10 Things You Need to Know About Buying a Home Overseas

Are you looking to buy a home overseas? Do you still have some questions about buying property overseas? Are you still unfamiliar with the process of buying property overseas? Are you worried about not being able to get a loan? Do you have many, many more questions? In response to our readers' calls, we've made a brief summary of some of the questions that can be confusing before buying a home.

1. Can I buy property overseas with China CPF?
The Chinese CPF can only buy houses in China, not overseas, but some overseas countries have similar policy measures for housing protection, just called differently.
China's CPF system was first borrowed from Singapore's Central Provident Fund (CPF) system. Singapore established its central housing provident fund system in 1955 with a membership system. The CPF paid by members is a compulsory social security system that can provide various functions such as home purchase, retirement and medical care. Particular emphasis is placed on the role of housing security, with 80 percent of the Central Provident Fund being used to purchase housing and pay for various types of insurance.

In Korea, on the other hand, there is the National Housing Fund, which was established in 1981. It is a policy-based housing finance institution established by the State to provide policy loans and subsidies for the housing needs of low- and middle-income households and focuses on the role of the Central Provident Fund in housing security. Concessional home purchase loans for low-income and first-time homebuyers.

Typical in Europe is Germany, called the Housing Savings Bank, which is in the form of an offer (an offer is a mandatory stage in the conclusion of a contract. A contract cannot be formed without going through the stage of an offer, which, as an indication of contracting, can create a binding force on both the offeror and the offeree), makes the housing savings contract available to the market, to be purchased and used by those who need it. When people buy a home savings contract, they start saving and become savers, and when they buy a home later, they can get special Loans. It is known that about 40 to 50 percent of the money German residents borrow to buy and build a home comes from the Housing Savings Bank.

2. When buying a home overseas, do buyers have to be present to transact the transaction in person?
Buying a property overseas usually requires you to sign the contract in person to conduct the transaction locally. However, in Australia, if you really can't fly to Australia, you can choose to sign the contract with a photocopy signature or power of attorney.

Photocopies of signatures are simple and economical, but they carry certain risks. This is because not all sellers agree to exchange contracts via photocopies. In case the seller refuses to exchange photocopies, even if the buyer immediately mails the signed original contract, the time difference of a few working days is not enough. In this case, it is likely that the property will be put back on the market or sold to another buyer. Since the buyer and seller have not yet formally exchanged contracts, there is no direct legal relationship between them and the seller does not make a formal offer to the buyer.

A power of attorney can cover the risk of missing out on a good property due to the time it takes to get the contract signed in time for the agent. However, there are certain legal fees and Land Office registration fees involved in signing the power of attorney, which can cost around $500.

3. If I buy a house overseas, can I keep living there without any restrictions?
In most of the popular countries, unrestricted residence and immigration visas have a direct relationship with the purchase of the house itself is not common. If you want to buy a house can be unrestricted residence, you can choose some of the countries where you can buy a house can immigrate, currently buy a house can immigrate to Cyprus, Portugal, Spain, Greece, South Korea (Jeju Island), Latvia, Malta, Slovakia, Italy, Andorra, upgrade Nevis, St. Kitts, France (Reunion).

4. Do I need collateral for an overseas mortgage? Can assets in China be used as collateral for a loan?
Collateral is generally not required for buying a home loan overseas. In Australia, for example, if you are buying a house in Australia, the house itself is your collateral and no additional collateral is required. Also, if you have assets in your home country, this will help you apply for a loan a little more convincingly. Equity in your country is "sufficient but non-essential" to enable you to apply for a loan. In addition, if the buyer can come up with a down payment of 20% or more of the sale price of the property in one lump sum, the bank will have confidence in your ability to finance the property.

5. Can I get a loan to buy a house overseas if I have no income yet? Do international students need proof of income?
International students are allowed to buy a home, whether in their parents' name or their own. Proof of income is required no matter what capacity you take out the loan in. Although international students have no income or a low income, they can use their parents as guarantors to secure your loan with their income. For overseas people with the ability to earn a steady income, you can apply for a loan of up to 80% of the price of the property to purchase a property in Australia; however, for International students who do not yet have the ability to earn an income can only apply for a loan up to 60% of the property price in this environment of tightened bank credit.
In addition, if the loan ratio exceeds 80%, you will be required to show proof of your ability to make continuous deposits for more than 3 months. A deposit of more than 5% of the loan amount is sufficient. The maximum loan repayment period is 30 years.

Can international students buy a second home in Australia?

6. If an investor buys an overseas property, will he have to pay taxes on the rental income from the property?
The rental income generated from overseas property rentals is generally subject to the relevant taxes, but the percentage of taxes paid varies from country to country. In the United States, the minimum personal income tax on rentals is 10% and the maximum is 39.6%. In Australia, the minimum rental PIT is 32.5% and the maximum is 45%. In Canada, the minimum rental PIT is 15% and the maximum is 29%. In the United Kingdom, the minimum personal income tax is 10% and the maximum personal income tax is 50%.

7. Do foreigners need to pay capital gains tax (income tax) on the sale of overseas properties?
Foreigners who sell property overseas are basically required to pay capital gains tax (income tax), although the percentage of tax varies from country to country depending on the policy.

In California, for example, foreigners who sell U.S. real estate are subject to "capital gains tax," which is an income tax that is levied by the federal and state governments. The state government collects about a total of 25% income tax. For example, if a house is bought for $800,000 and sold for $1,000,000 and the seller makes $200,000, the $200,000 of that gain is subject to a 25% ($50,000) tax. $200,000 x 25% = $50,000. This tax rate is subject to "withholding". It is due to the IRS within 20 days of closing, along with the withholding money. This tax collection is usually handled by a performance bond broker. Sellers who fail to legally withhold this tax may face various penalties. When selling a property on their own, Americans will have certain tax exemptions if they meet certain conditions, for example, a couple can have $500,000 of tax exemption. There is a $250,000 tax exemption for singles. So to invest in real estate in the United States, in addition to finding a good agent or management company for yourself, you need to find a reliable accountant to do it for you. Avoid the hassle by keeping your own tax returns paid.

8. If I have purchased property overseas, do I have to pay for the maintenance of the house every year?
When you buy a property overseas, you will basically have to pay for the upkeep of your home, but the weight of each cost will vary.

In the United States, for example, you will have to pay four maintenance fees every year: property tax, home insurance, property taxes, and maintenance fees.

Property Taxes: Property taxes vary from state to state and region to region. In the U.S. California property taxes are generally around 1.25%. The government will do an assessment on each house and then calculate the property tax based on the assessed value. Many domestic non-professional investors have misunderstandings about property taxes, in fact, by 1%, that is, you pay 100 years before the price doubles. In fact after 100 years house prices have already risen at least 10 times and the property tax is simply negligible. At the same time in China there is no concept of property tax, but only 70 years of ownership. By spreading the land cost of the house over 70 years, the amount of money spent may be quite a bit higher than the US property taxes.

Home Insurance: when you buy a property in the US, you usually buy home insurance. For a $500,000 house, home insurance is about $300-$500/year. In California, earthquake insurance is a separate policy due to the high number of earthquakes. In other states, there may be some natural disasters such as tornadoes or flooding. If you want to get a loan, the bank must have insurance before they will lend to you.

HOAfee: If you buy a condominium or condominium, there is usually a HOAfee for the common expenses of the community such as landscaping, lawn mowing, sanitation, swimming pool, tennis courts, garbage and water fees. Some of the more upscale single house communities also have property management fees. Condos cost about $3,000 to $5,000 per year, and the older the condo, the higher the maintenance costs and so are the property fees.
Maintenance costs: such as killing mosquitoes, replacing the roof (the lifespan of the roof is usually 15-40 years), cutting the grass, and other maintenance costs.

9. If I change my mind about buying a house overseas, can I return the deposit?
The situation varies from country to country because of the different policies for buying a house.
In Korea, if you pay a deposit, it is not refundable.
In Australia and Canada, there is a special clause called the "contract cooling-off period", once the buyer finds that there are serious problems with the house, or cannot handle the loan, in the contractual cooling-off period can cancel the contract and return the deposit.

10. Is there any change in taxation if I buy a second home after buying one overseas? Do I need to pay any additional taxes?
Since each country has different policies for buying a home and paying taxes, the taxes paid on the purchase of a second home will vary.

In the United States, for example, the government allows the purchaser to pay taxes on the home that will be used as his primary residence (if the taxpayer owns two homes, he lives in one). The interest on the loan is subtracted from income (the relatively longer home is their primary residence). If the taxpayer wants to sell his or her home, the taxpayer is subject to federal capital gains tax. However, if the sale is of a primary residence and the head of household has resided in the residence for at least two years within the last five years, no capital gains tax is payable on the sale profit of less than $250,000 for individuals and $500,000 for couples.

Only primary residences are eligible for this benefit, other residences such as investment rental properties are subject to capital gains tax.