Raising money for your property purchase

While many people choose to raise the funds necessary to buy property overseas is by mortgaging the property that they own in their own country, a good many others prefer to borrow in the same country that they are buying the property in. There are advantages and disadvantages to each approach. In the Caribbean, mortgage lenders may demand anything up to 50% of the value of the house as a deposit, and lending terms tend to be shorter with repayments tending to be higher than they would be with a longer loan period. However, on average, these mortgages tend to work out a good bit cheaper over the term of the loan than the UK or US equivalent, and offer the buyer more protection from fluctuations in the global financial markets, making them more attractive to those investors who can afford to take them out. However, financial gains can also be made with the other approach depending on whether you get your timing right. For instance, if you have paid in full for a property in your own country, which has since gone up in value, mortgaging the house will release the equity now locked inside your property investment without the requiring you to sell in order to benefit from the rise in house prices.

Using the proceeds from a tax-free investment scheme, such as a self-invested personal pension (SIPP for short), or an Individual Savings Account (ISAs) would seem to work out well as a funding option from a tax avoidance point of view. Although Caribbean lenders in the main tend not to recognise foreign investments as a form of collateral, you may be able to find a way around this in some instances if you are able to prove your financial security in other ways.

When buying abroad, it is important to be fully aware of any tax treaties that may be in place between your country and the country you intend to buy in. This can be especially crucial if you are planning to buy a property to rent out, as if there is no treaty in place, chances are that you’ll have to pay two sets of taxes on all money earned from the property, one in your country of origin and one in the country where the property is. This is less of a problem in the Dominican Republic, where there are virtually no taxes on capital gains, but, depending on your local tax regimes, you may have to pay tax in your own country, if you are still resident there, on any money earned abroad. This is one of the many reasons why taking up permanent residency in the Dominican Republic, if you can afford it, can turn out to be a very good move from a financial point of view.