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Securing a Mortgage For a Home Overseas

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By June Fletcher, The Real Estate Journal

RISMEDIA, July 31, 2007—Question: When buying real estate overseas, how does an American obtain a mortgage? Is it even possible? — Vladimir Ashtamenko

Answer: In our shrinking world, it’s no wonder that Americans want to buy homes overseas. And given that foreign housing markets don’t necessarily act in sync with ours — for instance, government statistics show that housing prices in Denmark were up 23.6% in 2006 over the year before, while U.S. prices dropped 10%–investing in them can be a smart way to hedge your real estate investments.

But getting financing can be a lot harder than finding that perfect little volcano-view villa in Italy. Few U.S. lenders want to front money on property unless they can seize it should you stop making payments. Since that means getting entangled in often onerous foreign rules about foreclosure, it’s simply not worth the trouble.

Some lenders specialize in foreign loans: for instance, IMI Group, a lender based in Phoenix provides loans to American and Canadian citizens who want to buy property in Latin America; Collateral International, a Birmingham, Ala.-based lender, will finance home purchases in Mexico. Foreign banks often will lend to Americans too, though be aware that interest rates are often floating rather than fixed, and lenders may require a down payment of 20% to 70%. Loan terms also are shorter than the 30-year terms Americans expect; some are as short as five years. (For a breakdown of typical financing terms in 18 countries popular with Western buyers, visit www.escapeartist.com.) One way to find a foreign lender who’ll lend to an American citizen is through a reputable real estate agent in the country that interests you; a good place to start is Worldproperties.com, backed by the International Consortium of Real Estate Associations, which represents 2 million agents worldwide.

Since finding foreign financing can be time-consuming, it may be worthwhile to limit your search to properties that offer seller financing. Or simply pay cash. You may be able to get the money you need by refinancing your current home, or taking out a home equity loan or line of credit. That way, you’ll not only avoid the hassle of finding a foreign lender and dealing with multinational red tape, you’ll also increase your bargaining power when you locate the property you want. In every language, cash speaks loud and clear.

June Fletcher is a staff reporter at The Wall Street Journal and the author of “House Poor” (Harper Collins, 2005). Her “House Talk” column appears most Mondays on RealEstateJournal.com.

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