What is best way to fund overseas property?

Trawdener

Hi there. My wife and myself are very keen to buy overseas, to be precise in Lanzarote. We have temporarily lived there previously, but only rented.
We are both in full time work and have a joint income of £50k. We have a mortgage on our house to the value of about £80k. The house is worth around £130k. The value of the property we are looking for is about £60 - 70k.
The problem we have is we don't have the 30% needed for the deposit. We definately want to buy and hopefully rent out. The property rental market on the Island is about £200 per week, which would help pay its way. What would be our best option (if any) of getting either the deposit or the full amount quickly. Any serious advice would be greatly appreciated.
Thanks
Geoff :beer:

Ian_W

Funnily enough we sold in Lanzarote in April. Got to go out very shortly, but if you check back later this evening I'll try and give you some ideas and our experiences.

Conrad

Clearly you will have to tap - into your UK equity by way of a further advance or remortgage.
Worth noting that many people are reporting Spannish property is over - supplied so renting can be difficult.
In terms of a pure investment, many investors consider other places to hold more potential as Spain / Cannaries has already had a long boom (but avoid risky Bulgaria etc of course). However, if you arent particularly in it just to maximise investment returns then fine.

You will find many UK lenders will lend on Spannish property as long as your deposit is sufficiently large.
A lot of freinds tell me you need a strong stomach for holiday letting as you will always find repairs need doing.

Ian_W

Hi Trawdener,
In terms of finance there are really 3 options I'm aware of:
1. Spanish bank €uro mortgage. Sol, Santander, Caja de Canarias or any of the mainstream banks over there will lend up to 70/80% LTV, interest rates are lower but your repayments are in €'s so there are costs to convert and currency risks, unless your renting income is rec'd over there on a tourist contract. If your main income is £'s the advice always was to repay in £'s but low € interest rates may have altered that.
2. Re-mortgage as Conrad says. You could release sufficient equity in your UK home to provide you with your deposit. Plenty of other threads about best remort rates deals etc without me needing to go into details.
3. Borrow against your lanza prop from a UK lender, again they will usually only lend 70-80% LTV but you repay in £'s so if your rental income is from private lets in UK it's ideal but the lender will not [unless things have changed] allow for lets as part of your income - it has to be sufficient, allowing for your UK mortgage, to meet the repayments. 8 yrs ago only RBS [Gib] and Abbey lent abroad, now LTSB, Barclays, and some BS's [Norwich & Peterborough?] will. You'll need to research that yourself.

We had a reasonable cash deposit [about 20%], then did both 2 & 3. Do be aware of legal & notary fees etc, EA's will tell you 10% but if you have an o/seas mortgage allow 15% on top of purchase price [mortgage has it's own title deed so it's almost as costly to register as the property!].

Renting is good in Canaries - 12 month season - but you have to get the right property then promote it well, just sticking a few ads in Daltons doesn't mean folk with be beating your door down. We had 40/45 weeks [around 50% repeat visitors] a year and I'm still letting for the new owners and there are only 3 free weeks until end of March '06. As private lets we got to know clients and they knew it was our home so we had very little damage. But you do have to think about wear & tear and running costs over there.

Parts of mainland Spain are very much over supplied with props but Lanzarote has much stricter building regs/zoning and although Playa Blanca is developing fast there is no other big developments on the Island. There is supposed to be a 10yr moritorium on building from 2010 - whether it happens is anyones guess but there isn't unlimited building land like some places.

Overall still a good investment if you like the place IMO -180%+ in 8 yrs + £5k pa net rental income for us. Words of warning though, big commitment, if the figures don't stack up save up until they do. Don't take a chance on your UK home if you can't really afford it!!

Anything else, post again or better still PM me an email address.