Buying overseas can be daunting, even more so when it’s over a few hours away as you can’t just nip across on a last minute flight to check on details and get things organised. For those buying a home in Florida – be that a holiday home, investment property or forever home – you can soften the effects of the exchange rate by buying the property with a mortgage.

It’s no secret that dealing in a foreign currency has its risks. The currency market is heavily influenced by economic data which causes the rates to fluctuate daily. To soften the blow of a all-out cash purchase, especially if the exchange rate isn’t at its best, there are alternative options.

Buy with a mortgage

While the UK mortgage market can often be hard to traverse, that’s not the case in the US. If you’re buying a property there, you can choose to buy with a dollar-based mortgage. This is especially attractive to would-be cash buyers thanks to the US’s redemption rules.

Choosing to buy with a mortgage allows you to leverage your cash. You’ll only need to exchange enough money to cover your deposit and closing costs, which can be extremely profitable if the markets have unexpectedly turned against you.

In the UK, we’d worry about early redemption or pre-payment penalties, but that’s not a thing in the US, even with fixed rate deals. This is excellent news for anyone exchanging a foreign currency to dollars to buy as you can choose to pay of all or parts of your home when the rate is more favourable. With a better exchange rate, you can end up paying less in sterling or euros than if you’d bought the property at the outset with cash.

 

It boosts your buying power

Buying a property with a US mortgage or dollar-based mortgage as it’s sometimes referred to, can boost your buying power and therefore your opportunity to earn a better rental income.

If you’re looking to buy a holiday home and intend to let it out when you’re not there, taking out a home loan in Florida can be extremely beneficial.

Florida, in particular, has a huge market for rentals among tourists. Large properties with between six and ten bedrooms are extremely desirable. If it’s on a resort or in a popular community – even better. These tend to attract higher rental yields and occupancy levels as there’s more amenities nearby.

Stretching your budget through a mortgage and choosing your property carefully, usually  proves its worth in the long run.

 

Ask for pre-approval

All US realtors will advise you get pre-approved for a home loan before you start searching. Not only will it give you a sense of security, it’ll also make you more attractive to sellers. What is pre-approval?

It’s a written conditional commitment from a loan lender for an exact amount loan, which means you are able to confidently make offers up to that amount.

To gain pre-approval, you will need to provide the usual documentation (proof of income, employment confirmation, proof of assets, credit history, ID, bank statements etc.). For more information on the required documentation, please visit any US loan lender. See HSBC USA here. Expect a small application fee.

 

What can you get on a home loan in Florida?

US lenders today require a minimum 20 – 30% deposit from non-US citizens buying a second home. Lots of buyers choose a 20 – 30 year contract with fixed rates ranging from 6 – 7%. Better deals might require you to have cash reserves in a US bank account for security.

Top tip: When applying for a US loan, avoid making any large purchases pre-approval as it can increase your debt-to-income ratio and reduce available funds to meet balance requirements to secure your loan.

 

If you have any queries about buying overseas, speak to a Independent Financial Advisor.

For guidance in buying property in the USA, download Your Overseas Home’s free USA buying guide today for guidance on each stage of the buying process.

 

Written by PropertyGuides for Rightmove

If you are considering an overseas property purchase, whether for lifestyle or investment, opening a no-obligation account with FCA-authorised Smart Currency Exchange will enable you to benefit from their competitive exchange rates and specialist currency knowledge, ultimately saving you money and time. For more information, download Smart Currency Exchange’s free report or visit the Currency Zone.