Many of us would love to buy a home in Greece but don’t have the cash to buy. Or rather, we think we don’t. The truth, however, is that for many potential buyers in Greece there are all sorts of ways to raise the money, some involving little sacrifice – simply using your assets better. Here are some of them.
Raising money from your UK home
Your main asset can work for you in all sorts of ways, and you won’t even have to sell it. That means you retain any capital growth in the UK market while you’re sunning yourself on a Greek beach!.
Equity release takes many forms, which is why it is essential to get good independent advice before doing anything. However, for homeowners aged over 55 with a property worth at least £70,000, it’s a real opportunity to enjoy life more without paying for it – at least not in your lifetime – by using the equity you have built up in your UK home.
It’s also a terrific way for retirees to buy a holiday home in Greece which their whole extended family can enjoy too, without losing the family home.
It only really applies to holiday homes, however, as you have to remain living in the UK property for at least six months of the year.
You can get this tax-free, as cash, without selling up or downsizing. Then you can use it as you wish, to buy a property, boat, investment or anything else. You do need to be a little careful in who you use for this – we would suggest you only use a provider governed by regulatory body the Equity Release Council. The benefit is that you should be able to continue owning your own homes, with the deeds in your own name and with the right to be there for life.
Renting out your UK home
There are two options here. If you need plenty of money to buy a home in Greece, but don’t wish to sell the family home, you could raise money on it via a buy-to-let mortgage. The fees are higher, and there will be restrictions, but you could potentially raise enough to buy in Greece. Then you have the option of moving back – albeit with a different mortgage, as you get older.
The second option is simply to take advantage of the huge differential in rental prices between the UK and Greece. According to Numbeo, rents in the UK are 154% higher than in Greece. If you can rent out your three bedroom home in the UK for the equivalent of €1,034 (Numbeo’s average) and rent one in Greece for under €450, that gives you a tidy sum to live on.
One serious cost to take out of that is a tax on renting out your UK home, however.
If you have a UK home but the kids have left, this is the most flexible way of raising money. You simple sell your home for the best price, move somewhere smaller and buy a property in Greece using the cash. This way saves any borrowing costs and may be able to live comfortably on the proceeds of any invested surplus, since the Greek cost of living is appreciably lower than British.
You also avoid the risk of stepping out of the UK property market should you ever wish to come back.
The downsides are that you lose the family home, and have to pay the costs of selling, such as agent’s fees.
If you downsize but stay owning a home in the UK and abroad, there will also be tax implications as the owner of a second home. You can be stung for high taxes on second homes and rental income, should you rent it out.
A Greek Mortgage
Greece did get burned in the financial crisis but it was the government that overspent, not the banks in particular, as in the USA and Spain. So it is possible to get a Greek mortgage. Typical loan-to-values are 70%, with a maximum term on 25 years. Your total liabilities will need to be less than 30% of your monthly net income.
Other ways of raising money
Holders of defined contribution pensions (although not holders of final salary schemes) can now use their pension “pot” as they like. They can withdraw 25% of the pot tax-free and leave the rest invested. Of course, you do need to be aware of scammers and always consult the Pensions Advisory Service before parting with any money.
Buying with family or friends
This is a great way to spread the wealth of a family – for example allowing the grandparents to leave a living legacy – as well as the burden of owning a property in Greece. (All the pool cleaning and olive picking, for example!).
The simplest option is to each pay a share. With a few siblings, aunts and cousins involved you could potentially own together for just a few thousand pounds each. And they might pay that amount for a couple of week’s holiday. Although the more people involved, the less you need to pay, the downside is that it could make for more complicated legal processes and ownership structures.
Property rental in Greece
You may have the savings to buy the house in Greece, but are worried about keeping up with expenses. Greek property taxes can be high, after all, and will be levied on all the usual costs too, such as utilities and maintenance. The most obvious way to defray those costs is to rent the property out for some of the time when you’re not using it.
Although, as stated, rents in Greece are lower than in the UK, in the holiday hotspots in August you can rent out a villa for thousands per week.
There are two vital questions to ask though:
Is it legal?
Greece, like all our favourite holiday home countries, has strict rules on short-term or holiday rentals. Rules may be in place to protect the local hotel trade, or simply the neighbours from noise and hassle. Overseas owners flout rules at their peril in Greece, where the authorities are on the lookout for overseas owners avoiding tax.
Restrictions might not be overt, it could just be that actually getting a licence is too problematic, with minimum requirements for health and safety, quality of the accommodation, guest registering procedures, etc
Will you really make a profit?
Buying property with a view to renting it out you have to work out if paying higher prices for the nicer properties and areas will make that up in higher income that property attracts.
Researching is relatively straightforward. You simply look up the many holiday rental websites, get a feel for occupancy levels and prices, then compare that with selling prices.
Researching costs is also easy, but do speak to your neighbours or the estate agent to ascertain the real costs.
Property management is usually your largest expense when renting out an overseas property, taking as much as 30% of your gross income if it includes marketing the property and meeting and greeting.