If you’re looking for that perfect ski home, it’s easy to leave the financial side until last. This can, however, prove costly, both in money and time. So, this week, we’re running through how to pay for a ski property, including your options for financing the purchase, how to protect your money and when to get started.
What are your options to pay for a ski property?
You’ve a number of options for financing your property purchase. Firstly, work out the total funds available to you on hand. As well as savings, if you have any assets you can sell, or investments you can cash in – including pension drawdowns – then you could benefit from a much higher budget. If you go down the route of joint ownership, you could as much as double, treble or even more your purchasing power.
Equally, you could purchase with a mortgage. Your two options here are either an overseas mortgage from a bank in your home country, or a local mortgage from a bank in the country of your purchase. Both have their upsides and downsides.
Generally speaking, the deposit for an overseas mortgage will need to be slightly higher than in the UK. In Spain, for instance, if you’re buying in the Pyrenees, you’ll be looking at around 30-40% of the overall price.
When applying, you’ll usually need an income tax declaration for the past two years, bank statements from the last year, payroll for the last six months, a list of already-held mortgages, a statement of your assets and liabilities and a copy of your passport.
On the other hand, for a local mortgage abroad, you’ll often find lower rates and a wider choice of mortgages. You can also often find that any deposit required would be smaller. However, currency fluctuation can make this a riskier option, as your mortgage will be in the local money. Equally, you need to be sure of the legal protections afforded to you.
How can you safely transfer your money over?
If you’re buying between two different currencies, then you do run a risk of losing money if you don’t plan ahead.
In the time delay between making an offer on a home and actually paying your deposit, the exchange rate will move – it moves every single moment of the day. If that movement is ‘out of your favour’, so the currency you’re using to buy the purchase currency goes down, you could lose thousands of pounds.
Take a real-life example. A budget of £800,000 in the month between May and July this year could have got you anything from €941,000 right down to €875,000. Could absorb a €60,000 change in your budget?
There is a way to completely avoid this risk, however. Many international buyers, when deciding how to pay for a ski property, opt for what is known as a forward contract. This means you agree to purchase at today’s exchange rate for a set period of time, such as twelve months, and for a set sum of money.
This way, your €800,000 remains at exactly what you’re expecting. Even if the markets saw another 5% drop, it wouldn’t impact you at all.
To find out more about how this works, don’t miss your free copy of the Property Buyer’s Guide to Currency.
When should you start sorting your finances?
It’s the old quandary – you can’t buy a house without finances, but you can’t finance something you don’t have.
Wat you do depends on the speed of your purchase. A lot of people will go and view houses, find one they like and come back to sort out the money side of things. This can be advantageous if you have quite a loose budget, and it’s more going to be dictated by the price of your house.
However, this does mean that someone else can put in an offer while you’re busy back at home sorting money. Remember that there’s no gazumping in many of the most popular ski countries, especially in Europe.
To avoid this, you need to be able to act speedily. This means making sure your money is sorted in advance. We normally recommend taking your viewing trip as a good date to work towards. By speaking to your currency specialist and deciding how you’re going to send your money, speaking to your lawyer to discuss how to structure your purchase and getting agreements in principle for a mortgage before you head out, you’re in place to immediately put in an offer on that perfect ski property.