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Planning for your place in the sun
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Planning for your place in the sun

Cheap mortgages, favourable exchange rates, low cost flights and a plentiful supply of relatively cheap foreign property is driving a boom in the sale of holiday homes, similar to the gold rush we are experiencing in the UK.

"Before signing up for that French cottage or Spanish villa of your dreams, don't forget that conveyancing problems, taxes and inheritance laws don't stop at the White Cliffs of Dover," warns Anna Bowes of Chase De Vere Private Clients.

Finding a reliable local solicitor to handle the conveyancing is just as crucial as for UK property purchase, if you want to avoid problems with planning permission, rights of access or existing charges on the property.

In Spain, a vendor's debts pass to the new property owner, so it is essential that your solicitor verifies that your vendor is not leaving any charges on the property.

Another pernicious Spanish law enables local authorities to confiscate your property if the land on which your property is built is needed for essential local amenities such as a road or sewage works. Check that there aren't any future developments which might affect your ownership. Thereafter, all the normal caveats of property purchase apply, including ensuring that you have good title and will own what you think you are paying for.

One UK investor who bought a property in Spain found to his astonishment that the local municipality owned half his swimming pool - a situation which cost him thousands of pounds to rectify.

Next you will need to decide whether to borrow in Sterling or euros. Many people choose to draw equity from their UK properties rather having to take out a new mortgage. This may be the only way if you are self employed because few continental lenders allow self certification of income.

The alternative is to take a euro mortgage, but unless you are paid in euros or expect to receive a rental income in euros, remember the exchange rate risk which may arise if sterling were to weaken.

Even though interest rates are much lower in euro-land (ECB base rate is currently 2% compared to the UK's 4.25%), the margin on Euro mortgages is much wider and the market less competitive, so the mortgage rate differential is not as large as you might expect.

A growing number of UK and Irish lending institutions offer euro mortgages, so it is worth shopping around for the best deal.

The cost of buying and selling property in euro-land tends to be much higher than in the UK - in France and Spain you are normally advised to allow 10% of the property's value to cover the extra costs. Also, be sure you know what the ongoing costs of maintaining the property are likely to be - service charges, community and local rates can be just as expensive as in the UK.

If you choose to rent out your holiday home, check the tax position on rental income. It may be possible to offset the mortgage interest against the tax on this income, but you need specialist tax advice, as some countries have double taxation agreements with the UK.

In Spain, purchasers are usually advised to write a Spanish will as the Spanish authorities will not recognise an English will for inheritance purposes. This means you should ensure that your UK will dovetails with your Spanish will so that the two don't contradict each other.


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Please note that articles on this site do not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. Call 0800 085 3250 for details of IFAs in your local area. Any statement regarding financial services products and tax liability is based on legislation and tax practices as at 1 January 2004, which is, of course, subject to change.The value of any tax benefits or reliefs depends upon the individual circumstances of the investor.When investment performance is mentioned you should remember that past performance is no guarantee of future performance. Where products have an underlying investment content, in many cases the value of the investment can fall as well as rise. For with-profit based investments, there is no guarantee as to the level of bonuses that will be declared, if any. Where mortgages or secured loans are explained do remember that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. All mortgages are subject to underwriting, status and are not available to people under the age of 18.

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Schedule of Articles

property investing
property refurbishment
buying overseas property
moving house
home letting
buy to let
home improvements

top 10 celebrity areas
6 up & comming areas
5 signs that an area is up & comming
city types yearn for the country in town
your place in the sun
equity release
planning permissions & extensions
estate agents
rent or buy
buy to let
mortgage overpayment
mortgage endowments
mortgage protection
stamp duty
self build your home
electrical surveys
the cost of moving in
the perfect neighbourhood
council tax
house price league
good neighbours
stamp duty land tax
top 20 towns 2003
cut the cost of moving
interest rates
buying in scotland
dream homes
first time buyers
the worth of uk homes
bad estate agents
keeping up appearances
home improvements


Please note that articles on this site & any other 'planning-approval' related web site does not constitute professional advice. All articles are intended to provide a general view of many subjects. We suggest you to consult a solicitor before making any important decisions.  The author is not an expert in any given field.

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