When we talk about real estate financing, we usually think of the mortgage. However, in the case of the acquisition of residences abroad, consumer credit is sometimes just as interesting, if not more so. Our explanations through a concrete example.
Mortgage: the solution at high costs
When it comes to financing the purchase or construction of a home, one immediately thinks of the mortgage and not the consumer loan. Indeed, if only two reasons had to be cited:
- The amounts granted for private loans are generally not enough to cover the cost of real estate. In particular, it is rare to find a property in Switzerland worth less than 300,000 dollars. As a reminder, the maximum amount of a consumer credit will depend on the situation of the applicant, and will rarely exceed 100,000 dollars.
- The interest rate charged on a mortgage remains more advantageous and therefore generates a lower monthly cost.
The case of residences abroad
If the question “credit or mortgage” does not arise in principle for Switzerland, the situation may change when it comes to acquiring property abroad. So in countries like Portugal:
- The price of real estate is significantly lower than in Switzerland, so that consumer credit can sometimes be enough to finance the acquisition.
- Added to this is the fact that a mortgage is not always feasible abroad.
- If the mortgage is feasible, the procedures are often more complex and longer than in the case of the private loan.
- When buying a second home, it is not possible to finance equity with a 2nd or 3rd pillar a. The necessary personal contribution is then more difficult.
How to know if the credit is interesting for a real estate purchase?
Everything will depend on the country where the second home is located, the possible feasibility of a mortgage, and the amount involved. For amounts less than 100,000 dollars, it is considered that a consumer loan can be a viable alternative to the mortgage, sometimes even more advantageous. The best, in case of doubt, remains to call a specialist. For example, Hyper Finance offers both mortgage and credit solutions for any acquisition abroad, and compares the solutions for its customers. An expert will thus benefit from an opinion, or even a proposal without obligation.
A client wants to buy a small holiday home in Portugal, not far from Lisbon. The total value of the property is estimated at 60,000 dollars. The client has no equity. As it is a secondary residence, he cannot use his LPP or 3a capital to finance this equity, making the mortgage de facto impossible.
With a personal loan, he can get 60,000 dollars with a planned repayment over 7 years. With a rate of 6.9%, the monthly amount of the reimbursement is only 896 dollars. In addition, the list of documents and supporting documents to be provided remains very modest, and the decision can be made within 24 hours once the file is completed.