Seanest - Jan Van Parijs Properties

Getting your finances in order before you invest in property

There are always risks involved when youinvest in property. Of course, investment is never something to take lightly, but overthinking and over-analysing your choices can lead to ‘analysis paralysis’.

 

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There are always risks involved when you invest in property. Of course, investment is never something to take lightly, but overthinking and over-analysing your choices can lead to ‘analysis paralysis’. With relevant knowledge and sound planning, you can make an educated decision and won’t have to worry about making disastrous oversights.

If you decide to buy foreign property purely as an investment, you need a clear strategy. Once you’ve figured your personal investment strategy, you should evaluate your budget. Knowing how much capital you have to invest in property will dictate the type of property you invest in, as well ensuring your investment is low-risk. Buying with your head, not your heart is challenging, but getting your finances in order can ease this process. We’d advise you to to do the following:

 

1. Know your Budget

 

How clued-up are when it comes to deposits and repayments? Smart investors always save up for a deposit. While it’s possible to purchase property without an initial down payment, banks tend to favour buyers who are able to pay deposit. The general rule is to save between 5% to 20% of the cost of the property you’d like. Remember: saving more than 5% means you’ll have a better chance of getting a cheaper mortgage.

If you’re taking out a loan you’ll most likely be subject to various tests to ensure you can keep up with timely mortgage repayments. If  invest in property you might have to take affordability tests so your lender can determine what level of monthly payments you can afford.  Lenders need to be sure that future factors like rising interest rates and potential lifestyle changes won’t affect your ability to pay the mortgage.

 

2. Decide how to Pay

 

Have you thought about the various ways to pay for your real estate and which method is best? If you’re lucky and can afford to make a cash purchase then you can negotiate an excellent price on your property. If not, there are other viable options like borrowing money against your British home. This is definitely the more hassle-free way, and your won’t be exposed to currency fluctuations.  

Alternatively, you can make use of international mortgage services offered by UK high street banks. Just be sure to check which countries qualify, because banks tend to only provide mortgages for purchases in countries where they have offices.

Another option is to take out a foreign mortgage. However, you will be at the mercy of currency fluctuations. The good news is that in most of Europe, your mortgage would be in euros, which means a slightly lower interest.

 

3. Find the Right Mortgage

 

Before you invest in property, you should shop around for the right mortgage. Never feel like you have to settle for recommendations and always compare a range of products. Interest rates, repayment periods and legal fees are important factors to consider.

We recommend using an independent mortgage broker, who can access a wide range of lenders and offer competitive rates when buying abroad. They can also pre-qualify your application to give you a good idea of your affordability.

Lastly, if you choose to buy a property off-plan, you’ll be expected to pay for your real estate through a series of stage payments as phases of the construction are completed. Make sure that your deposit is refundable and that there’s a cooling off period in case you change your mind.

 

4.  Don’t Forget Additional Costs

 

Time and again, buyers land up spending more than they initially budgeted for because they neglected additional costs. Don’t forget about bank transfer, tax, legal and property management fees. You’ll also need to pay income tax, and if you’re renting out your property, you might need to purchase furniture and everyday living utensils for your tenants.

If you want to invest in property the smart way,  you need to do more than just sort your finances. There’s tonnes of research to be done - not to mention defining your strategy and knowing how to manage your property portfolio. We’d encourage you to download our ebook, A Foreign Property Investment Guide for expert info to help you along your investment journey. Remember: when purchasing real estate, it’s always a good option to lower risks by diversifying your property portfolio. To start off, why not take a look at our competitive property for sale in Calpe.

 

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