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Refinancing U.S. Property While Living Abroad

There are plenty of reasons to refinance an international mortgage, including obtaining a lower interest rate. In 2014, however, refinancing applications in the U.S. may decrease sharply to about 36 percent of all mortgage applications if interest rates begin to tick up, according to Mike Fratantoni, Mortgage Bankers Association vice president of research and economics, who was quoted in a CNBC article.[1]

When a U.S. citizen is conducting financial management from abroad, the process can be more complicated to navigate. Here are some tips to help Americans refinance their U.S. property while living abroad.

Find a Broker Authorized in Your State

Individuals should start the refinancing process by looking for a bank that's authorized to do business in the state where the property is located, says Shane Milne, a senior loan officer at the Bank of England in Laguna Niguel, Calif.

“When people file their U.S. tax return with a foreign address, their options become more limited.”

— Shane Milne, senior loan officer at the Bank of England

For example, when individuals move to a foreign country like France, they generally want to bank with a local bank and wish to be paid in the foreign currency by their employer. If these financial documents are in French for a second home with a mortgage, it's important that the bank refinancing the property in the U.S. can also process foreign loan documents that might not be in English. "Sometimes the lender who is doing the loan will pay for a third-party translation of the documents into English," Milne says, adding that larger banks with in-house translation services can sometimes perform the service for free.

Residency and Credit Concerns

How long the borrower has been living out of the country can also affect their ability to qualify.

"When people file their U.S. tax return with a foreign address, their options become more limited," Milne says. This is because all of the major loan products, such as the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac, use computer-generated underwriting. A foreign address will kick the application out of the system and require it to be manually underwritten. "These applications can be 70 pages long," Milne says. "And some mortgage lenders aren't willing to go through the hassle."

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In addition, individuals who have been living and working in a foreign country for years may no longer have a credit score. "After about six to 12 months with no new activity, the score can disappear altogether," Milne says. Expats can avoid this by periodically making purchases on a U.S. account to keep it active.

Currency Exchange Rates

Transaction fees can be a significant cost of any refinance. For borrowers who need to convert their money to foreign currency to cover these fees, the cost can rise or fall depending on exchange rates. "Locking in a currency rate can be done in advance to reduce uncertainty of currency changes, similar to locking in a mortgage rate," says Ruth Kennedy Sudduth, vice president and director of the residential brokerage division of LandVest, a luxury real estate company in Boston.

That's why homeowners should consider using a trusted online foreign exchange provider to secure preferred currency exchange rates and initiate money transfers to the U.S. Plus, an online FX service enables homeowners to see the rate they will pay at the time their transaction is booked. This ensures that the full amount is submitted so that the refinancing goes smoothly.

[1] "Refi Madness Is Finally Running Out of Steam," May 31, 2013, CNBC

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