Before taking out an overseas mortgage you should first consider a number of factors, including the interest rate, the closing costs, and the loan term. Laws in many nations make it difficult for foreign investors to take out an overseas mortgage, so you must find out what rights you have as a foreign borrower before applying for any loans. Other factors to take into account when choosing an overseas mortgage include taxes and currency fluctuations.
Standard mortgages in most nations last for up to 30 years and have fixed monthly payments. Some countries allow lenders to write exotic loans that have unconventional terms. In some instances, you can take out 40 year mortgages that pass to your heirs when you die or you can take out negative amortization loans on which you pay small interest only payments that cause the principal on your mortgage to rise over time. Do not assume that foreign lenders only have the same lending products as domestic lenders. Find out about all of the options available to you and find a product that best fits your needs in terms of payment and duration.
Some mortgage closing costs are unavoidable, such as fees related to recording the mortgage deed, but other fees are discretionary and vary from lender to lender. Borrowers should always contact at least three lenders and ask for a good faith estimate so that closing costs can be compared. The term of the loan can have an impact on the closing costs, so consider extending or shortening the loan term if doing so reduces the closing costs.
When you take out a mortgage in your own nation you are often able to deduct interest payments from your taxable income, but the same rules do not usually apply to interest payments made to lenders overseas. If you are considering overseas mortgage options, you should review the tax consequences of taking out a loan in a particular country because you may have to contend with taxes in both that nation and your own country. Speak with a tax certified professional to find out what tax advantages different mortgage products offer. Hire an attorney licensed to work in the foreign nation to review the terms of each mortgage to ensure you fully understand the terms being offered.
Laws in some countries mean that you can only borrow money from lenders based in that particular nation, but if you plan to take out a mortgage in Europe you can often take out a loan with a lender in a nation other than the one in which you intend to buy property. Mortgage payments denominated in foreign currency are subject to change due to fluctuations in the currency exchange markets. Consider the strength of each nation's currency and the risk that your payment could rise or fall due to changes in the currency's value.
