Guide To Buying A holiday Home Abroad

There’s a lot to think about when buying a property abroad. Of course, the location and property type are essential, but there are local rules and regulations to consider too. For instance, some countries might restrict the property type an overseas buyer can purchase. There are also many risks associated with owning a home abroad, so having suitable insurance can help mitigate these.

In this guide, we’ll do our best to answer some of the key topics surrounding fees, research, and mortgages, so you’re better informed about choosing a property.

Why buy a holiday home abroad?

Buying a holiday home abroad is a huge decision, but it’s one that can bring many benefits. As with any property purchase, holiday homes can be a great investment. You can make money over time and may achieve a healthy return on investment if you ever decide to sell. When you’re not there, you can also consider renting out your holiday home to generate extra income from paying guests.

Of course, having a property abroad gives you the option for frequent holidays. In many cases, your holiday property becomes your home away from home.

Researching buying a property abroad

Researching where to buy a holiday home typically involves far more than finding beautiful neighbourhoods and nearby amenities. First, investigate the typical properties in the area. In doing so, you’ll find out how sales prices differ according to the type of property.

What’s available may shape your decision on the locations you consider. But you’ll also have more clarity on what properties are most appealing to you and holidaymakers. Is it a chalet in a winter wonderland? Or perhaps, a villa with a pool by the sea? You’ll be better equipped to narrow your search parameters by fixing on a particular property.

Further considerations for drafting a shortlist might include:

• Natural disasters – earthquakes, floods, and storms can damage your property, inflate insurance premiums, and cause significant inconvenience.
• Rental yields – if you’re planning to rent out your property, many lenders may require that you generate 145% of your mortgage repayments You can get a rental property yield estimate from a rental agent.
• Regulations and laws – some countries have restrictions for foreign buyers. In others, you’ll need specialist documentation. To buy a house in Italy for instance, you’ll have to apply for a Codice Fiscale. This is your tax number or identification code and is equivalent to the national insurance number in the UK.

Finding an overseas property

There are many helpful resources to use when narrowing your search for property overseas. You may also want to lean on local property experts, such as estate agents, who can do all the proverbial heavy lifting—just be mindful they might charge a fee.

• Online property websites – Run a quick Google search and you’ll find websites specialising in property listings abroad. It’s also worthwhile asking friends and family for recommendations, especially if they have purchased property in your desired area.You can also turn to forums for advice, speaking to people who have already bought a property in your research location. They can give you first-hand experiences about the current market and available properties. In addition, it’s a good idea to seek out customer reviews to find unbiased opinions about local services.
• Local real estate agents – Once you’ve made a few enquiries and thoroughly familiarised with the local housing market, consider seeking support from a local real estate company. They’ll have feet on the ground and more intimate knowledge of what’s available—not to mention information about local areas and amenities. ‘On-site’ real estate agents are also familiar with the rules around purchasing a property as an overseas buyer.If you’ve settled on a property, you’ll need to prepare various documents for your mortgage application and a structural investigation—many local agents can refer you to reputable organisations for further help.
• Housing developers – Some of the latest properties on the market may not yet be listed on local websites or fin regional real estate offices. That’s because new build housing is typically snapped up quickly, especially if it’s in an in-demand area or built by a respected developer.You may even identify a prime area of land owned by a development company, where you may be able commission the construction of a property. So, it’s worth getting in touch with development companies to ask about any plots they have available.

Where to buy a holiday home abroad

Ultimately, it depends on your circumstances. If you have pets, you may wish to buy a holiday home that’s not too far away or hot, and perhaps even within a drivable distance. If you have a family, you’ll likely want a bigger property that may have activities nearby.

Alongside property type and facilities, consider the location you’re after. The location you choose will probably be influenced by how far you’re willing to travel, the cost of living, and average temperatures. According to A Place in the Sun, Spain is the most popular place to buy a property, closely followed by France and Portugal. However, many Brits are purchasing holiday homes further afield, so you could branch outside of Europe, too.

Legal investigations for buying a property abroad

Once you have identified your dream property, it’s time to undertake legal and structural investigations to uncover potential hidden issues. A sale can’t go through until the necessary checks are complete. Therefore, you may consider appointing a specialist UK-based solicitor and surveying company to conduct legal investigations. Alternatively, you may be able to find reputable, local, English-speaking businesses.

Securing an overseas mortgage

The mortgage you secure will depend on how the property is used. For instance, if you wish to rent your property to holidaymakers on a short-term basis (days and weeks), you will need a holiday let mortgage. Longer-term rentals require a residential buy-to-let mortgage, suitable for tenants staying 6-12 months.

To arrange a mortgage outside of the UK, you may be expected to pay a higher deposit than for a UK property. And the costs of an overseas mortgage will vary from country to country.

The value of your deposit will depend on several factors, including the lender, your finances, and the amount borrowed. Put down a larger deposit, and you’ll likely receive more favourable mortgage terms and interest rates.

It is important to note that the FCA does not regulate property transactions outside the UK. This means that you may prefer to use a UK-based broker that understands the local market and can minimise risks.

Costs of buying a property abroad

There are several costs to bear in mind when buying a property abroad, including:

• Mortgage fees – including broker, arrangement, and administration fees.
• Surveyor fees – you’ll need to pay for a chartered surveyor to review the property.
• International bank transfer fees – don’t forget to factor in the cost of moving deposits and other funds overseas.
• Legal fees – can include making a will, which is mandatory in some countries.
• Tax adviser and local property tax fees – you’ll need to have funds available for an independent tax adviser, as well as possible income tax on your property.
• Exchange rate fluctuations – Exchange rates can affect the initial cost of the home and the mortgage repayments.
• Holiday home insurance – you’ll want to consider a policy that can protect your property from potential risks.

Key considerations before buying a property abroad

There are a host of additional factors to be mindful of when buying a second property, including:

The impact of Brexit

The cost of living in EU countries has increased since the UK left the European Union, leaving a significant impact on how long UK citizens can stay there. Also, UK citizens are restricted to 90 days at any one time during a 180-day period. This is enforced by passport stamping on entry and exit. Holiday homeowners that stay for extended periods and aim to visit their property for several months of the year should be careful to stay within the rules, or risk future freedoms.

Be mindful too that while many tax rules remain unchanged, some EU states have altered their rates for UK citizens. For more information, read our guide on buying a holiday home after Brexit.

Finding the right property management

As Brexit limits your freedom of movement, you won’t always be there to watch over a second property abroad. This means you may require a trusted individual or management company to ensure your property is safe. Dedicated property managers can visit your home regularly to check everything is running smoothly and there are no disasters.

Property managers can also facilitate rental agreements if you wish to welcome paying guests. They ensure your home is fit to house holidaymakers and act as the keyholders for when you’re away from the country.

Unoccupancy period for your insurance policy

One of the benefits of insuring your holiday home with Intasure is that, under our policy, your second home can be protected whether you’re there or not.

Benefits of buying a property abroad

There are many benefits of buying a property abroad, including:

• Prices can be cheaper than in the UK – particularly if you find a hidden gem off the beaten track.
• Source of income – holiday homes are attractive to holidaymakers that want to rent your property on a short-term basis.
• Long term investment – holiday homes can be a long-term investment, and you can fetch a healthy return on investment when it’s time to sell.
• Holidays – second homes present a ready-made holiday whenever you need a break.

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Intasure accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.

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