If you are a U.S. citizen with a history of foreclosure and are planning to buy a property overseas, you have very limited financing options. You will have to deal with a massive amount of paperwork (more than what you have to in the U.S.) to get through the formalities. This is primarily the reason as to why most buyers purchase overseas properties with cash.
That said, it won’t be impossible to secure financing for your home purchase abroad if you have no alternative. Before we delve deeper into how to obtain a mortgage if you have a foreclosure on your credit report, let’s go over a few things you need to keep in mind when buying a home overseas with a mortgage:
- Mortgage interest rates are at historically low levels in the U.S. They are in fact lower than those in most European, African, and Asian countries. You should take into account how much interest you will be charged (on a fixed, as well as a variable basis) if you are going to finance a property deal in a particular country.
- Even if you can secure the mortgage, you will not get 100% financing. You will make down payments that can be up to 60% in some countries, depending on your financial history. For example, South African banks will lend up to 50% of the purchase price, subject to their standard terms and conditions, which would include a valuation of the property.
- Just like in the U.S., lenders will ascertain your ability to repay the loan. They will make an assessment of your credit worldwide, your income, and expenses before approving your mortgage application.
- You will need to add currency exchange rates to the total property acquisition costs. Since an enormous amount of money is involved in a property’s purchase, this cost may be substantial.
- Many countries will require you to open a bank account, secure a tax-identification number (called by different names in various countries), or get approval from government housing agencies before allowing you to buy a home.
- The country where you are buying may have an entirely different taxation structure and insurance requirements. For example, you’ll have to pay ‘wealth tax’ (called patrimonio in Spanish) in Spain, while it’s compulsory to take out a building insurance to own a home in South Africa.
- Many countries have put restrictions on foreign property buyers. They may have to pay additional stamp duties and taxes as an international buyer. For example, you’ll have to pay additional buyer’s stamp duty in Singapore. On the other hand, some countries welcome foreign investment. For example, you can get a residency permit if the value of your investment exceeds a certain threshold in Portugal.
Now that you know the most important things you need to consider when buying overseas, let’s talk about how you can secure a mortgage. If you have a foreclosure history, it will be tough to get financing from a conventional bank in most countries.
The following are a few tips you can follow to increase your chances of getting a mortgage in a foreign land:
Approach an International Bank
When you start exploring your financing options abroad, you should first visit the branches of foreign banks in the area where you are buying. If the same bank runs operations in the U.S., they’ll have a better understanding and access to the facts related to your financial situation back home. You can even visit their branches in the U.S. to know your options. Many international banks offer special mortgage programs for expats and overseas buyers.
If you own property in the U.S., lenders in some countries, particularly international banks, will allow you to put that down as collateral. You will have to establish that the property is free and clear of liens. A lien may be deterrent to the approval of your mortgage application. How much equity you have in your U.S. property will also affect whether the lenders will accept it as collateral.
Fix Your Credit Rating
Foreclosure can stay on your credit history for up to seven years in the U.S. Though mortgage terms vary from country to country, even bank to bank, lenders in foreign countries will thoroughly examine your credit history before approving a property loan. You need to improve your credit rating when applying for a mortgage in the U.S. after foreclosure. The same is true anywhere in the world.
Become Aware of Foreclosure Laws in Your Target Country
In most cases, you will find foreclosure laws in the U.S. to be different from those in the country where you are planning to buy. Find out if there are any specific legal provisions for foreign nationals. You should be aware of the extent of liability in case you default on your mortgage in a particular country. You will have unlimited liability in some countries. For example, Spanish lenders can seize not only your property, but other assets (like your car and bank accounts) and chase your assets outside Spain if you fail to pay mortgage installments.
There is no denying the fact that getting a mortgage for an overseas purchase is tough if you have a foreclosure history in the U.S. But it’s not impossible if you do your homework and try to improve your credit rating.
Simon Campbell has spent over 15 years in all the various facets having to do with real estate, including sales, purchases, investment, and research.
Simon has changed directions and is now sharing his knowledge and experience with others to avoid foreclosure. For more details, check his website http://www.stopforeclosureshelp.com