Watch the video on Florida Mortgages
Foreign nationals who seek to obtain a mortgage when making a Florida property purchase, can do so, subject to qualification, in a relatively simple manner.
- Up to 80% of the purchase price or valuation (appraisal), whichever is the lower is normally readily obtainable.
- Fixed and/or variable rate loans of up to 30 years are normally freely available, regardless of ANY age.
- Some loans can be repaid in either US dollars or another currency and sterling loans often are available with fixed terms and currency exchange rates.
- Interest rates do of course vary according to the type and time of the loan;generally a foreign national /investor will pay 1% more than a US resident. Interest rates currently range between 1% and 8% (May 2007)
An applicant should be able to provide the lender with a list of certain documentation, as proof of ability to repay the property loan and normally the best available rates are freely obtained when supplying the maximum amount of documentation.
If you are planning a trip to Florida with a potential property purchase in mind, we recommended that you take with you a few important documents, which are listed below. Of course you may however have already supplied these documents to a suitable lender for a prior loan pre-qualification.
The recommended documents are:
Employed
A minimum of 2 years Inland Revenue P60s, plus copies of tax returns, if available and your most recent pay slips, covering the prior 30 days.
Self-Employed
A minimum of 2 years accounts, plus a letter from you accountant confirming Inland Revenue approval.
Employed & Self Employed
a) A minimum of 3 months Bank and/or Building Society and/or Stocks and Share statements. The statements should provide evidence of the whereabouts of your intended down payment (deposit) on your property.
b) Proof of title deeds to any unencumbered asset.
c) A copy of a full years-Council tax (rates) demand on your UK home. This is to prove that your permanent home is in the UK.
Non-income verification loans
- Non-status (self-certification) loans are readily available, although documentation similar to the above is still required without the income verification, which is merely stated. This is due to the loan being based on the strength of the asset.
- Although the maximum percentage of these loans varies from time to time, normally they are freely available up to 75% of the purchase price, subject to a satisfactory appraisal. In certain cases a possible 80% non-status can be arranged, although the interest rate is then loaded.
- US lenders offer a variety of flexible mortgages, which can be tailored to your particular needs. Interest rates vary just like they do elsewhere in the world. You can choose between a variable and a fixed loan, although most popular with overseas buyers is a loan capped on an annual basis, in intervals over the life of the loan. These are more commonly known as A.R.M.S. (adjustable rate mortgages) and they are normally available with capping options at 1, 3, 5 & 7 years.
The purpose of the capping is to control the interest rate within a specified percentage range, which can provide peace of mind when on a budget. The fixed rate loans are normally repaid over 15, 20 or 30 year terms.
- U.S. loans will normally cover the repayment of principal property taxes, interest and hazard insurance. Many carry no pre-payment penalties and should you decide to make additional payments each year, you can reduce your term substantially, which is well worth consideration!
- Interest only loans are available Countryside International/Florida Countryside personnel have full knowledge of several independent lenders and brokers with expert knowledge in their field and a personal introduction to ensure the best possible advice is obtained is highly recommended.
A loan pre-qualification prior to any purchase is advised & is freely available upon request without any obligation.
Mortgage Approval
Once a mortgage application is presented at the time of any purchase agreement, normally a lenders acceptance confirmation is forthcoming within a 4 to 8 week period from the time of submission.
When the acceptance notice is received, you are required to sign the authority and if you have not already done so a 'down payment' is made which is normally the balance of 5 % 10% or sometimes even 20% (an initial holding deposit may have already been paid) the exact sum will of course depend on the contract terms.
This stage is the US equivalent of the UK's 'exchange of contracts' and pre-payments and closing costs together with the additional deposit balance are payable at closing.
Purchasing a property with cashIf you pay by cash, there is no requirement for any pre-payments and the closing costs are reduced.
Closing (Completion)
When a new property is being built, prior to closing an orientation (walk thru) with the builder takes place. This involves either you or your representative (brokers like us often provide this free service for their clients) checking the property to ensure entire buyer satisfaction. (snagging list).
The 'Title Company' then conveys the title (a title insurance policy is issued) & ensures that the appropriate monies are distributed to all of the relevant parties. They do not act for either seller or buyer and you can rest assured that the money is protected and dispersed correctly. The closing costs are similar in many ways to the items we pay in the UK Stamp duties, etc. Although the main cost is attributed to the mortgage loan.
It is prudent to allow up to 4.5% (four & a half per cent) of the total purchase price, to include disbursements (this is the maximum sum it should cost you). A cash purchase should reduce this sum to a sum ranging from 1.5% to 2%.
A breakdown of the estimated associated costs is provided by the lender once details of the property chosen is known.
Taxation- Property taxes normally amount to approx. 1.5% (one & a half per cent) of the property's value, which is commonly paid on a monthly basis along with the mortgage payments.
- A sales tax is charged on all rental income and currently is 12%. It is the equivalent of the UK's VAT. A tax treaty between the UK and USA means that double income tax is avoided although all rental income must be declared.
- As a guide; all relevant expenses including the mortgage interest can be off set against any due tax from rental income and once all of the appropriate expenses are taken into account, in certain cases often the tax is wiped out completely; this of course will depend entirely on the individual personal circumstances.
It is recommended that ALL buyers obtain expert professional advice regarding taxation and Countryside International/ Florida Countryside personnel are happy to make introductions to an appropriate qualified accountant/taxation lawyer upon request.
Interested to know more? Contact Countryside International on UK number 08456 444 747 or visit www.countrysideinternational.com
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With exchange rates greatly favouring the Euro & sterling against the U.S. dollar, US real estate opportunities for European & UK savvy buyers are seemingly boundless; however the “window of opportunity” that provides the best conditions to enable the lowest possible purchase price to be obtained may just be starting to close, although of course only time will reveal if this is the case or not !
