When buying a property overseas often a buyer will need to take out a mortgage to help them fund the purchase, just like they do when buying a property in the UK. What is different when buying a property abroad is that there can be several different options available to you;

1. Mortgage abroad

The most obvious option is to take out a mortgage in the country that you are buying in. You buy a property in Spain and take out a Spanish Mortgage, if you buy a property in Portugal you take out a Portuguese mortgage and so on. This has several advantages;

a. It keeps things very simple and reflects what is actually happening.

b. The mortgage is registered against the property that you are buying. This means that the value of the property is in the same currency as you are paying back. Interest rates are also linked to the economy that you have your property in and therefore as everything is in one economy you are less likely to have things go completely adrift in terms of value of the property, interest rates and so on (unless, of course, there is a collapse in the economy).

c. You are keeping any mortgages used to buy property overseas away from your main home in the UK
  2. A UK mortgage

This doesn’t mean that you can walk into your High Street bank in the UK and, for example, take out a mortgage to buy a property in Spain. We are not aware of any British Banks that will lend against a foreign property. What actually happens is that you release equity from your UK home to give you the money to buy the property abroad.

The advantage of doing this is that the mortgage payments are in the same currency as you earn, meaning that there are no exchange rate losses when it comes to paying the mortgage. However, even in this scenario there can be several disadvantages;

a. This means that the property overseas is free of mortgages but it does mean that your main home in the UK is more exposed if you can’t pay the mortgage.

b. The amount that you borrowed is not linked to the value of the house you bought (i.e. the property abroad) and therefore the two things are much likely to get out of sync in terms of amount left to pay on the mortgage, property value, interest rates and so on.

3. A mortgage in a third currency

This particular option was prevalent in places such as Cyprus over recent years. Originally when a British person purchased a property in Cyprus they were often encouraged to take out a loan in Japanese Yen because of the exchange rate and interest rates. When the Japanese Yen stopped being so attractive the banks switched their attention to Swiss Francs.
The big problem with taking out a mortgage in a different currency is that it is very easy for the interaction between the three currencies to go wrong and to leave you in a financial minefield.
You will have three sets of currencies where exchange rates can vary. You will have three sets of economies to rely on and of course the more countries and currencies involved the more likely that something adverse will happen to one of them; which will affect how much you have to pay back.
Taking out a Japanese Yen or Swiss Franc Mortgage to buy a property in Cyprus always had the capacity to create a problem with so many variants outside of the borrower’s control.
Many people who took out a Swiss Franc Mortgage to buy property in Cyprus now find themselves in the financial position of owing much more to the bank for their mortgage than they did when they first bought the property; and all of this despite having been paying back the mortgage for years.
If you have a Swiss Franc Mortgage for a property in Cyprus you can down load our Swiss Franc Mortgages Brochure.

4. Take over developers mortgage

In some countries it is possible to take over a mortgage that is already on the property. This is most common when buying a property direct from a developer (i.e. an off plan property). The developer will often have a mortgage on the property which allows him to fund the construction.
When the property is finished the buyer will take over (subrogate) the mortgage from the developer with the authority of the bank. Basically the buyer will step into the shoes of the developer as far as the instalments related to the mortgage are concerned.

This is a very convenient way of proceeding – after all, the mortgage is already registered against the property and you simply take it over. However, the mortgage that the developer takes out for a short period of time of a couple of years may be very different from the sort of mortgage that you would want long term.

The terms and conditions associated with the mortgage may therefore not be suitable for you. It is, of course, also important to make sure that the mortgage has been properly segregated as often the mortgage is over the whole plot and you don’t want to end up being responsible for the whole mortgage for all the properties.

If you would like to know more about the mortgages for purchasing a property abroad then you can contact our legal team. Please note that we are solicitors and not mortgage brokers. We cannot therefore advise you as to the best mortgage to take but can put you in contact with reputable specialist international mortgage brokers who can assist you with obtaining your mortgage. We do not receive any commission for putting you in contact with the mortgage broker and do so simply because they have given good service in the past.

Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.

Over the last few years there have been a great many people who have been trying to sell their properties abroad but without success. Typical comments from Sellers are that there aren’t the numbers of buyers that there used to be, there are so many other properties in the area for sale that competition and pricing are fierce and that the market is saturated with properties on sale.
 
In countries like Spain, for example, would be Sellers are having to also compete with the Spanish banks who are aggressively trying to sell off the properties on their balance sheets which they have previously repossessed from mortgage defaulters.
     
Imagine the scenario where you are buying and have looked at two identical properties. They are in the same complex and have the same layout. They are on for the same price. Everything appears to be the same but one of the properties comes with a full due diligence pack already in place. This makes life easier and means that not only will the transaction go through more easily but will also mean that things will therefore be cheaper and quicker from a legal point of view. Advertising a property with a full due diligence report already carried out can perhaps provide that all important advantage.
 
So what does this actually mean? Essentially this means that we carry out all the relevant checks on your property before you even start to market the unit. By carrying out land registry checks, we make sure that;
 

• The property is duly registered at the land registry in your name and therefore you can legally sell it
• There are no charges or mortgages on the property that shouldn’t be there.
• The property has been legally registered at the land registry
• The description of the property is correct at the land registry
• There are no illegal extensions or bits of the property that are not registered.
• The correct size of the property is registered and that this matches up with the Catastral registry (if applicable)
• The property has all the relevant habitation licenses and that these are available.
• The property has, if applicable, the relevant structural guarantees
• An energy certificate is obtained
• The property is up to date with all the relevant payments including utility bills, rates, Community fees etc)

 
All of the relevant information and documentation (including the title deeds) are packaged and we issue a report on the purchase which confirms the legal status to the property. This bundle can then be used to help sell the property – after all, if all of this is available to the buyer right from the beginning aren’t they more likely to buy your property rather than the one next door where there may be an illegal extension or charges on the property. Essentially you are saying to the potential buyer “I have nothing to hide and there are no problems with my property”.
 
If you are selling a property overseas and would like to look into the possibility of carrying out advances due diligence on your property in order to help you sell it you can contact one of our specialist overseas property legal team
 
Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.

If you have an existing Housing Loan in Cyprus in the Swiss Franc denomination (CHF) taken out for the purchase of an immoveable property in Cyprus, you may now be looking, or being encouraged by the bank in Cyprus, to renegotiate the terms of the Loan to achieve a more manageable agreement. However, it is important to understand all of the financial and legal implications of such a restructure on any current or future legal case you may have.
 

• Many of the deals that we have seen being offered to clients by Cypriot Banks aren’t as good as they initially look. It may be tempting to accept something that initially looks like it is a good deal or which gives you a bit of financial breathing space in the short term, but on closer inspection some of the deals offered by the banks in Cyprus are not as good as they initially appear.

     

• It is therefore vital that you consider whether you are going to be able to comply with the terms of the new deal offered by the Bank in Cyprus. There is little point in re-negotiating a new agreement with the bank only to find that in a few months you cannot afford the new terms either. This is not only a waste of time, but it also means the bank will now have tighter documentation when they inevitably pursue clients for non-payment. Re-negotiating with the Bank in Cyprus and signing new loan documents simply confirms your new agreement with the bank and this is useful ammunition for the Bank in any subsequent litigation against you.  

It is advisable that you seek independent legal and financial advice as to the impact of any new deal being offered before accepting it.
 
If you would like to speak to a member of our legal team in relation to Swiss Franc Mortgages in Cyprus you can contact us.
 
Disclaimer – International legal issues are a complex area of law and this information is no substitute for independent legal advice on an individual basis taking into consideration your personal circumstances and legal requirements. This information is provided to provide general information only and was correct at the time of publishing. The legal position in relation to international transactions can change frequently and this page may not have been updated following any changes in the law. You should therefore not rely on this information and should seek legal advice in relation to your personal circumstances.
 

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