Christmas is the perfect time for making plans. But if you’re feeling the post-Christmas pinch, finding the money for a home in the sun may not be top of your festive activity list. Perhaps it should be! Here are five ways you might be able to raise the money to buy a property abroad in 2019 and make it your best ever year.
This could be the biggest financial product of the next decade. More and more “baby boomers” who bought UK property when it was relatively cheap are realising that the family home is an asset that could be working much harder. There are dozens of different schemes, and you do have to be careful. But the principle is that you borrow money off the back of your property. It is repaid when you either die or move into long-term care.
Products that are licensed by the Equity Release Council are the safest, with guarantees, for example, that you will never be repossessed or your heirs will be left in negative equity. For equity release you normally need to be 55 or over and still be spending at least half the year in your UK home.
Whatever scheme you use, do remember to lock in your currency.
Interest-free retirement mortgage
This is one of the equity release schemes mentioned above. It deserves a separate listing, however, because it allows you to make regular payments of the interest. The capital is still repaid when you die or move into long term care, but at least the debt doesn’t accrue.
The age of 55 is the key to pensions as well as equity release. If you are in a defined contribution scheme, you can use that pot of money as you wish. Moreover, the first 25% will be tax free. For investments overseas there are schemes such as QROPS.
A local lender will operate in most of our favourite overseas property locations. With the low European interest rates at present – the European Central Bank interest rates are even lower than the Bank of England’s – you can find some great deals. The usual loan-to-value will be at least 30%, and you will need to add fees and taxes to that.
If taking out a foreign mortgage, it is essential to think about long-term currency requirements. Smart’s Regular Payments Plan, used with a Forward Contract, will ensure that not only are payments made on time, but that they will be the same each money for up to a year.
Buying with family
An extended family shouldn’t just be for Christmas! Buying a holiday home together makes all kinds of sense. So while you’re seeing the family this Christmas, why not drop a few hints about how great it would be to see each other again when the weather is a little better. Clubbing together not only makes the costs just a fraction of buying on your own, but the workload too. And the legal processes needn’t be any more difficult than when an unmarried couple buy a property together.
It’s also a great way for an older member of the family to create a “living legacy”,to spread the wealth through the generations while enjoying it together. There is no reason to sell the family home either, if you use an equity release scheme. What could be nicer than looking at properties abroad and looking forward to holidays together every year not just the Christmas but in the summer too? Read this guide for more information.