Foreign-Real-Estate Mortgage Loan Program
Did you know that foreign nationals are able to purchase real estate in the United States for personal use by obtaining a Foreign-Real-Estate Mortgage Loan Program? They can do so in their personal names or under an eligible corporation or LLC3.
Purchase demand continues to be strong domestically, as new homebuyers are looking for that forever dream home.
According to the National Association of Realtors, younger generations, including Millennials and Generation Y, make up 38% of the market and are the largest share of buyers seeking to purchase a home1.
However domestic buyers are not the only ones who can benefit from buying real estate within the U.S. According to the Miami Association of Realtors, foreign buying activity also remains strong2.
So why would a foreign national choose to buy real estate in the U.S.? There are several factors at play, but some that are especially prevalent are pandemic or government change which could cause havoc on economies, both domestically and internationally. In many ways, the U.S. housing market may appear safer than other alternatives. By utilizing a Foreign Real Estate Mortgage, you can purchase a second home or an investment property in the USA.
Jorge L. Guerra Jr. mentions that “South Florida’s foreign home buyer market share remains more than double the state figure and eight times larger than the U.S2.”
New Century Mortgage has been integral with providing mortgage financing to foreign nationals looking to purchase domestically, offering a wide variety of solutions that borrowers can choose from.
We will review some of the particulars in how foreign nationals can complete a real estate purchase domestically, as well as review a few loan programs that you may want to consider when purchasing real estate within the United States.
Legislative and Taxation Considerations
Purchasing real estate in the United States can be very lucrative, however foreign nationals should understand some of the legal reporting requirements and tax implications involved in any U.S. real estate purchase.
International Investment and Trade in Services Survey Act
Foreign nationals are certainly allowed to purchase large parcels of real estate within the United States. The catch, however, is that under the International Investment and Trade in Services Survey Act (IITSSA), the purchase must be reported to the U.S. Department of Commerce3.
Minimally, names and addresses of both parties (buyers and sellers), as well as the financial information related to the property, must be reported3. It’s also important to note that property consisting of 200 acres or more, as well as real property with a purchase price over $1million, may require additional reporting information3.
Foreign Investment in Real Property Tax Act
While it is a little-known piece of legislation, the Foreign Investment in Real Property Tax Act (FIRPTA) was actually established back in 19804. However, this tax law recently gained traction in 2016 as new regulations surrounded it.
Essentially, FIRPTA was created to capture taxes on gains resulting from the sale of U.S. real property interest, owned directly or indirectly by foreign nationals or entities4. Any profits from the sale of U.S. property may be subject to additional withholding4.
It’s important to discuss the tax implications for a sale with a tax advisor. There could be strategies to reduce or possibly eliminate FIRPTA withholding.
Investors – Foreign-Real-Estate Mortgage Loan Program
There are several flexible Foreign Real Estate Program is available to foreign real estate investors. Keep in mind South Florida secures about 10% of all U.S. international home sales2.
New Century Mortgage can offer foreign nationals options to finance second homes, vacation homes, as well as investment properties.
For certain transactions, qualified borrowers can finance up to or even over a million dollars, with liberal repayment terms. What’s even better is there are typically no lengthy credit verification requirements. In some cases, you may not even be restricted to have already owned multiple other financed properties.
Buyers can finance eligible 1-4 unit homes, with consideration for condominiums and planned urban developments.
Looking to refinance? Cash out refinance options may also be available. For certain transactions, corporations and limited liability companies may also be permissible.
Want to learn more about foreign real estate investor loan programs? New Century Financial Mortgage may be able to answer all your financing related questions for the Foreign Real Estate Program. In other words, we may be able to help you purchase a second home or investment property in Florida. We have various lenders to choose from because we are brokers.
Give us a call at 850-775-0135 or email us at firstname.lastname@example.org
1 2020 Generational Trends Report (Rep.). (2020, March 05). Retrieved July 2, 2020, from National Association of Realtors website: https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-report-03-05-2020.pdf
2 Gerrity, M. (2020, June 11). Miami International Home Sales Totaled $6.9 Billion in 2019. Retrieved July 2, 2020, fromhttps://www.worldpropertyjournal.com/real-estate-news/united-states/miami-beach/miami-real-estate-news-miami-association-of-realtors-miami-home-sales-data-for-2019-miami-beach-real-estate-report-foreign-buyer-data-for-2019-11982.php
3 Jurado, R. (2015, June 15). What Foreign Nationals Need to Know About Buying Florida Real Estate. Retrieved July 2, 2020, from https://jflawfirm.com/what-foreign-nationals-need-to-know-about-buying-florida-real-estate/
4 Contributor, C. (2019, December 09). What You Need to Know About FIRPTA, The Foreign Investment in Real Property Tax Act. Retrieved July 2, 2020, from https://www.tax.gov/Individual/education/FIRPTA