For many homeowners in Ontario, buying a home abroad can be an exciting prospect. Whether it's the sunny beaches of Florida, the lush rainforests of Costa Rica, or the charming streets of Portugal, owning a property in a different country can be the perfect getaway from everyday life. However, before taking the leap, it's important to understand the mortgage process for international properties and how the market differs abroad.
Common Ways to Finance a Mortgage Abroad
One of the most common ways to finance a mortgage abroad is by taking equity out of your Canadian home. This process involves borrowing against the value of your current home and using those funds to buy a property overseas.
Other less common and riskier options include securing a mortgage through a foreign bank or lender, or using a local lender in the country where you want to buy your home.
Moving Money
Purchasing an international property is going to involve quite a bit of movement of funds. Initially, a deposit will be sent to secure the purchase. Later, the balance of the monies owed will be sent. Ongoing payments will include property tax payments, payments for utilities, property management fees etc.
There is sometimes a significant amount of time in between the initial deposit payment and the ultimate balance payment for a property. Currency fluctuation can impact the balance owed by quite a bit! Global Currency Services can help to manage that risk by securing today’s rate for a future date. Let us tell you about forward-contracts to manage this exposure!
Often, international properties can generate income, and this will offset the outgoing payments. While Global Currency Services offers an inexpensive option to moving funds, it’s still cheaper to not have to move funds at all. Please reach out to Global Currency to discuss the best way to decrease your expenses related to moving money.
How The Market Differs Abroad
As it does from province to province, and even city to city in Canada, the market differs in each country. In some countries, it may be more common for buyers to pay in cash, rather than financing through a mortgage. The demand for certain types of properties, such as vacation homes or investment properties, may also be different. It's important to research the local market and work with a real estate agent who is familiar with the area to understand these differences so you can make informed decisions when buying a home abroad.
As political and societal climate change, so can the market. Right now, the market in Florida, where homes used to be fairly priced, is competitive, with many homes selling quickly and often above the asking price. In Costa Rica, the market is more affordable, with many options for both luxurious and budget-friendly homes. Portugal, on the other hand, is currently experiencing a surge in demand, with many buyers drawn to its warm climate and favourable tax laws.
Risks of Buying a Home Outside of Canada
Owning a home internationally comes with certain risks, such as not being able to monitor your property all the time, or being subject to foreign laws and regulations. It's important to carefully consider these risks before making a decision. You may also want to hire a property manager or caretaker to keep an eye on your home while you're away.
Do The Benefits Outweigh The Risks?
While owning a home abroad can be exciting, it's important to only buy if the benefits outweigh the risks. Consider factors such as the location, the cost, the potential return on investment, and how often you plan to visit the property. If you're not sure whether owning a home abroad is right for you, consider renting a property in the area first to get a feel for the local market and lifestyle.
It’s important to approach international homeownership with caution and careful consideration. By researching the market, understanding the mortgage process, and weighing the risks and benefits, you can make an informed decision about whether buying a property abroad is right for you. If you have questions about financing your mortgage abroad, or how the process works, reach out to our team!