Buying overseas - why a mortgage can save you money - 18th April 2007

Buying overseas is the dream of many people in the UK, but only too often, dreams can turn sour when properties are bought on a whim or without the proper safeguards that would be taken if buying in the UK.

With bargain properties still available, especially in emerging markets, it’s only too easy to hand over savings, or money raised against UK properties, seemingly cutting out all the middlemen, red tape and the extra costs they would entail. However, there is significant evidence that using intermediaries is whilst possibly a little more expensive, potentially a life saver in the long term.

Handing over hard cash runs the risk, even in countries with established markets, of losing everything if a lender isn’t involved. The major advantage to arranging an overseas mortgage is that the lender should carry out essential checks and arrange a valuation.

It cannot be stressed highly enough the importance of seeking independent advice from an overseas solicitor, which would not necessarily happen if the sale was in cash. A local solicitor will examine all documentation, which may well not be in English. They will ensure legal title to the property exists, establishing that the seller has the legal right to sell the property, and if there are any legal or financial burdens registered against the property for which the buyer would be responsible. If the property is new or off plan, the solicitor will establish liability or redress should the developer be unable to deliver. A valuation should point out any issues with the property, e.g. subsidence, damp, wiring etc. and most importantly, any valuation should point out potential boundary disputes.

Increasingly, people are deciding that perhaps one of the safest options is to arrange their loan through an independent overseas mortgage broker, such as Conti Financial Services Ltd. Simon Conn, MD of Conti says, “We’ve over thirteen years experience of arranging overseas mortgages, and have heard of many bad experiences through people not taking basic precautions, which they wouldn’t dream of doing in the UK. There are numerous potential pitfalls in buying properties abroad, taking out a loan via ourselves or similar intermediaries can go a long way to eliminating these.”

If Turkish mortgages are taken as an example of possible dangers, Conti has discovered a number of occasions when buyers have paid for properties, but lost their money when they subsequently find out they have no legal title.

Other examples include ‘apartments’ being sold that turned out to be converted garages, consequently having no habitation licences, or attempts to sell property in military zones where foreign nationals are forbidden to buy. UK Nationals have even arranged for locally based Turkish nationals to buy the required property on their behalf, clearly money will have changed hands, but title to the property will be with the Turkish purchaser, with no recourse for the UK National.

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