- An Overseas Second Home as Investment Property Abroad
Property investment overseas is a long term benefiting venture. The asset purchased can be profitable and you as a buyer should never consider your overseas property as passive investment. For, it can serve as one of your best investment property abroad.
In the 21st century people are exploring every possibility of investing in the real estate industry. In the recent years there has been a lot of hype about buying property for sale abroad. As per the statistics of real estate agents, about a million of British people own a home in other European countries. With the changing trends, there is a growing interest in buying property abroad.
With many people moving abroad for vacation, it is convenient if you buy a property in your favourite destination. The survey result of National Statistics shows that around two hundred thousand UK people travel abroad to find a second home – and make an investment in property abroad.
When you decide to buy a home abroad, there are few important things you have to consider. The following may be of help for making a good investment and finding the right property.
- Where to buy – The first and foremost thing is to decide where to buy the property. Your investment property abroad can be made in any country, so it is wise to choose the country first and then proceed further. It is better if you make your investment in your most favourite destination.
- Location – The next important thing is to choose your locale. It may a country house, a town apartment or a beach side villa. The vacation home is going to be one of your ideal getaways. Hence it is important to choose the right place. In case, if you are moving abroad for business prospects or investing just for the sake of rental income, it is always better to invest in town property.
- Budget – The amount the buyer is willing to allocate for his investment in property abroad. Overseas property for sale can vary from ordinary house to luxury villas. So, the buyer has to fix his/her budget first before investing in property broad. The amount required for the property can be availed even from overseas mortgages. The mortgages ease you of financial worries and help you make a successful investment. There are several mortgage plans available. You have to choose one that fits you best.
- Access to the city – The buyer has to decide upon the accessibility to their neighbours. This is crucial because investment property abroad can yield more rental income if it is within accessible limits to cities.
- Size – The size of the property has to be decided. It can be one bed room or multi-bedrooms apartment or individual building or villa. The size is proportional to your budget. It is generally advised to look for a property that does not exceed your budget or financial limit.
- Rent – When owning a property abroad that is not your first home, buy to let property abroad can be considered. This is a rewarding business venture as the property will earn you regular rental income. In this way, your overseas second home will become an investment property abroad.
These are the initial questions to which answers have to be found before entering into a deal with regard to your overseas second home or investment property abroad. When you are applying for overseas mortgages, it is always advisable to read through the legal proceedings of the country and especially the region where the property is located. Banks can also help the buyer in this regard. But the investor has to be aware of the interest rates and the insurance schemes before investing in property for sale abroad.
When you consider your second home as vacation home, then it is better if you plan to let out your property for rent. Buy to let property abroad is always worthy as it generates good income. Popular holiday destinations especially can yield value for your money. Hence by investing in buy to let property your overseas second home can be a resourceful investment decision.
- Can I remortgage to consolidate debt?
Today, remortgaging is seen as a way of securing better interest rates for monthly installments or securing funds for home improvements. What most people don’t know is that you can remortgage to consolidate debt. See, as a homeowner with a loan or lots of credit card bills that need to be repaid, it is possible for you to take the equity in your house and remortgaging to repay off the debt. Considering the seemingly ever-rising property prices and low mortgage rates currently in the market, it’s no wonder the homeowners tend to get tempted, as most of them struggling with debts, whereas they have a lot of equity in their property.
Let’s get real here for a minute, the process of remortgaging for debt won’t be easy at all, therefore, you should expect some barriers. Before the lenders give you the loan, they will consider your property’s value as well as your credit rating. Your credit file is what the lenders will use to figure out how well you can repay the loan, especially given the fact that you are already struggling with the repayments of some of your previous loans as well as your credit card bills. The truth is, this fact alone may work against you as it pushes your credit score down. And if your credit score turns out to too poor, the amount you can borrow against your house or the interest rate will be greatly affected.
So, what should you consider before remortgaging?
It is true that a majority of the homeowners struggling with debts see the equity in their property as an easy route to get some money to pay off their loans, but the thing is, not always is this the best idea. As we said earlier, the lenders take a lot into consideration before they actually decide to give you the mortgage. And since these people owe a lot of money, they may find themselves requiring more money to pay off these debts, which means they might borrow more than their outstanding mortgage. So, this is to say that, yes, you may pay off your other debts, but your mortgage loan will be higher.
So, with that in mind, the homebuyer also has several things to consider as well, before deciding to take another mortgage. For instance, the borrower needs to consider the rate and the time period for the new mortgage. You also need to consider all the fees applicable to the remortgage, including legal and valuation fees. If you put all this into consideration, ask yourself if it is worth it paying for a bigger loan for you to pay your existing debts, and also whether doing this will improve your financial situation in any way. These are important questions that need you to think really hard before making a decision. You really need to weigh all your options carefully.
But there is also some positive news: in the UK today, mortgage rates have dropped to a record low in the last couple of years. What this means is that borrowers can get mortgages at considerably low rates. Even though these mortgages are tough to find, they are there. And if you were to get your hands on such a mortgage, then the better for you. If you compare these mortgages with personal loans, you will find that the mortgage will be easier for you since the monthly repayments are way less.
To understand what it means, let’s take a look at this: according to the Bank of England, the average rate for a remortgage with a 40% deposit is 1.53%, while that of personal loans is was 3%. This means that you can borrow more if you take a mortgage than a personal loan. For instance, for a personal loan, you can only get a maximum of 50,000 pounds, which is where remortgages start. Lastly, the repayment period for a remortgage spread for over 20 to 30 years, whereas for a personal loan you are only given 3 to 5 years to clear.
Are there cheaper alternatives though?
However, remortgaging isn’t the only option you’ve got to consolidate your outstanding debts. There exist also alternatives. For example, you may consider a balance transfer credit card as it allows you to pay off an old card, and then move the remaining balance to another provider who will give you an interest-free introductory offer for three years. This way, you are able to focus on repaying the debt, rather than the interest for that period. Another alternative is the peer-to-peer platforms where you use personal assets as security for a loan. The platform conducts a review of the assets and decides the amount of money they would give you based on the value of the assets. But before getting there, why not review your income and expenditure first to see if there is a way you can budget better and reduce your spending. After all, money, like emotions, is something you must control to keep your life on the right track.
- Can I still get a mortgage if I have bad credit?
This is a question that so many people around the world ask themselves from time to time. You see, some of us, at one point in our lives may have taken too much debt, and probably due to some financial hardships, you defaulted paying it back, or maybe you were late in paying it, which means that you were listed in the credit bureau because of it. Now that things aren’t the same anymore, and you’re financially stable, or at least you aren’t in the same place you were before, you are considering taking a mortgage to boost the construction of your property. But you are not sure if you would be granted the loan, considering your past credit status.
What you need to know is that, yes, it is possible for you to get the mortgage, though the process might be a bit different and more complex than normal. There are mortgages that are designed to be given to individuals with poor credit, and there are some lenders whose specialty is giving out mortgages to these kinds of individuals.
When you apply for a mortgage, the first thing that the lender does is to check your credit history, trying to understand how you manage your finances. What’s more, they inspect your income, savings, and monthly outgoings – which is the amount you earn and the amount you spend. They do all these to ensure that any borrower who borrows money from them can afford monthly installments, and especially when things change – such as income going down or the interest rates going up.
When you have bad credit, of course, it will tarnish your credit eligibility, but if you present yourself in the best possible light, by taking care of your credit history and budgeting in a sensible manner, then there is a very high chance that the lender will consider your application. Also, there are a number of things you will have to do in order to prove to the lender of your credit worthiness. They include the following;
- You will have to prove to the lender that you are a responsible borrower, by ensuring that all your regular payments such as credit card payments and utility bills are made in full and on time.
- You should also review your spending to try and save as much as you can, and aim at maintaining your monthly outgoings as consistent as possible. At the end of every month, you should have some money left. This will further prove to the lender that you are a responsible borrower.
- Ensure that your credit report is up to date. You should review it regularly in order to ensure that the information contained therein is accurate.
- If you have a good explanation as to why you defaulted or were late in paying your past loans, include it in the application for the lender to see. It may be because of ill health or just redundancy, this information will help in trying to convince the lender that you faced some understandable financial difficulties in the past.
- The property that you are targeting should be realistically priced and affordable, especially since there are no mortgages around 95-100% loan to value.
- You will also have to give the lender an assurance that you will pay the installments no matter what. For example, you might need to consider having a guarantor, just as a reassurance.
What you should expect if the lender approves your loan
If the lender is convinced enough that you are a responsible borrower, you will get the loan. But the thing is, the loan won’t be a regular mortgage. Instead, expect that it will likely come with higher interest rates and the limit could definitely be lower. Also, depending on the lender, you may also be asked to deposit a larger percentage of the property’s value – maybe 20-25%, instead of the usual 5-10%.
The reason why this is the case is that the lender sees having bad credit or a lower credit score as a high risk. According to them, the higher the credit score, the better the chances of getting low-interest rates on the mortgages and also the chances of their loans being approved.
How about a joint application with your partner?
In cases where it is a joint application, where one partner has bad credit, the same case applies. Things will be less straightforward, and you may end up receiving unfavorable rates. But with the help and advice from a professional mortgage broker, it is very much possible for you to find a lender who will consider the credit score for both the wife and the husband separately and then looks at their overall worthiness of the credit. Furthermore, some lenders consider the reason and the severity of the mortgage, as well as the age of the borrower when making their lending decision.
So basically, the answer to whether you can get a loan when you have bad credit purely rests on you. It’s how you will present yourself to the lender. It’s upon your mortgage broker – if you have one – to prove to the lender that you can be a responsible borrower and to reassure them that you will heed to the terms of the mortgage.
- What is a mortgage broker?
If you live in the world we live in, then you’ve probably heard the term ‘mortgage broker’ somewhere. Maybe you heard good things about it, or you may also have heard some bad stuff about it as well.
For now, let’s set these opinions aside, and let’s try to understand what a mortgage broker really is and also what they do. So, a mortgage broker is essentially a middleman between a mortgage lender or bank and the borrower or homeowner. They work directly with both the lender and the borrower, and their main aim is to help the consumers qualify for a mortgage – whether it’s a refinance or a purchase mortgage.
These three entities don’t communicate with one another at a single time. Instead, the broker is the one who communicates to both parties separately. This is to say that with the broker as the intermediary, at no point will the borrower ever speak to the lender directly. In fact, some borrowers don’t even know which lender the broker decided to apply for the mortgage with until loans servicing documentation are sent to the borrower. That’s when the borrower finds out the name of the lender bank.
So, how does the mortgage broker thing work?
When a prospective borrower contacts the mortgage broker, and the broker decides to take the job, he starts the application process by gathering all the relevant financial information. This includes the income, assets, as well as employment documentation, and not forgetting the credit report. All this information helps the broker assess the possibility of the borrower getting the mortgage. Even with the broker out the picture, if you decide to present yourself to a lender, the same information and documentation will be required.
If it is a refinance, the lender will assess your current home equity, the appraised value of the property and they use of a mortgage payment calculator to determine if there are any loan terms that might benefit the borrower.
So, after the broker has all the necessary information, they can then determine the best solution for the situation. This includes setting up the proper loan amount and also determining the type of loan that works best for the borrower. The homeowner does have a say in all these, in fact, they can decide on all these on their own. The broker is there as the assistant.
The borrower should do their research beforehand, so as to ensure that they are not steered in the wrong direction.
Why do you need a mortgage broker?
Mortgage application isn’t a walk in the park. There are a lot of processes that are involved before you are actually given the loan. And given that most borrowers are often busy and usually have pretty hectic schedules, hiring a broker is the next logical solution for the borrower. A broker helps you navigate all the stages involved in finding and applying for a mortgage, enabling you to get the best possible deal based on your individual circumstances.
For instance, a broker:
- Helps you to assess your finances
- Suggest the most suitable solution based on your needs
- Conducts research on the market in order to find the best deals that match your criteria.
What are the advantages of using a mortgage broker?
Convenience – in cases where the borrower doesn’t have a good working knowledge of the mortgage and finance markets, or if the borrower doesn’t have the time to search for deals or work on the paperwork, a mortgage broker is quite useful and necessary.
Access – mortgage brokers are quite skillful and experienced and have a lot of contacts. What this means is that when you use a broker, your chances of finding the best deal that matches your criteria is very high.
Expertise – let’s face it, the lender-borrower industry is quite complex and a little bit confusing, especially considering the rapid fluctuation of interest rates and that mortgage deals come and go. This is to say that having an expert who understands the industry and is able to explain everything clearly can go a long way in ensuring that you have a smooth experience, and therefore, can be invaluable.
What about the disadvantages?
Cost – hiring a mortgage broker is not free, you have to pay for the services. This means that they may be adding to your costs, at a time you are trying to save up as much as you can. The fees vary from broker to broker. But considering the expertise and knowledge each of them brings to the table, it’s totally worth it.
Limitations – the mortgage market is quite broad, and as such, not all brokers will have access of the entire market, which means that relying solely on one broker limits your options. You may even find brokers who may choose a lender just because they have good relations with them, not because they are offering the best deals to the borrower. So, it’s important for the borrower to always ask the broker how many lenders they work with and if they favor certain lenders over others.
Quality – experience, and qualification vary dramatically between mortgage brokers. So, an incompetent broker at best slows the application process, and at worst he will cost you a lot of money if they don’t get the best deal. So, it’s important to vet all the brokers carefully before you hire one of them, and ensure that you get recommendations where possible.