Bank Financing For The Purchase Of Property Overseas

“Kathleen, your mailings and newsletters are filled with information, all of which I appreciate. Here is one question I have never seen answered directly.

“Most of us in the United States have homes bought (or being bought) with mortgages. Yet, home mortgages seem an almost unknown in the rest of the world.

“I want to hold on to my house (duplex) here; it is a great rental investment with insignificant equity. Without pots of extra cash that eliminates much chance of buying overseas or does it?

“What places overseas offer something approximating a homebuyer’s mortgage?

“I am past retirement age now.

“Thanks once again.”

–Scott H., United States

You can get a mortgage, if you qualify, as a foreign resident in Belize, Panama, Mexico, Nicaragua, and much of Europe. However, the terms won’t be what you’re used to in the United States. No 95% loan to value, and no 30 year fixed rate, except maybe in Panama.

As a foreign buyer in a place where you can get a loan, that loan will be variable rate. Outside Europe, where interest rates are very low right now, that variable rate will be much higher than in the United States.

You’ll also be limited on the length of the mortgage. Most banks in other countries require the borrower to buy a local life insurance policy that pays off the mortgage if you die. In most countries, you can get life insurance only up to age 70 or 75. If you’re 65 today, you’ll be able to get only a 10-year loan.

The cost of the life insurance along with the relatively short amortization period can make the monthly payments prohibitive. In that case, you rent.

Foreign Property Investment

“How does one legally transfer funds out of the United States to purchase property in another country?”

— Pascal L., United States

Transferring funds from the United States for property purchase in another country is straightforward. The easiest strategy is to wire the funds required from your bank to the seller’s bank, your attorney’s bank, or to your own local account in the country of purchase. If you’re wiring to the seller’s or your attorney’s bank, you’ll want the money to go into escrow, not directly into the seller’s or the attorney’s account.

Back in the United States, the wiring bank takes care of all the required reporting (whatever it may be…frankly, I don’t really know).

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