Survey: 40% U.S. millionaires plan on buying a home overseas

Some Americans plan to tap into real estate markets outside of the U.S. this year.

Almost 40% U.S. millionaires plan on buying a home overseas within the next 12 months، according to the latest Trend Report by Coldwell Banker Global Luxury.

Another two-thirds of respondents plan to purchase a home abroad within the next five years، according to the report.

The survey polled 1،053 U.S. consumers of ages 18 and up، with a household income of more than $1 million، from November 27 to December 11، 2023. 

Buying a property abroad can be a dream for many Americans. But it’s not a decision one should make on whim; multiple factors can easily complicate the process، experts say.

“Living in a country is not the same as spending a lovely three weeks there،” said certified financial planner Jude Boudreaux، a partner and senior financial planner at The Planning Center in New Orleans.

Mortgages، currency exchange complicates a purchase

While there may be similarities to the U.S. market when buying a home overseas، there are also unique challenges on the financial side of the purchase.

Oftentimes، Americans buying properties abroad end up financing the transaction with cash outright، experts say. If you do want to finance your home purchase، assess the options to consider how often you may be exposed to interest rate changes.

That’s because mortgage structures in foreign countries are more likely to have variable rates، or short terms if they are fixed-rate loans. It is rare to encounter financing options similar to the 30-year fixed rate mortgage، which is a “very American phenomenon،” said Boudreaux، a member of the CNBC Financial Advisor Council.

You also have to be mindful of the exchange rate on the foreign currency you will be transacting with، as well as the cost to trade your U.S. dollars. Fluctuations in rates، and the differences in banks’ rates and fees، can make a significant difference in how far your dollars go.

A bank wire is often the “least expensive way” to exchange currency، and with a large enough bank، they’ll have facilities that can reduce the cost of the foreign transfer like a favorable exchange rate، said Boudreaux.

The need to open a bank account

But in most cases، the U.S. buyer will need to open a bank account in the country they’re buying real estate. And that process is not always straightforward.

For one، many banks will refuse to work with U.S. citizens because the Bank Secrecy Act of the U.S. requires foreign entities to report assets، he explained.

In addition، smaller، regional banks might not be equipped to handle that reporting، so U.S. citizens will generally need to seek larger institutions، Boudreaux said.

Before you acquire a property outside of the U.S.، it’s also important to make sure you have a clear picture of what you will use it for; your tax responsibilities to the foreign country and the U.S. may change depending on that answer.