Americans buying a home in Europe: 3 top tips
From the Alps to the Algarve, Torremolinos to Tuscany, Americans are crossing the Atlantic to find a European base. If you're one of them, my top tips will help you do this successfully.
Trump’s re-election, remote working, the strong dollar, and new direct flights across the Atlantic: a few reasons why more Americans are hunting for a home in Europe than ever – especially in France, Portugal, Italy and Spain.
Whether you’re motivated by politics, property prices, or the promise of a better lifestyle, it’s not a decision to be made on a whim. Buying a property in Europe exposes you to a different legal system, currency, and probably another language. Plus, living in a country is not the same as spending a blissful holiday there.
These three tips will help you navigate unavoidable factors that can easily complicate the process of buying property in and moving to Europe as a US citizen.
1. Applying for a visa
Before you can think about living la dolce vita (the sweet life) in Italy or embracing ‘art de vivre’ (the art of living) in France, you must apply for a visa.
As an American, you are considered a third-party national by the European Union (EU), meaning you need a visa if you plan to spend more than 90 days out of every chunk of 180 in an EU country. Let’s explore popular visa options for countries US buyers typically love:
France
The French long-stay visa – la Visa Long Séjour valant Titre de Séjour (VLS-TS) – is the most common option when buying in France. The type of VLS-TS you apply for is determined by your employment status and financial position. For instance, retirees must apply for the Visa de Long Séjour valant Titre de Séjour – visiteur. This permits them to reside in France for between four months and one year, primarily for non-professional purposes.
If you plan on semi-retiring to France, the long-stay work visa is an option. This permits you to continue working while there or find a job after you move. You can’t apply for one more than three months in advance, and it’s only valid for up to a year. Therefore, if you’re considering moving to France permanently, you should eventually apply for residency.
The talent passport (passeport talent) is a multi-year residence permit valid for up to four years, designed for highly skilled individuals contributing to France's economic output.
Portugal
If you plan to visit Portugal for more than 90 days within any 180-day period, you must apply for a temporary stay visa. This is valid for up to a year and permits unlimited entries into the country. You can use the visa for things like work and health.
If you want to move to Portugal permanently, you will initially need to apply for a residency visa. This is valid for four months and permits you to enter the country twice. During this settling-in period, you must book an appointment with the Portuguese Immigration and Border Service (SEF) to apply for a residency permit. Qualification categories include work, family reunification, and fixed residency.
The D7 visa – also called the passive income visa – allows non-EU nationals to relocate to Portugal if they have the funds to support themselves while there. This is an option for those with an income, making it popular with retirees and entrepreneurs. It also permits holders to travel freely within the EU.
Italy
If you plan on staying in Italy for more than 90 days within any 180-day period, you must apply for a long-stay national visa (visa nazionale) before travelling. Typical purposes include work, self-employment, study, or family reunification. Once granted, you must apply for a residence permit (permesso di soggiorno) within eight working days of entering the country. This is valid for up to two years, depending on the reason for your stay, and must be renewed at least 60 days before it expires.
Three visas are commonly applied for by US citizens looking to obtain permanent residency in Italy:
· Elective residence visa: Only valid for applicants planning to move to Italy permanently who won’t need to work.
· Work visa: If you have a job offer from an Italian employer, you can apply for a work visa. You can apply for a self-employment visa under certain circumstances.
· Investor visa: Also known as the golden visa, this offers residency through significant investments in the country's economy.
Spain
Check with the Spanish consulate in the UK regarding what type of visa and/or work permit you may need. Common visa options if you plan to stay in Spain beyond the 90-day limit for visitors and tourists include the non-lucrative visa and the work and residence visa.
You can apply for a non-lucrative visa if the property you’re purchasing is worth less than €500,000 and you plan to live but not work in Spain – making it a popular option with retirees. The visa is valid for one year and can be renewed every two years until you reach the five-year quota for permanent residency. You can also apply for a work visa after one year.
Eligibility requirements include:
· Proof that you’ve purchased – or rented – somewhere to live.
· Proof that you have the funds to support yourself.
· Proof you have sufficient income to support yourself.
· Proof you have sufficient savings to support yourself.
If you plan on living and working in Spain, you must obtain a work and residence visa. You are required to have a job offer before moving, then your employer can apply on your behalf – you can’t apply. If you set up a company in Spain and become self-employed, you must apply yourself.
Golden visas
This popular visa option – still available in some form in Portugal, Greece, Cyprus, Italy and Malta – offers residency permits in return for investment into a country. This typically includes the purchase of residential property.
2. How to pay for your property
There are fundamental similarities to buying a home in the US and Europe, but there are also unique challenges – especially when it comes to financing the purchase.
Americans buying abroad often choose to finance the transaction with cash outright. For example, most are cash buyers in France because getting a mortgage there is not always easy for foreigners. If you have the funds available, a cash purchase could give you an edge over other buyers if the owner wants to sell quickly and might help you negotiate a better price.
If you can’t finance your property purchase this way or don’t want to, consider your mortgage options. Generally, it's challenging for Americans to obtain a mortgage directly from a US lender to buy property in Europe. Most US banks don't offer mortgages secured against properties located outside the country.
When assessing your options with overseas lenders, evaluate how often you may be exposed to interest rate changes. Mortgage structures in other countries are more likely to have variable rates or short terms if they are fixed-rate loans. The typically American 30-year fixed rate mortgage or similar is a rarity overseas.
Speak to an estate agent, independent financial advisor, and lender when assessing your overseas finance options. Don’t forget to find out how much you will have to put down as a deposit. Also, consider how you will cover the monthly repayments and what you would do in an emergency, such as unemployment or illness.
3. Don’t overlook exchange rates
With so much to consider when buying property in Europe, the potential impact of exchange rate fluctuations is often overlooked. Buyers wouldn’t be so reckless if they understood that the price of their property is changing by the minute under their influence. As a ‘live’ market, the cost of purchasing euros in the morning will be different by the afternoon. Over the course of an overseas property purchase, which can take several months, that movement can be dramatic.
Suppose you agreed to buy a €200,000 home in Spain when the dollar was 0.97 against the euro – at that rate, it would have cost you just over $206,000. After waiting for the legal elements of the purchase to take place, you’re finally ready to complete four months later. But in that time, the dollar has plunged to 0.91, increasing the cost of the same property to over $219,700. Now you would have to find another $13,700. If you couldn’t come up with it, you might have lost the property and your deposit.
This currency market volatility is perfectly normal during the buying process; in fact, it could be even worse. Be aware that when you’re offer is accepted, you’re agreeing the price in euros, but the price of your property will constantly fluctuate in dollars – unless you shield it from currency market volatility by locking in your rate with a Forward Contract.
To do this, contact a currency specialist. If you did this early in the buying process for that property in Spain, you could lock in the current 0.97 USD/EUR rate and secure the price at $206,000 – no matter what happens in the currency market between your offer being accepted and completing.