At home abroad

With the pound strong and prices low, it may be the right time to buy a retreat on the Continent, writes Harvey Jones

Your summer holiday is over, the tan has faded, you're back in rainy Britain. However, many Britons try to sustain their happy memories by buying a holiday home in Europe. Spain remains the most popular country for Britons to buy a summer or winter retreat. But France, Portugal, Italy and Greece are also popular.

There are several reasons why this may be a good time to buy on the Continent. With sterling strong against the euro your money will go further, and you could well pick up a dream home without breaking the bank.

Recent UK property price rises have not been repeated on the Continent, and with mortgage interest rates in Europe starting at 3.95 per cent, borrowing the money should be cheaper than for properties in Britain. You have several options for raising the capital, says Patrick Bunton, senior manager with London and Country mortgages. If you have cleared most of the mortgage on your UK home, you can raise money against the equity in this property through your current mortgage lender and use it to buy overseas.

Alternatively, a small number of UK-based lenders - these include the Abbey National, Barclays Bank, Norwich & Peterborough building society and the Woolwich - may allow you to use the overseas property as security on the loan.

You can also get your mortgage from a lender in the country where you are planning to buy. Independent brokers, such as Conti Financial Services or FPDSavills, can help you arrange financing.

Inevitably, there are complications when buying abroad - for example, different property and taxation laws, and of course the language problem.

You should brace yourself for the higher costs of buying a property abroad, says David Wells, European co-ordinator at Abbey National. Such costs can typically rise to between 12 per cent and 15 per cent of the value of the property, once VAT, notary fees, land registry charges and local taxes have all been taken into account. "Otherwise the process is not so different to buying at home," he says.

"When you have found a property you make a formal application and the lender arranges for the property to be valued. Finally, your lender can put you in touch with an English-speaking notary who will help you complete the transaction."

You should also take into account other costs such as renovation of the property and transport to it, home insurance and life cover for the loan, as well as your lender's valuation and loan arrangement fees.

Mr Wells says purchasers take longer to buy a property abroad than at home, typically one or two years as they shop around and test out the local market. Bureaucracy can also stretch things out.

If you are intending to rent your property out on a commercial basis, you should make that clear to your lender. "We are happy for borrowers to give informal short-term lets to family and friends, but are not keen on people doing longer-term rentals, for example, registering their property with a holiday home company," Mr Wells says.

The house-buying process will differ, depending on where you are buying and you should make yourself aware of local market conditions. France has shot up in popularity recently, with the Channel Tunnel cutting travel times to rural properties in northern France and beyond, and Eurostar tempting many to buy an apartment in Paris.

You can still pick up a cottage in Normandy needing some restoration for as little as pounds 25,000 but it may be difficult to sell on, as buying an isolated old house is more of a British than a French fantasy. Spend more and you can buy into a "hotspot" where homes are much in demand: a small studio flat on the trendy Ile de Re, close to La Rochelle and favoured by wealthy Parisians, will cost you at least pounds 40,000.

Abbey National, Barclays and Woolwich will grant mortgages on properties in France, often at interest rates lower than elsewhere in Europe. For example, Abbey National's rates start at 3.95 per cent, whereas in Italy they begin at 4.4 per cent and start at 7.5 per cent in Portugal and Spain.

Rates will differ according to the lender, the amount of deposit you can put towards the property, and the type of mortgage taken. Both fixed- and variable-rate mortgages are available, but you may need to have a larger deposit than in the UK.

Although prices in Spain and Portugal have recently risen, they still represent good value for money, since they still have to make up lost ground after a major slump in the early Nineties.

The Norwich & Peterborough BS, which lends from its Gibraltar office, says the typical British buyer in Spain is a thirty or fortysomething looking to spend pounds 70,000 on a townhouse by a communal swimming pool. A detached villa with its own pool will only set you back about pounds 110,000 - an affordable dream if you have paid off most of your UK mortgage.

If your property is part of a tourist development, find out what the annual fees are. And check whether a sea or countryside view could be obscured by future developments.

The key is to take good advice says Simon Conn at Conti Financial Services. "A lot of people don't take independent legal advice and run into problems. But some lenders are getting wary and insisting on contracts being signed by notaries."

WHO TO CONTACT

Lenders in the UK

Abbey National 0800 449090

Barclays Bank 0171-977 4357

Jyske Bank 0800 378415

Newcastle BS 0191-244 2442

Norwich &

Peterborough BS 01733 362636

Woolwich 0181-298 4400

Mortgage brokers

FPDSavills 0171-408 5520

London & Country 01225 408000

Conti 01273 772811