How to Transfer Money Abroad to Buy a House

If the dreary UK weather has ever made you long for a sunnier climate, you aren’t alone. Brits buying property abroad has become a fairly common phenomenon in recent years, whether they want to buy a retirement villa or they are property investors looking to generate some rental income.

Millions of Brits now live abroad permanently or have a holiday home in a foreign country. However, this thought might leave you wondering how to transfer money abroad to buy a house.

While you may have read my previous article about the best money transfer services, with large and regular payments, such as the mortgage costs for a property abroad, there can be other factors to consider. That’s why it’s important to properly understand the implications of buying overseas property, as well as how to send money abroad in a safe way.

Buying a property is a huge investment, so to avoid running into any potential issues, it’s important to know all the facts. So, if you want to live your overseas property dream, read on for everything you need to know.

What do I need to think about before I buy property overseas?

There is a wide variety of reasons why you might want to buy a property in another country. However, before you do so, there are three important things to consider:

Do you know where you want to live?

While you might have an idea of where you want to live, it’s important to have a sense of certainty. Before you commit, it’s important to be sure about which part of the country you’d like to live, as well as what type of home you may want to own.

Where you’d like to live and what property you’d like to buy will affect how much money you’ll need, the likelihood of getting a mortgage, and can potentially have legal implications.

Doing thorough research before you commit will help to give you a greater sense of confidence and can help to ensure that nothing derails your plans.

Do you know how much you want to spend?

Another important consideration is how much money you’re willing to spend when you buy your dream house. Do you have a budget to keep in mind? If you do, will it be enough to buy the property outright or will you need to apply for a mortgage?

This is a key issue as if you do need to take on a mortgage for your overseas property purchase, it’s important to understand the legal requirements and how large a deposit you may need to pay.

For example, if you’re hoping to buy a rural property in Spain, lenders will often only offer 60% of a property’s value. This can potentially throw a spanner into the works if you’re not careful, so it’s important to do your research.

Furthermore, you may want to keep an eye on the exchange rate, as this will affect how much you can afford to spend if you’re taking out a mortgage in the local currency.

Are there any legal issues that you need to be aware of?

As you might imagine, each country tends to have different rules when buying property. This is why it’s important to seek professional advice before you purchase property overseas.

Furthermore, you may benefit from speaking to a solicitor in the UK before the move, as buying a foreign property could have tax implications that you haven’t thought about.

Is it illegal to send money overseas?

One of the most common concerns that people have when transferring money abroad is the legality of it. While it isn’t a crime to send money overseas, it can become one if you aren’t careful.

The reason why you have to be cautious is the fact that some criminals use international transfers as a way to launder money.

While there is no legal limit on how much UK citizens can transfer overseas, individuals banks and other money transfer providers can impose their own limits. This is why it’s important to speak to them about their terms and conditions before you send any more abroad, to ensure that you don’t run into any issues.

What are some of the most common ways to transfer money abroad?

If you want to take out a foreign mortgage, it is likely that you’ll have to do so with the local currency and through a local property agent. If you need to send money abroad, there are several common ways in which to do it:

Through your bank or building society

When sending money abroad, one of the easiest ways to do so is through your high street banks or building societies. The main benefit of doing it in this way when buying property overseas is that you’re protected by the Financial Services Compensation Scheme (FSCS).

To know that your money is backed by the scheme, which you can read about here, can give you a greater sense of confidence and security.

However, it’s important to bear in mind that these international money transfers are often the slowest, with some transactions taking up to six days. This could potentially pose an issue if a delay causes any of your mortgage payments to be late.

Furthermore, it can also be more expensive as banks often don’t offer the best exchange rates compared to other money transfer providers.

Will it help if my bank has an overseas branch?

If your bank has an overseas branch in your chosen country, you may be able to remove some of the hassle out of the process. If it does, you could benefit from opening a local account, alongside the one you hold with them in the UK.

This can help you to transfer money abroad when you need it, making the process easier and potentially reducing many of the fees and additional costs that you may otherwise have to pay.

Of course, it’s important to bear in mind that this won’t help you with the issue of exchange rates.

Please remember that if you transfer money internationally, you will need to know the IBAN (International Bank Account Number) and BIC (Bank Identifier Code) for the account that you’re transferring money into.

Through a forex broker

Another alternative when buying property overseas is to make your international payments through a foreign exchange company. These are sometimes also known as “forex brokers” or “FX brokers” and they offer specialised money transfer services on behalf of their clients.

Using a broker can be especially helpful if you need to send large amounts of money abroad, as they tend to be faster than banks. This can be useful if you need to make regular payments for a mortgage and you’re concerned about missing one due to delays in the transfer.

Forex traders also tend to offer much more competitive rates for exchanging money than banks do, meaning that your cash will go further. This is obviously a good thing as real estate tends to be very expensive and even small differences in the exchange rate can make a huge difference in the long term.

However, unlike banks, when you transfer money with a broker, you are not protected by the FSCS. This means that if they go out of business, your money will be lost.

Another potential issue is that, unlike when you transfer money through your bank, if you don’t already have an account with a broker, setting one up can take several days. This can potentially pose a problem if you’re in a rush, for example, if you’re concerned that another buyer will buy your desired property before you get a chance to.

It can sometimes be difficult to know which brokers are trustworthy. As I touched upon in my article about transferring money to the US, it can be easy to fall victim to scammers if you aren’t careful.

That’s why, before you get in touch with a broker, it’s important to do your research and find one who is registered with the Financial Conduct Authority. This is how you know that the person you’re hoping to work with is trustworthy.

Are there any potential issues with recurring payments?

Typically, both banks and forex brokers will let you set up recurring payments to cover any mortgage costs that you may have to pay. However the fees for doing so can vary, so it’s important to check beforehand what they are.

How could the exchange rate affect my mortgage?

One of the biggest issues that you may run into when transferring money abroad for a foreign mortgage is the issue of exchange rates changing during your repayment period.

Since the rate goes up and down, payments may be worse than when you set them up. For example, if the pound significantly falls in value, as it did after the Brexit referendum in 2016, your payments could increase suddenly.

If you’re concerned about the exchange rate falling, it may be possible to “forward contract” your future transfers, which locks in the rate. This can potentially save you large amounts of money if you plan to make regular, large, overseas payments, and help to give you a greater sense of stability.

Do I have to pay Stamp Duty when buying a property abroad?

As you probably know, when buying a house in the UK you may have to pay a tax called Stamp Duty on the value of the property. When you buy additional properties, this rate of tax goes up. If you’re planning to buy a house abroad, you may be wondering if this rule still applies.

Unfortunately, if you are buying an additional property or properties, such as holiday homes, you may have to pay extra Stamp Duty, even if the other houses are abroad.

Furthermore, even if you own more than one property temporarily, you may still have to pay the extra rate.

For example, if you plan to sell your UK home to move abroad permanently, but there is an overlap between the time of the sale of your original home and the purchase of your new home, you may be liable for the extra rate.

Of course, this also depends on the value of the property that you currently own, so it’s important to do your research before you move.

There may also be other tax considerations, such as potential Capital Gains Tax liabilities on your home abroad. You have to pay this tax when you dispose of an asset and make a gain on the sale, even if that sale is abroad.

If you want to avoid any potential tax pitfalls, then you may benefit from seeking professional financial advice.

How can seeking financial advice help me?

Whether you’re hoping to buy a seaside apartment as a holiday home or buy an investment property, if you intend to take out an overseas mortgage, it pays to plan ahead.

If you’re hoping to buy an overseas property to rent out for an additional source of income, they can help you by acting as a sounding board for your decision, considering factors like price growth to ensure that you’re making a good investment.

If you’re planning to buy a house abroad, working with a financial advisor can help you to weigh up your options and make a comprehensive plan, taking into account all the costs involved and all the issues you may need to consider, such as potential legal issues or local taxes.

Once you’ve decided on where you’d like to live and which property you’d like to buy, they can also help you by scouring the market for a money transfer provider who is right for you. For example, they may be able to find one who charges low fees or offers the best exchange rates, helping you to save money.

Working with a financial advisor can help you to find the best deal from local mortgage lenders, giving you one less thing to worry about.

Seeking professional advice can also help you to avoid any potential tax issues that arise from purchasing property overseas, giving you greater confidence and peace of mind.

Please note:

This article is for informational purposes only and does not constitute financial advice. All contents are based on our understanding of HMRC legislation, which is subject to change.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.