HOW TO FINANCE YOUR PURCHASE

There are a number of ways in which a purchase can be financed in Eastern Europe. The first is (if you are fortunate enough) to pay up-front, thus owning your home outright. The alternative is through raising the cash in the UK, either by re-mortgaging your home or applying for a mortgage with a UK bank. Finally, you could apply for a mortgage in the Eastern European country where you are buying.

The mortgage market is currently emerging in Eastern Europe and as such, interest rates are slightly higher than the established markets such as Spain and Portugal and, in most cases, UK buyers prefer to re-mortgage in order to raise the funding. It should also be pointed out that in some Eastern European countries, local banks do not advance mortgages for off-plan properties due to the lack of security.

Alternative methods for raising finance include securing a short-term loan. This is particularly popular if you know you have a lump sum of cash coming to you – such as a pension – and need a stop-gap to help pay a deposit or other fees. There are also facilities such as an overdraft extension or the use of a credit card, but again, while the use of these is personal preference, make sure you do not lumber yourself with more debt than you can repay.

Eastern European vs. UK mortgages

• You generally only get a mortgage of a maximum of 70% of property value in Eastern Europe.

• Generally, Eastern European mortgages are only for 15 years, although 25-year mortgages are becoming increasingly available.
• Not all property types and locations will be eligible for a mortgage, e.g. off-plan purchases.
• The lending process and repayment schedules differ, as do the restrictions. Typical repayments, based on 25 years, with an interest rate of 6.5%, are as follows:
  €100,000, repayment = €675 per month
  €200,000, repayment = €1,300
  €300,000, repayment = €1,975.

CURRENCY CONVERSION

The best way to negotiate and successfully navigate currency exchange is to search for the best exchange rate deal. There are numerous specialist currency exchange companies out there who will often beat rates offered by the main banks. You can choose from a risk-free option – to buy all of your currency in one go and fix the cost of exchange, or a high-risk strategy – to buy euros each time you need to send them to the developer/seller. There are also a number of forward-buying contracts, where you fix your foreign exchange rate for a specified amount today and elect a date in the future to pick up and pay for your currency. A deposit payment of between 3% and 10% is generally required on agreement of the contract.

There are also a number of sophisticated currency swap arrangements that individuals can enter into, but these are probably not going to be suitable for most and do not always provide complete protection.

Useful contacts:

www.fidentiagroup.com
www.currencies.co.uk
www.globexfx.com
www.travelex.co.uk
www.currenciesdirect.com
www.hifx.co.uk