How much is your home abroad costing you?
Ten years ago, the prospect of buying a property abroad in sunny Spain couldn’t have seemed more appealing.
The property boom of 2007 meant that buyers were benefiting from receiving easy loans and many cashed in on the opportunity to soak up the sun at attractive rates. Sadly, it would seem that the good times have been short-lived and figures suggest that UK buyers have taken a step back from the Spanish property market, with demand for properties falling by 28%.
But what are the implications for those of us that already have a property overseas? Find out about how, in light of increasing financial uncertainty, your home away from home could be costing you more than you bargained for.
Two-thirds of homeowners in Spain will share what is known as ‘common areas’ with other residents. These incorporate areas like patios, pools, and lifts, and all of these amenities cost money to maintain. Properties like this are owned by a system of part-ownership and one of the disadvantages is community fees. You need to be wary of this, as these fees can amount to several hundred euros per month, on top of your mortgage and other costs. Properties with common areas can also have a number of other downsides, such as a lack of privacy and insufficient parking space. Be sure you have factored in monthly community charges when working out your budget.
British buyers were given easy loans at the peak of the Spanish property boom in 2007, with a lot benefitting from interest-only mortgages. With many of these ten-year plans set to expire, experts are warning homeowners that their mortgage fees could soar by as much as 1,000% per month. If you’ve been breezing through with relatively low payments each month, brace yourself as things could be set to increase rapidly.
The risk of Negative Equity
A property is in negative equity if it’s worth less than the mortgage secured on it and it’s normally caused by falling property prices. Ten years ago, many people were purchasing properties abroad at inflated prices but since the crash property prices have fallen significantly. If you own a property abroad you could find yourself in a situation where your home has fallen so much in value, you owe more than what it is worth.
It may seem obvious, but you’ll need to map out just how much all of those add-ons are costing you each year. While flights to Spain and Italy may be cheap, if you’re planning on visiting your gorgeous new villa three times a year, the extra bills will soon start to creep up on you. Also, be sure to consider the cost of exchanging money, especially given how weak the pound is at present.
Check out how we help a recent client break free from the burden of his foreign property: