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BUYERS GUIDE
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How To Buy
Your Florida Property Purchase
Mortgage finance for your property
If you wish to purchase a Florida property with a mortgage, then subject to qualification, it is a relatively simple matter.
- You should be able to obtain up to 80% of the purchase price or valuation (appraisal), whichever is the lower.
- Fixed and/or variable rate loans of up to 30 years are normally available, regardless of age.
You will need to provide the lender with a list of certain documentation, as proof of your ability to repay the loan on your property. Normally the best available rates are readily obtained by supplying the maximum documentation. We recommend that you take the documents with you during your visit, subject to you not having already supplied the information during pre-qualification by a suitable lender.
The recommended documents are as follows:
Employed
A minimum of 2 years Inland Revenue P60s, plus copies of tax returns, if available and your most recent pay slips, covering the prior 30 days.
Self-Employed
A minimum of 2 years accounts, plus a letter from you accountant confirming Inland Revenue approval.
Employed & Self Employed
a) A minimum of 3 months Bank and/or Building Society and/or Stocks and Share statements. The statements should provide evidence of the whereabouts of your intended down payment (deposit) on your property.
b) Proof of title deeds to any unencumbered asset.
c) A copy of a full years-Council tax (rates) demand on your UK home. This is to prove that your permanent home is in the UK.
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Loan finance for your property
Non-status loans are available to buy property, although documentation similar to the above is still required. As the loan is based on the strength of the asset, no income verification is needed.
- The maximum percentage of these loans can vary from time to time although normally they are available up to 75% of the purchase price, subject to satisfactory appraisal.
- US lenders offer a variety of flexible mortgages, which can be tailored to particular needs. Interest rates vary just like they do elsewhere in the world. You can choose between a variable and a fixed loan, although the most popular with overseas buyers is a loan that is capped on an annual basis, in intervals over the life of the loan. These are more commonly known as ARMS and they are normally available with capping options at 1, 3, 5 or 7 years.
The purpose of the capping is to control the interest rate within a specified percentage range providing peace of mind when on a budget. The fixed rate loans can normally be repaid over 15, 20 or 30 year terms.
- U.S. loans normally cover the repayment of principal property taxes, interest and hazard insurance. Unlike in the U.K. most do not carry any pre-payment penalties. Should you decide to make additional payments each year, you can reduce your term substantially and this is well worth consideration!
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Let us help make your property purchase run smoothly
We have full knowledge of several lenders and brokers with expert knowledge in buying Florida property, and are happy to make an introduction to ensure you obtain the best possible advice. Please let us know at an early date, if you wish to proceed on a pre-qualification basis prior to your Florida visit.
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Mortgage Approval
For those submitting the mortgage application after the purchase agreement, normally the lenders acceptance confirmation is forthcoming within 4 to 8 weeks from the time of application submission. Should you opt to obtain pre-qualification, subject to your application being submitted in good time, you should receive a conditional offer, prior to your Florida visit.
When the acceptance notice is received, you are required to sign the authority and if you have not already done so, you then need to forward the 'down payment' (10% deposit) balance. This stage is the US equivalent of the UK's 'exchange of contracts'. The pre-payment and closing costs together with the deposit balance are payable at closing.
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Purchasing your property with cash
If you pay by cash, there is no requirement for pre-payments and the closing costs are reduced. However in the case of a new property purchase, you should be aware that on occasions you may be required to make stage payments during the course of construction.
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Closing (Completion)
When a new property is being built in Florida and prior to closing, an orientation (walk thru) with the builder takes place. This involves either you or your representative (we provide this free service for our clients) checking the property to ensure entire buyer satisfaction. (snagging list).
The 'Title Company' conveys the title (a title insurance policy is issued) & then ensures that the appropriate monies are distributed to all of the relevant parties. They do not act for either seller or buyer and you can rest assured that the money is protected and will be dispersed correctly. The closing costs are similar in many ways to the items that we pay in the UK Stamp duties, etc. Although the main cost is attributed to the mortgage loan.
It will be prudent to allow up to 4.5% (four & a half per cent) of the total purchase price, to include disbursements (this is the maximum sum it should cost you). A cash purchase should reduce this sum to around 2%.
A breakdown of the associated costs can be provided; once we know which property you have chosen.
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Taxation
- The property taxes on your home normally amount to approx. 1.5% (one & a half per cent) of the property's value and this is commonly paid on a monthly basis along with your mortgage payments.
- A sales tax must be charged on all rental income and this is currently 12%. It is the equivalent of the UK's VAT. The tax treaty between the UK and USA means that double income tax is avoided, although all rental income must be declared.
- As a guide, all relevant expenses including the mortgage interest, can be off set against any due tax from rental income and it is not uncommon for an ultimate payment to be minimal, once all of the appropriate expenses are taken into account. In some cases it may even be wiped out completely, although it will all depend entirely on the individual personal circumstances.
We recommend that you obtain expert professional advice in this field and we are happy to place you in touch with a qualified accountant/taxation lawyer upon request. They can then deal with your personal affairs in the best possible manner.
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Renting Your Florida Property
If you wish to rent your home during absence it is fairly easy to do so. There are many letting companies in Florida and the highest number are in Orlando, due to the considerable demand. Please refer to out Buyer's Guide section 'Before You Buy' for further information about renting your property.
'Florida Countryside', being neither affiliated or representing any particular letting company, is most pleased to pass on our unbiased knowledge of management companies to our clients.
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