How investors can beat the overseas mortgage freeze

It is now a buyer's market for property investors in Spain and Portugal and the US yet Investors are increasingly being frozen out of mortgages overseas despite it being possible to secure rates at 0.5% above Euribor, report IPS.

Related topics:  Overseas
Warren Lewis
22nd February 2012
Overseas
There has never been a better time to invest in holiday properties in countries like Spain and Portugal, prices are up to 60% below their peak in 2007 and you can now buy luxury apartment for less than €200 a month.

However there is just one problem - banks in many of the most popular overseas investment locations are making it virtually impossible to lend on the open market.

Jon Ainge Director of IPS comments:

"The overseas mortgage market has changed dramatically since 2008 and not for the better. If we look at some of the extremes we have seen in the past 5 years -  for example in 2007 - you could readily achieve 80% mortgages in the US at reasonable rates of about 4% and in some cases achieve interest only.

"By 2010 you could hardly finance any property in the US and it is only now that 50% LTV mortgages products are available for overseas buyers. When the crisis first hit it was particularly difficult as banks did not have the policies in place for loans to overseas buyers as the rules changed on a daily basis.

"At least now we know that if you require new lending it will almost certainly be difficult, however if the bank currently finance a development they are keen to deleverage themselves of the current risk they hold - this is where you will find that most loans are now being issued in countries such as Spain and Portugal."

According to ipsbmv.com distressed housing stock is still the best purchase investors can make. The company highlights that banks in both Spain and Portugal need to deleverage themselves from developer debt, so where a bank needs to recycle money it is no coincidence that loans can be approved more easily.

Buyers are purchasing property at fantastic prices compared to four years ago as a result. Currently if an investor is in a position to purchasing at 25% - 50% below market value and secure a mortgage from developers at 0.5% over Euribor then this is a great opportunity to take advantage of yields approaching 8% in the best coastal locations of Spain and Portugal.
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