Can I use capital on my property to buy a second home in Germany?

Posted on 6 March 2008

We have seen a property for sale in Germany, which we would use for holidays and as a long term investment. We have had our offer accepted and could raise a mortgage as our property is worth £190,000, with £4,000 debt left on it. I want to know if we can use capital in our property only, instead of tying up my income, in any way. I am 44. We don't want to sell to raise the monies either. Please can you help in any way.

Thank you.

A residential mortgage (which you would have on your own home if you raised capital out of it) always ties up your income; you are, after all, expected to pay the mortgage from your income.

The only way to avoid this is to get a buy-to-let, on which the rent is expected to pay the mortgage.  You might be able to do this but the mortgage would have to be secured against the relevant property - i.e. the one in Germany.  Some advice, and the contact details for international brokers are in many of my letters here: http://www.charcol.co.uk/knowledge-resources/ask-katie/category/buying-abroad/

I would imagine it is easier to raise a residential mortgage from your property here, and ensure that you get a constant rental stream from the property abroad to make up for it.

One alternative, if you are really stuck for money, is to raise more capital than you need: perhaps enough to cover the mortgage payments for a few years.  This is very high risk however, and can be short-sighted, unless you have a plan for how to replenish your equity later, if property values don't increase.

Category: Buying abroad

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