Negative gearing

[Tarby777]

Hi all,

 

Given the difference between UK and Aussie interest rates, I was wondering whether anyone has done the sums to find out whether this might be an option: re-mortgaging in the UK, bringing the money over here for a year, then paying off the capital and the interest, and pocketing the difference. Or maybe even just using the monthly interest received to pay it off over a period of time, and never having to send the capital back. I guess you'd want a mortgage with no early repayment penalties and ideally a non-earning partner in Oz to own the savings account (for the tax breaks), but I would have thought it's possible somehow to make a buck or two this way. Has anyone tried it?

[Rupert]

Sounds like a massive FX risk to me.

[desreb]

Hi - I did think the same myself, and did some basic sums. It did seem to work out that I could just out the mortgage in a uSaver savings account over here for a year, then send it back, and make a profit, even with a 0.5% FX charge either way.

 

However, the interest rate here has dropped a bit that this may now be marginal, and yes, it's more an FX gamble you're taking - a swing in the rate can massively outweigh any savings income (either positive or negative!).

 

The other thing is that if you could negatively gear your UK home - so you can claim income tax back on a portion of the extra interest you're now earning. Of course, you pay that tax on the savings income you're earning over here. It's at this point I decided I didn't want to take a risk that might push us back years on our mortgage repayments, left things as they were, and went to the beach instead.

 

You might contemplate a committed IFA, or a big spreadsheet and a large mug of coffee, to think through this one...

 

 

 

D

[newjez]

I think the risk would outway any benefits. Plus you have to consider tax on the aussie savings.