buy or retire overseas they may be on second or third marriages or relationships. That will have profound implications for inheritance in countries such as Spain, France and Italy where “forced heirship” rules mean you may not be free to leave your property to whomever you choose. For example, children may automatically inherit ahead of a spouse.
For unmarried people, in whose name the property is listed and bills paid can all have tax implications when you come to sell. Thinking about such matters can seem pessimistic and even a little unromantic, but still, it’s best for all concerned to have a tricky conversation now!
You can buy off-plan in confidence
In the past, some buyers in Spain and elsewhere lost deposits on unfinished homes, especially when the 2008 global financial crisis put so many property developers out of business. Since then, laws have been tightened, deposit systems implemented, guarantees legally enforced and so – subject to checks by your lawyer – you can rely on your property being completed as promised or your money returned in full.
Check residency and tax implications
Simply buying a home abroad does not make you a resident, but it may affect your tax obligations. Some countries levy annual property taxes or wealth taxes, especially on second homes.
Residency rules vary too: for example, you can stay up to 90 days in any 180-day period in the EU without a visa, but longer stays require permits. Understanding how property ownership affects your tax position in both countries is vital.
Understand local legal processes
The basics of a property purchase are the same the world over: viewings, offer, deposit, legal checks, final payment and completion. However, there are big differences within that simple system.
In most European countries you will need to pay a reservation deposit, of maybe a few thousand euros, to show commitment and take it off the market. Will that be repayable if you change your mind on the plane home? In Spain, France, Italy and Portugal a notary must witness the sale. In some countries rural properties come with extra obligations, and in some planning controls can appear extremely strict.
It’s vital to be well-informed and in control, with a specialist property lawyer involved.
Currency exchange can save – or cost – you thousands
When your dream home is priced in euros, dollars or another currency, the amount you pay in pounds depends on the exchange rate on the day of transfer. A shift of just 1% could mean thousands of pounds extra.
Effectively this means that until the day when you pay the final amount in the notary’s office, probably hundreds of thousands, you won’t know what the property will cost you. Stressful! That’s why so many buyers protect their budget with a forward contract, fixing an exchange rate with Smart Currency Exchange as soon as they are committed to the purchase.
Mortgages are usually available
If you need some extra funds – or prefer to keep your money in other assets – you don’t necessarily have to be a resident in a country to get a mortgage. Moreover, with European interest rates now significantly lower than in the UK and US, a mortgage may make good financial sense
But overseas mortgages often require higher deposits (of 30 to 40%), stricter lending criteria and can take longer to arrange. It’s best to get a mortgage offer in principle before starting the search. You generally won’t find interest-only mortgages available.
Bear in mind, too, that buying costs will not be included in that loan to value.
Beware of hidden and additional costs
When setting your budget, make sure you allow for buying costs. The purchase price is just the beginning. Buyers should budget for stamp duty, legal fees, notary charges, surveyor fees, land registry costs and agent commissions. These vary by country but can add 10–15% to the purchase price. Without proper planning, these extras can derail your budget.
Final thoughts
Buying a property abroad is perfectly achievable and can be one of the most life-enhancing things you ever do. But it requires careful planning and professional guidance. From understanding local laws to protecting yourself from currency swings, doing your homework now will save you stress and money later.
At Smart Currency Exchange, we help thousands of buyers each year to secure their dream homes abroad without being caught out by currency volatility. Whether you’re paying a deposit or planning long-term payments, our currency specialists can help you fix your budget and move money safely.
Talk to a currency specialist today and take the first step towards buying your home overseas with confidence.
