What do you do when bank financing is not available in your destination country? This article explores other options to finance your foreign property investment.

You’re not getting the same mortgage deal you’re used to

Bank financing abroad will be different from what you’re used to at home. Here are some ways in which the terms will likely be different:

1. Loan-to value ratios will be around 50 to 75 percent of what you're used to.

2. Terms may be shorter. It's almost impossible to get a 30-year loan when buying abroad.

3. You will be offered adjustable interest rates, rather than fixed.

4. You might be required to get a life insurance to secure your loan for foreign property. This isn't good news if you're already around 60, as banks wouldn't borrow you loans of more than 15-year terms. The reason being that insurance companies, as a rule, wouldn't cover you when you're above 75 years old.

Hence, there is need to check out other financing sources.

Financing tips from experts

Generally, here are some financing tips from foreign property experts:

1. If possible when starting out; start small and pay in cash. If this isn't possible, you can use your current home as collateral, without having to rely on banks or regular mortgages. Depending on the amount of equity in your home, you might get lower rates.

2. Research bank financing terms, requirements and laws in your destination country to decide which financing option would work for you. 

3. Since most of what you know about real estate might be ineffective in your destination country, it would be wise to get a partner or local agent. You'll need someone who can offer useful advice regarding financing and home ownership laws in the country.

4. If you'll be transferring funds denominated in your domestic currency, either to make a down payment, full payment or mortgage payments, don't go through the local bank. Local banks, with their wide dealing spread and limited transaction sizes, offer poor Forex services. Foreign exchange services would offer a better deal. 

Options to finance foreign property without using the local bank

Here are three options for foreign property investors who don't want to go through the local bank:

1. Personal loans.

Potential buyers with excellent credit will often fund an overseas purchase with an unsecured personal loan for foreign property. Interest rates can be in the single digits for qualified buyers.

Financing with a personal loan avoids the risks that go with leveraging property with a HELOC or cash refinance. This type of financing is particularly attractive when you are investing in a developing country where mortgage rates are high, and the cost of property ownership is relatively cheap.

2. Seller financing.

Some private sellers might be willing to pay part of the price. The conditions will be whatever you and the owner decides, and an average term is up to five years. In most cases, the longer a bit of property has been on the market, the better conditions you can negotiate. Much like bank funding, don't expect the owner to provide the deed until you've finished paying the loan.

3. Home equity (HELOC).

When cash is not an option, tapping into your home equity is one of the easiest ways to finance a property abroad. If you are investing in a country without a developed banking industry, it can also be the cheapest. Getting a HELOC has the added benefit of making you a cash buyer, which provides leverage when negotiating price.

When you hear stamp duty, don't run for cover! Stamp duty fees are only applicable in the Commonwealth of Nations countries, Singapore, Australia and a few states in the US. It is a tax that arises from the transfer of property, usually, you pay when you sell. In this case, there will be a transfer of documents. Stamp duty legally requires that these documents are stamped, this shows the amount of tax paid. This means you’re actually paying for government stamp. Where enforced, stamp duty is placed on transfer of lands, homes, buildings, copyrights, patents and securities.

Facts About Stamp Duty fees

Stamp duty can be one small additional cost to your home, especially if you're dealing with a second home or investment property. Here are some things you should know about stamp duty:

* In the UK, the government levies stamp duty tax on all share transactions, currently at 0.5%. This generates £4bn for the treasury.

* In the European Union, Germany, Sweden, Luxembourg and the Netherlands have no stamp duty.

* France charges stamp duty only for transactions above £5,000. In the US, stamp duty is more or less insignificant, only 0.003 percent is charged.

* When you deal with really big money, it becomes a problem. Stamp duty is the reason why influential fund manager, Fidelity, moved half of its £6bn UK special situation fund offshore in 2016.

* Stamp duty came into being 200 years ago in the UK and some people believe that it was the sparking flame for American Independence Movement. When it was introduced to the American colonies in 1765, it was met by protests.

* Stamp duty is only paid on brick and mortar of the house. It shouldn't feature fixtures and fittings, white goods or items of furniture as they are exempt. You pay stamp duty on land and property purchases.

* You also pay the stamp duty when you buy shares valued at more than £ 1,000, although it is a different system, and the rates are different as well.

* You do not pay it on properties in Scotland. Instead you have a Land and Buildings transaction tax on properties costing more than £ 145,000.

* In the UK, just because your property is below £ 125,000 does not mean you can ignore Stamp Duty. You still have to submit a Stamp Duty land tax return.

* Even though your lawyer usually takes care of it, it is your responsibility to make sure that the return and payment are shipped on time. If it is late, you will pay a fine of £ 100, plus any interest.

* If you are transferring a portion of your home to an ex-partner after divorce or separation, or if you are giving the deeds of your house to someone - as a gift or in your will - you do not have to pay stamp duty.

How Much Stamp Duty Should I Expect To Pay?

In the UK, there are several price bands for Stamp Duty. The tax is calculated by the part of the purchase price of property that falls within each band. For example, if you buy a house for £ 275,000, the tax on the stamp duty (SDLT) you owe is calculated as follows:

0% on the first £ 125,000 = £ 0

2% on next £ 125,000 = £ 2,500

5% in the final £ 25,000 = £ 1,250

Total SDLT = £ 3,750

In this case you pay £ 3,750. This will not be the case in other countries. So, it is important that you contact a lawyer in your destination country who’d give information on how stamp duty is calculated.

Depending on your home's value, your market and comps in your neighborhood, you could consider making renovations in your home before listing. In a place like New York, however, where houses are being snapped up fast and prices are over the roof, renovating your house for sale might be a crazy idea. But in suburbs with high inventory, your house needs to measure up.

When selling, you wouldn't be looking through the same eyeglasses as a new homeowner. Your calculations and priorities will be much different. The most important thing when you have to consider value is return on investment. What renovations will make my house sell fast and at the same time give good return on investment? Before you embark on gutting your circa 1990 kitchen, the first thing you might need to do is consult an experienced realtor who knows what works best in your particular neighborhood.

You might find out that minor cosmetic upgrades will get more buyers through the door. And yea, the door is important. Instead of spending money on pricey renovations like adding a deck or basement revamp, Remodeling magazine’s 2015 Cost vs. Value Report says that replacing your existing front door with a new steel door will net you a 101.8% ROI for a minimal replacement cost of $1,230. Knowing which areas to spend on will help save you a lot of money when making renovations. Let's look at five low-cost ways to increase your home's value.

        Inexpensive Home Improvement Tips to Improve Your Home’s Value

1. Consider curb appeal. Nothing says 'welcome to this lovely house' to a prospective buyer as a nicely mowed lawn, a few shrubs here and there and a well-swept walkway. The first impression buyers have as they drive to your home is truly important. So, it's necessary you set the stage right. Hiring a good landscaper will be worth the money. Not only will your home appeal to prospective buyers, your neighbor would also love the effort.

2. Have a cohesive kitchen. Kitchen plays a big role in home improvement. Many Realtors call it the heart of the home. Indeed it is; since an average American homeowner spends at least 37 minutes daily in the kitchen. Sprucing up your kitchen demands that you create the impression of a clean and updated kitchen. One way to achieve this impression is creating cohesiveness, especially with color. Mix and match kitchens are not the best. If your kitchen appliances don't match, consider ordering new doors, e.g new cabinet doors or face panels for them.

3. Work on your bathroom. Next to the kitchen, bathrooms are important to potential home buyers. You can make a difference in your bathroom at a low cost by adding new toilet seat and a pedestal sink. These are also pretty easy for homeowners to install on their own. One thing you may not be able to do on your own but which will add value to your bathroom is replacing an old, discolored, bathroom floor with vinyl tiles. Bright, energy efficient lighting will also improve your bathroom's appeal.

4. Update closets. Cramped storage spaces are not attractive to potential buyers. You can step up your storage by adding a do-it-yourself wire and laminate system to bedrooms and pantries.

5. Check the mechanics. Having a minor inspection and working on existing faults in your home like faulty outlets, loose wires and water leaks give the impression that someone has really taken care of the home.