LovetheBeach
4/5/2017 14:09 EST
deangolden, in most parts of the world, people do indeed "just save up the money". In Latin America and some parts of Europe I'm familiar with, young couples either live with one set of parents until they can afford to rent and furnish a house or apartment, and then if they have jobs that pay well enough, they save until they can buy a lot or piece of land, then wait and save until they can afford to put in the foundation. They continue to save until they have enough to put in the rough plumbing and electrical. Then save some more until they can build some walls, and so on. Houses are built in stages as the money is accumulated. Sometimes family members help out with gifts of money and labor. It is very common in many parts of Central and South America for it to take 10-15 years for a complete build-out of a small home. The homeowners will often move in when the first floor is complete and then continue to build as money is available. In some parts of South America, the home may not be "finished" for many years because the full amount of property tax is not due until the home is "finished". You will often see homes that are only painted on the front or sides, rebar sticking up out of the roof, etc. Also, as the homeowners' parents become elderly, they frequently move in with the grown children and grandchildren, so there's always the possibility of adding another story to the house. In some South American countries the only way any citizen can get a mortgage is to have a personal relationship with an officer in the bank, then the loan may not be for more than 50% LTV, with very high interest rates, and all due and payable in 5 or 10 years. So, short answer, yes, the only way to buy a home in many countries of the world is to pay cash in full. That's one reason many of my friends in South America think Americans and Canadians are all really wealthy -- we "own" a home. They just assume we have the cash to hand over to buy and move in. They don't know that most of our homes are actually owned by the banks and mortgage companies.... And to the last part of your question, most U.S. lenders will not lend anything on a foreign property as there is no way for them to foreclose if you quit paying the loan. You may find a U.S. lender who will lend, requiring collateral on another piece of real estate you own in the U.S. In some cases, you can use a 401K or a Self-Directed IRA to purchase real estate in a foreign country, but you may not be able to use it as your own residence, i.e., it must be an investment/rental property. Consult with a tax professional who is familiar with foreign property ownership and Self-Directed IRAs and 401Ks.
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