USA Property Financial Considerations

USA Mortgages

Fortunately, the US mortgage industry is reasonably advanced offering a range of different options for foreign purchasers. However, any mortgage obtained in the USA will be in US dollars, which can cause budgeting difficulties for those whose income is in sterling or some other currency.

Financial Considerations

Get a Free Quote Additional Financial Considerations for US Property Investment
As with any property purchase, it is not simply about raising the necessary capital to buy the property. There are additional initial costs as well as ongoing costs that need to be taken into consideration. These additional financial obligations may make the difference between a viable investment and a drain on resources.

Insurance
Any property in the US should be insured whether it is being used as a long-term let, a holiday let or as a second home for occasional use by the owner. Insurance is available on the property itself as well as on the contents. Generally, it is more cost-effective to obtain both insurances from the same provider, but this may not be possible, particularly if you have specialist requirements such as being in a flood zone.

Purchase Points
.Purchase points・ is a concept that exists only in the USA and therefore requires additional research and understanding by those aiming to enter the US property market. A .purchase point・ or a .buy-down・ as it is sometimes called is an upfront fee paid to the lender at the point of obtaining the mortgage, or on closing.

The idea is that each purchase point is 1 percent of the purchase price and the more points purchased, the less the interest rate on the mortgage for the length of the term. For example, with a US $200,000 mortgage, each point is valued at $2,000. If a deposit of $30,000 is available, this will give the buyer 15 purchase points.

The decision as to how many purchase points should be bought will depend on a number of factors including how long you intend to own the property and how much you can afford to pay on a monthly basis and, of course, how much up-front cash you have available.

Fees
When arranging a mortgage, there are always likely to be arrangement fees such as paying for the survey, ensuring that the title of the land is clean, as well as any other checks that the lender has to run on your own credit rating.

Different lenders levy different fees and any borrower should shop around to make sure that they obtain the best possible deal for their individual needs. As a general rule, those lenders that offer higher closing fees will also have lower interest rates, so look at the costs over a 5- or 10-year period. As a guideline, 2 to 3 percent should be budgeted for closing fees on any property purchase.

Summary
Bullet Point In addition to the capital purchase price, an investor should also budget for additional fees of around 2 to 3 percent of the property value;
Bullet Point insurance is a regular expense which must be met on a monthly basis and will vary markedly from property to property;
Bullet Point purchase points are available at 1 percent of the asking price and will reduce the overall interest rate.

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Typical Interest Payments

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2.89%

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2.89%

Discounted Rate

2.99%

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2.99%

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3%

 

 

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