It’s Getting Harder And Harder To Borrow Money Overseas
I recently participated in a “How To Buy And Profit From Real Estate Overseas” webinar. For the hour-long conversation, Kathleen Peddicord, Real Estate Marketing Director James Archer, and I welcomed three special guests representing key markets of interest right now—Panama, Brazil, and Argentina/Paraguay/Uruguay.
The agenda for our discussion was broad. We talked about the main benefits of investing in real estate overseas, as well as the pitfalls and risks. We talked about how you get started investing in real estate overseas if you’ve never done it before. And we focused on some key current opportunities (this with the help of our special guests).
We also fielded questions. Unfortunately, we ran out of time before we were able to address all of the questions raised by participants in the event. One that we received from a number of listeners on the line but weren’t able to speak to before our hour ran out had to do with financing.
Specifically: Can a foreigner get financing for a property purchase in another country?
Like so many questions to do with buying real estate overseas, the answer is that it depends—first on the country. If you’re looking to buy in a country where it’s possible for foreigners to borrow for the purchase of property, then it also depends—this time on whether you can meet the local requirements for lending.
Often, in countries where formal lending for the purchase of real estate is available, banks treat resident foreigners the same as resident citizens. If you’re living and working in a country legally, banks likely will consider you a “local” for the purposes of lending money to you as long as you have a job with a local company and can show formal paystubs.
As a non-resident foreigner, your options are more limited. In this case, you either won’t be able to get financing at all or the cost will be too much to make the option interesting. And, in this regard, as with most things in the offshore arena, the bar is always moving.
A decade ago, before the global real estate crisis, I was able to get a loan in France as a non-resident for the purchase of an apartment in Paris without too much trouble at all. Over the last few months, I’ve been trying to get a new loan for the purchase of another apartment in Paris. This week I’ve had to admit defeat. It seems that, today, it’s close to impossible for a non-resident to get a mortgage in France. The apartment purchase will proceed but without bank financing. I don’t have a choice.
Other countries where it’s been possible historically for a non-resident foreigner to get a mortgage but where that’s no longer the case are Spain, Ireland, and Panama. Technically, it’s not impossible today to borrow as a non-resident foreigner in those countries or in France either, but you’ll have to find the right bank and have the right profile get a loan.
As I said, I haven’t been able to find the right match in Paris. One bank I approached only does non-resident loans for people working for companies listed on the French stock exchange. Another doesn’t lend to non-residents who work for their own company. Etc.
If you are able to get bank financing for the purchase of property in another country, note that it will come with a requirement for a local life insurance policy. That adds to the cost of the mortgage, but, more important, it also can limit the possible length of the loan. Many insurance companies will issue life insurance policies only through age 75. Therefore the best a 60-year-old looking for a mortgage could expect might be a 15-year term.
Bank financing isn’t your only option when buying property overseas. Increasingly, in certain markets, a developer or individual seller can be willing to carry a mortgage on the property you’re interested in buying from him. With this kind of financing, you can’t expect terms like you might get from a bank, but a five- or seven-year loan, say, is better than no loan at all.
“Lief, the information that is provided in your and your wife’s newsletters is fantastic. Yet I do not know where to start with a limited budget and amount of time. I have not had the chance to really dive into every newsletter.
“We do seek to get a second citizenship, to own real estate in Belize and France for starters, and to do business in Panama. Do you think Panama would be the location for our second citizenship?”
Panama requires naturalized citizens to sign a document stating they will renounce all other citizenships. Not that everyone (or even anyone, as far as I can tell) who is naturalized in Panama does that, but it’s the law. Not doing it, you run the risk of Panama taking away your naturalization if they find out you didn’t give up any previous citizenships.
In addition, I see two other small hiccups to do with being naturalized in Panama. First, the time clock doesn’t start until you have obtained permanent residency. With the new “Specific Countries” visa, you are granted permanent residency on your first approval, which can take but four to six months from the date of your application. However, Panama will be electing a new president in May. As the Specific Countries visa exists thanks to Presidential Decree…the new president could un-decree it. This is one reason we’re hoping the candidate from Martinelli’s party wins. If he does, everyone expects the visa program to stay in place.
The second hiccup is that once you’ve been processed for naturalization, the president must sign off on the final approval. Some presidents have been more eager to accept new citizens than others. The president before this one signed but a handful of naturalization papers. Martinelli, on the other hand, has granted hundreds. Again, we’ll have a new president in May…