Using your savings

tropical houseA good way to get your dream property abroad is to save up the money before hand so that you can buy the property without the need for additional financing. This gives you peace of mind and is the ideal solution if you want to retire in your new property. It allows you to feel financially safe when you have retired as you do not have any rent or loan payments to pay.

It is a very good idea to try to save as much money as possible before you move down to the tropics.  This does however not mean that you should take unnecessary risks. Slow and steady wins the race.  Always invest your money in low risk investment such as blue chip dividend stock.  This might not give you the same return as some other instruments but you do not risk loosing all your money.  Never invest the money you save for a dream house in high risk instruments such as binary options or CFD:s.  Do not believe the binary brokers hyped ads. Most people who invest in binary options end up loosing money.

Benefits of buying a house without a loan

Without any rent or loan payments it is often possible to live well even on a small pension. If you choose a cheap country such as Nicaragua, the Philippines or Thailand you can live on only a couple hundred dollars a month.

If you want to live in a more expensive area such as Spain you are going to need more money. But since you are living without having to pay any rent you can often survive in these areas for as little as 500 a month if you avoid unnecessary expenses. You are not going to live like a king but you will have enough for groceries, wine and lives basics.

How much money should I save if I want to retire abroad?

I recommend trying to put away at least $250 a month if you want to save enough money to be able to buy a house abroad. 500 will give you a lot more options. The numbers I give above is based on the assumption that you want to buy a property to retire in 20 years. If you have a longer or short time frame you will have to adjust your plans accordingly.

Is paying cash better than borrowing money to buy a property abroad?

No. Whether or not you should use your savings or borrow money depends on your situation. If you are close to your retirement and want a safe retirement then you should always choose to use your savings (if you have them). This way you are set. You do not have to worry about your economy.

cashA stock market crash or recession will not effect you. You have your home already paid and don’t have to worry about being able to make payments or that your security is loosing in value. You will be in a safe position to take advantage of the downturn in the market.

If you are young and still a few years away from your retirement. (at least 5 years.) It can be better to use your saved money to invest in the stock market and then use your stock as security for a loan. Some brokers allow you to borrow money at very favorable rates. They often allow you to do whatever you want with the money.

This way you can earn a return from you investments while still being able to buy the property you want. This is a good idea as long as you can earn a return on your investments that is higher than the interest rate you pay on the loan. This is usually a safe assumption with today’s low interest rates.

How to transfer the money

Always leave your money in your native country while you are looking for a property abroad. You should only transfer the money when you have a signed contract written by a reputable lawyer. If you are buying the property from another expat (very common) it is likely that you will be requested to transfer the money to a country other than that in which you bought they property in. It is always best to transfer the money using a wire transfer. Escrow is not necessary if you already have an contract that specifies the account the money is meant to be sent to.