To purchase a second residence abroad, you can obtain financing both in Belgium and in the host country. This article will explain more about borrowing for a second residence abroad.
Borrowing from a Belgian bank
With your current bank, you can obtain financing via a home loan. Specifically, you then (re)take out a mortgage on property in Belgium, for example your already paid-off family home. In other words: to finance the foreign property, you establish a mortgage on your Belgian property.
Bullet loans are also possible. With a bullet credit, you only pay the periodic interest. Only when the loan matures do you pay off the capital in one lump sum.
Typically, Belgian banks allow you to borrow up to 80% of the foreign investment. Importantly, you are investing in an existing property. Often banks are reluctant to finance a purchase on plan or the purchase of a building plot. However, this depends on your case: there are always exceptions. Finally, sufficient repayment capacity is also necessary.
Belgian banks request proof of purchase before making the loan available. This is usually a draft notarised deed of purchase. However, notaries in Spain and Portugal finalise the draft deed only a few days before your appointment, so you may not have enough time to transfer the funds. Therefore, it is important to let us know in advance that you are going to borrow, so that we can provide you with a draft in good time
Note: possibly, when buying on plan, your bank will also request planning permission. Not all projects have an approved permit at the initial stage.
Borrowing from a Spanish bank
Borrowing for a second residence can also be done through a local bank. Financing is then done through a mortgage on the second residence. The cost of a mortgage can vary greatly from one bank to another, but as a rule, they may only charge appraisal fees.
To borrow in Spain, as a family you usually need a minimum taxable income of 48,000 euros per year. And you can borrow for a term of up to 20 years (with age 75 as the limit).
Finally, you can generally borrow up to 70% of the purchase price (excluding fees). Allow for around 12.5 - 14% of additional costs.
The disadvantage of a Spanish or Portuguese mortgage is that the interest rates are higher than in Belgium.
Besides a conventional mortgage, there are other options for financing a second residence. For example, Belgian banks also offer credit via an advance on securities. Your investment portfolio is then the collateral of the loan. In turn, international mortgage loans are available for luxury properties.
Are there tax advantages to borrowing a second residence?
There are indeed tax advantages. On the one hand, you can claim the interest deduction. On the other hand, you can enter capital repayments into the tax basket for long-term savings. However, from 2024 onwards, the benefit of the long-term savings tax basket will expire.