While at first glance, there appears to be enough similarities in terminology to make Foreign Nationals buying property in Florida think that the mortgage system will be quite easy to find their way round and similar to the process of buying a property in their home country.  Because the process seems so similar many assume that they can put that Foreign National Mortgage process to one side for the moment and concentrate on finding a great South Florida property at the right price.  The professionals at R & S Realty Group, Inc. can explain the differences in Foreign National Mortgages.

Foreign National Mortgages work differently when financing property in Florida

The one thing that every foreign national citizen buying in Florida must remember is to not make assumptions about how mortgages work in Florida. Many of the differences may be minor, but others might just make the difference between a successful purchase and non-productive purchase.  You should work with a spcecialist in order to secure a foreign national mortgage to avoid the potential for disaster.  R & S Realty Group, Inc. can help you avoid the pitfalls and direct you in your search for a great South Florida home and the right Foreign National Mortgage.

The best way to guarantee the success of your Florida property purchase is to gather as as much factual information as possible, and get relevant advice from the right people with your best interest in mind and who work with foreign national mortgages on a regular basis.  The professionals here at R & S Realty Group, Inc. specialize in finding great homes for foreign nationals and can recommend a professional mortgage broker for your needs.

Mortgage Types for Foreign National Investors

Many of the popular types of mortgages available to foreign nationals buying in Florida will generally be familiar to buyers in their home countries.  Particularly the basic fixed rate and adjustable (variable) rate mortgages. However, there are many variations on these themes that have no real foreign national mortgage equivalents.  There is also a wide range of programs and offers that are really only suitable for special case USA citizens.  Below you will find a brief description of the many types of foreign national mortgages.

FIXED RATE MORTGAGES
Fixed rate mortgages have traditionally been the most popular type of mortgage in Florida. With a fixed rate mortgage, you pay both capital and interest over a fixed period of (usually) 10, 15, 20 or 30 years at exactly the same monthly payment for the duration of the loan.  This type of foreign national mortgage suits buyers who value knowing exactly what their repayments are going to be over the long term and don’t want to take any risk of being affected by rising interest rates.

ADJUSTABLE RATE MORTGAGES
With an adjustable rate mortgage (much like a UK variable rate) there is usually a fixed interest rate for the start of the term (typically one, three, five or seven years), after which the rate is adjusted either once every six months or once every year (depending on the foreign national mortgage type) and fluctuates in line with independent published financial indexes. There is a specific form of ARM that is proving very popular with non-US Citizens buying property in Florida, especially where rental income is involved. This “Option ARM” is covered separately below.

INTEREST ONLY LOANS
Interest only loans are popular in Florida for foreign investors or individuals who are looking at their South Florida property as a shorter-term investment. With an interest only loan you pay only the interest due and the total amount borrowed is due at the end of the loan.  This type of loan offers the lowest payment that you can make without actually increasing the amount owed.

EQUITY BUILDER MORTGAGE
These types of mortgages go by different names.  The payment method is to make biweekly payments during the course of the loan.  Instead of a monthly payment, payments for half the monthly amount is paid every two weeks thus allowing the foreign national buyer to pay off the loan in a faster period which can thousands of dollars of interest over the life of the loan.

SPECIAL CASE MORTGAGES
When searching for a foreign national mortgage you may see references to things like a piggyback or balloon loan. These are just two examples of a wide variety of special case mortgages that are designed to serve very particular circumstances. The construction of these loans can be quite complex, sometimes involving multiple loans that are related to each other, or highly front- or back-end weighted payment schedules.

There is a foreign national mortgage structure for almost any situation, and once your mortgage broker understands your circumstances, they will be able to find a suitable mortgage to fit your situation. 

THE OPTION ARM
The Option ARM (Adjustable Rate Mortgage) has a variable interest rate that fluctuates in line with independent published financial indexes just like a regular ARM. The key difference with this type of mortgage is that each month your statement gives you typically four different payment options to choose from.  You get to choose which type of payment that you make, and we've outlined the most common payment options for foreign national mortgage customers below:

Minimum Payment. This is the lowest of the four payments and is similar to making the minimum payment on a credit card. With this type of payment you are paying neither the principal nor the entire amount of interest due on the loan. The interest that you leave unpaid this month gets added back into the interest due on the loan and this increases your actual loan balance.

Interest Only Payment. This type of payment option is the second lowest payment type.  You avoid deferring interest and increasing the amount of the loan, but at the same time you are not actually reducing the amount of capital owed.

30-Year Payment. Also called the “30-Year Fully Amortizing Payment”, this is the equivalent of the payment that someone makes on their standard 30 year mortgage, going towards repaying both principal and interest. If you made this payment every month, you would pay off the loan in 30 years.

15-Year payment. This is similar to the 30-year payment, but is an accelerated repayment option that would result in the loan being repaid in 15 years if you made this payment every month.

The idea behind the option ARM is that you can modify your payment behaviour month by month as your circumstances dictate. The difference between the minimum payment and 15-year payment options can be around 100%.  For example, the option of paying between $1000 and $2000 each payment.

The Option ARM is applicable to anyone who has a fluctuating income or who values the extra flexibility it offers in managing household finances.  As a Foreign national mortgage, it is especially attractive to those with an investment portfolio by offering the flexibility of putting their money into higher yielding investments when the opportunity presents itself rather than tying it up in their foreign national mortgage payment.  An Option ARM is beneficial to those who are relying on rental income to pay the mortgage.  The Option Arm allows you to reduce your mortgage payments in the months when rental income is low or when you have extra property related costs to cover.  When your property is at full occupancy the option ARM allows you to re-invest a bigger proportion of the income at that time.  This flexibility will help in managing a positive cash-flow while allowing you to finance minor emergencies without having to inject extra cash into the Florida property part of your bank account.

There are two possible negatives to an Option ARM:

The first is the Variable Rate. This has a degree of risk associated with the interest rate being variable rather than fixed for the full term.
The Option Arm requires management.  This type of foreign national mortgage is an active mortgage.  You will have to be prepared to study the monthly statement and make educated decisions about what you are going to pay.

MORTGAGES FOR RENTAL PROPERTIES

There are different types of mortgages available, and these vary depending on the use you plan for the property. There are different lending rules for mortgages on properties which are used as a primary residence, a second home or as an investment.  Many times there are different and / or additional rules for Foreign residents.

For those seeking a foreign national mortgage, you must ensure that you and your mortgage broker are completely open about why you are buying a property in Florida in order to avoid any serious consequences.

For example, while you are researching the Florida market, you may see advertisements featuring loans of up to 80% of the property value which would increase your buying power.  However, typically these loans are only available on properties that are for your personal occupation as a primary or a secondary residence.  These types of loans are not designed for and are specifically not offered on rental properties. Some agents and brokers may not reveal this fact to you until you are presented with the final documents to sign.  This can result in you finding yourself at the final hour and closing on the property, with a difficult decision to make.  Do you pull out of the deal and potentially lose the property and your deposit while you find a mortgage that is properly designed for your planned use or do you sign a document you know to be false, which in Florida is perjury?

The above is a classic example of the need to work with an experienced foreign national mortgage broker who understands your situation and your goals to guide you through the Florida mortgage system.  Getting the right type of mortgage can also be a consideration when you are signing the contract that commits you to purchasing a property.  It is common for contracts in America to carry contingencies which may cause you to stop you from going ahead with the purchase of Florida property.

A number of contingencies are almost standard in such contracts. If you are a non-US Citizen that is seeking to purchase property that you plan to rent out you'll need to have a special contingency in your contract that allows you to back out of the deal if you cannot get the type of investment mortgage you require for this purpose.  Without that specific clause, you would be committed to either buying the property with a mortgage that doesn’t allow you to rent it out, or perjuring yourself to mortgage the property as a primary or secondary home.

We, at R & S Realty Group, Inc., work with many international, national, regional lenders and some Wall Street conduits and investment firms. Not all US lenders offer foreign national mortgages or an international borrower program.  Each lender may limit options in some way.  Some US lenders concentrate on one area or one niche market.

When working with a buyer interested in a Foreign National Mortgage, the professionals at R & S Realty Group, Inc. motivated to find the lender who offers the best rate and quickest approval based on our client's particular situation and goal.  Because of this, we are not tied to any one bank and will work with many lenders to find a competitive rate and to guarantee loan approval. Our desire to find our clients the most suitable mortgage ensures a continued stream of referrals and solidifies our reputation as a top-notch foreign national mortgage resource.

You may have been told that a foreign national borrower needs a minimum of a 30% down payment.  The professionals at R & S Realty Group, Inc. can help you find foreign national mortgages with 10% and 20% down payment options.

Many foreign national mortgage borrowers are only offered mortgages with prepayment penalties.  Your Real Estate Broker at R & S Realty Group, Inc. can assist you in locating a lender that will not charge such penalties.

Some lenders will only offer a variable rate or adjustable rate mortgage to non-US Citizens.  Our Agents can help you find lenders that can offer 80 year fixed or 15 year fixed rates.

You may have been told that a foreign national borrower may not apply for an interest only mortgage.  One of our Brokers can assist with finding lenders that provide interest only mortgages to foreign nationals.

As a foreign national borrower you may have been offered a foreign national mortgage with a rate 1% to 3% higher than the market rate.  The professionals at R & S Realty Group, Inc. can work with you to find a program that guarantees the same rate that a US borrower is given.

R & S Realty Group, Inc. your professionals in South Florida for Real Estate Property and Foreign National Mortgage resources.