What to Know about Buying a Home in Europe
If you’re looking to get in on some solid real estate in Europe, mortgage seekers from an overseas lender can easily find lower interest rates, but may have a harder time getting approved. Nevertheless, interest rates throughout Europe have declined dramatically over the last few years, making European mortgages extremely attractive to foreigners who would love to live in places like Amsterdam, Berlin, Paris, and Zurich. According to a Marketwatch.com Real Estate analysis, “Rates on home loans in Europe have been dropping as the three-month euro interbank offered rate that they’re often pegged to was roughly 0.2% this month, down from about 1.3% in the beginning of last year.”
While only 1% of Americans purchased homes outside of the United States in 2011—about 5,000 homes—the number is slated to increase as long as European markets stay attractive to potential homebuyers. While mortgages can be attractive on the other side of the Atlantic, however, many Americans should expect additional legal work when they have chosen a place to buy abroad. Many U.S.-based lenders do not offer mortgages for international or foreign properties, and many foreign lenders simply do not have the expertise (or are simply unwilling) to work with foreign buyers. As such, it is important to do enough research about a real estate property in a given European market and find an approved lender that can facilitate such an international purchase.
Once this is secured, consider some of the following tips for buying a home in Europe:
Beware the Euro-zone. People looking for homes in Europe might expect a 20% down payment from a lender, but that figure can easily increase (upwards of 50%) in countries like Greece that have experience considerable economic downturn. Those looking for a home in country that has faced considerable economic turmoil in the last five years will likely be required to place down a substantial amount of money to secure their real estate.
Have Excellent Credit. European lenders will inspect your credit much more closely than their American counterparts when considering to sell a home to a foreigner. Lenders will use a microscope to analyze your credit card statements, lines of credit & loans, bill payment history, and other aspects of your financial life to mitigate what they perceive as taking on a higher degree of risk when selling a home to a non-EU citizen. Having excellent credit is key here, so if you plan on buying even two, three, or five years down the road, ensure you credit rating stays impeccable.
Watch out for Restrictions. Many overseas restrictions can apply to non-citizens attempting to purchase a home in Europe. In some areas, purchasing land is impossible to non-nationals. Extra political situations may be faced as well, such as the time it takes for the government to approve your residency and work-visa status, real estate or property tax status, and how this is affected by your non-national status. This is also where extra legal fees may be faced, since many mortgage seekers will have to hire a lawyer to handle this complex, bureaucratic glut.
Plan your Finances.Those who are smart will plan out what will happen with their money as their European real estate investment moves forward. Savvy mortgage buyers will find a way to deduct their home investment from their host country’s taxes, and can even find a way to save some money (thereby generating capital) for a purchase abroad. Because oversees real estate investments are private, many Americans who purchase abroad are not legally required to report anything in this arena to the IRS.