Mortgages in the UK
Overseas mortgages (general) – options
Mortgages (& taxes) in Cape Verde
What’s a mortgage?
A mortgage is like any other kind of loan – you borrow money and you pay it back with interest over a period of time. However, it has one key difference: it is secured against your home. Therefore, if for any reason you can’t repay it, the lender can repossess your home, or in other words, take it from you and sell it to recover their money.
Mortgages in the UK
For detailed and impartial information on mortgages, if applying for one in the UK, please visit the FSA (Financial Services Authority) website, which we recommend. You will have access to all sorts of publications and tables, comparing mortgages, regulations, budgets, etc. Just click here
Overseas mortgages (general) – options
1.) Raising finance at home Re-mortgaging an existing home to release equity is a popular option. Many overseas property buyers live in countries in which the housing markets that have left them with equity in their own homes. The UK property market is a good example of this many people have benefited from steady house price increases leaving them with small mortgages and large amounts of equity.
Advantages
:: Re mortgaging is not complicated and the process is straightforward:: Huge choice of mortgages products available.
:: Overseas property buyers are left with the bargaining power of cash
:: Quicker to buy a property abroad
:: Mortgage rates may be lower in their own country
:: Currency fluctuations can increase spending power
:: Mortgage is not secured on property abroad
Disadvantages
:: Your home mortgage repayments go up:: The size of your mortgage increase
:: You may have to pay off mortgage in your retirement
:: If you don’t keep up payments you may lose your home
:: Mortgage rates fluctuate
:: Currency fluctuations may decrease your money
2.) Using a local overseas mortgage lender. Many emerging markets are getting to grips with overseas buyers and can now provide a real alternative for the overseas property buyer.
Advantages of a local lender
:: They will accurately asses value of property
:: Surveys for mortgage purposes undertaken
:: Thorough checks on the land and property
:: Checks on the developer will be undertaken
:: No costs on transferring money abroad
Disadvantages
:: Higher interest rates aboard:: Higher lender fees
:: Loan to value ratio may smaller requiring larger deposit
:: Language and cultural barriers
:: Complicated procedures to those new to process.
3.) Securing an overseas mortgage with an international mortgage provider International mortgage providers can provide mortgages in a whole host of countries. The choice of countries is increasing as the demand for overseas mortgages develops. International mortgages advisors tend to be knowledgeable in this specialist field and provide overseas buyers with a real alternative to other financing options.
Advantages
:: Expert advice
:: They can take the stress out of complicated procedures
Disadvantages
:: Mortgage secured on overseas property
:: Fees can be higher
4.) Use local financing from a developer. Many developers may offer their own in-house financing.
Advantages:: One stop shop the entire prices can be delay with one company
:: Incentives are offered and discounts may apply when taking developers mortgage finance
Disadvantages
:: Higher interest rates aboard
:: Higher lender fees
:: Loan to value ratio may smaller requiring larger deposit
:: Language and cultural barriers
:: Complicated procedures to those new to process.
:: Earning in one currency and paying in another can mean frequent variations in payments
Mortgages in Cape Verde
The lack of local mortgages could be construed by many as a disadvantage, but it means that the market is indeed in its infancy, allowing international property purchasers to source excellent quality property at remarkable prices.
What is more, the Cape Verde market promises some of the best possible capital appreciation rates worldwide and a future rental market that will rival many other major holiday destinations. There is already talk of many developers in Cape Verde starting to make progress by offering mortgages to off-plan buyers but the paradox is that as the financial stability of the area increases and mortgages are become more readily available, the best investment opportunities will already have gone. Prices will undoubtedly rise substantially when this happens and, as with every emerging market, it is the very early investors who see the potential in the area that make the most substantial returns on investment. Today it is possible to achieve a mortgage upon project completion but this does not help a property purchaser fund an investment.
The payment schedule for buying an off-plan property in Cape Verde is very different from a more established market such as Spain which typically offers a 30% deposit and 70% payment on completion. This can almost always be covered by a standard mortgage, usually offered by the developer itself. However, a typical purchase in Cape Verde will include 5 stage payments across the development period of the property. The investor or home buyer will need to fund these payments but has the possibility of achieving a 70% "mortgage" on the valuation of the property when they finally sign the completion documents.
Mortgage loans for foreigners in Cape Verde - overview
:: Currency: Euro €:: Amount: Up to 70% LTV (subject to status)
:: Subject: Purchase of a property
:: Term: Up to 15 years
:: Type of mortgage: Repayment mortgage – capital and interest
:: Interest rate: Variable rate: 6 months EURIBOR + 3.75 approx. 7%
:: Fixed interest rate: approx. 8%
:: Bank arrangement fee: 1.25% fee
:: Early redemption penalty:
:: First 5 years: 1-2% of the outstanding balance.
:: After 5 years: 0%
:: Stage payment financing: Yes
:: Collateral: mortgage on a real estate in Cape Verde
Taxes in Cape Verde
When you sell property in Cape Verde there are no property taxes to pay. However property purchase is subject to the following taxes:
Cape Verde - Transfer Tax
This is charged at a flat rate of 3% of the property value and is paid prior to the signing of the deed of purchase and sale.
Cape Verde - Holding Property / Annual Rates
This tax is charged at a flat rate of 3% on 25% of the value of the property and is paid annually every April (or in two installments in April and September).
Cape Verde - Capital Gains Tax
:: Capital gains on any other property sale are taxable if their sale value exceeds a 30% increase on the value at which they were initially purchased. The capital gain is taxed at a flat rate of 3% and is payable within 30 days of the deeds, together with the submission of a "Declaracao de Mais Valias" (Capital Gains Statement)
Cape Verde - Inheritance/Gift Tax
Any inherited or gift property is taxed at a flat rate of 3% on the attributed value of the property. For more detailed tax information, please contact us and speak with a specialist Cape Verde advisor.
