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talktosi

UK mortgage while in Australia

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Anyone had experience of maintaining a UK mortgage while living in Australia ? Given high cost of buying in Australia and that we can get a double in rent for UK house than what we pay for UK mortgage we will initially rent before we commit to staying long term and then buying is Australia. I generally renew mortgage every 2 - 3 years and take up to best offer at the time. Are banks willing to lend purely based on fact that rent will cover mortgage ? Obviously we would have Australian income as well. Thanks

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I did this as we were only supposed to come over for a year or so!  Ended up staying for 7 and now were back (in Oz), having sold my flat in Edinburgh on our last extended trip back in 2018.  It was rented out through an agent and went reasonably smoothly, no void periods but a few issues to sort out when I got the keys back.

Its not something I felt overly comfortable with, being on the other side of the world.   You have to have a good agent who you can trust if things go wrong, mine was OK, not great to be honest.  On the plus side you can try to take advantage of any big currency swings, when the GBP was weak and hit 1.5 to the dollar we were sending any spare AUD back and using it to pay down the mortgage.

I arranged it with my existing lender whilst still living in the flat and was upfront with them, they allowed consent to let rather than having to go on to a buy to let which would have been higher rates.  This was almost 10 years ago now so not sure if this can still be done.

Im assuming youre in the UK just now?

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also to add, theres tax implications in both countries - youll have to do a UK tax return and report relevant profit/earnings from the property on your Aussie tax return.   In addition, if you have many years away and then make a profit on sale theres cgt implications as you werent resident for those years.

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Posted (edited)

We have been renting out UK properties from overseas for over 20 years, and up to now have never had a problem or found it difficult

We have very good agents who take care of everything which is very important.

I can’t help too much on the mortgage side, as everything has been in place such a long time.

I hope I am giving the correct information, our properties are in both our names, and we had them valued I think in 2015, so any CG since that date is split between us.

I also can’t help on the tax side, as this is the first year we have paid tax in Australia, previously we only paid UK tax, but have lodged a tax return in both countries. 

Edited by ramot
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16 minutes ago, ramot said:

We have been renting out UK properties from overseas for over 20 years, and up to now have never had a problem or found it difficult

We have very good agents who take care of everything which is very important.

I can’t help too much on the mortgage side, as everything has been in place such a long time.

I hope I am giving the correct information, our properties are in both our names, and we had them valued I think in 2015, so any CG since that date is split between us.

I also can’t help on the tax side, as this is the first year we have paid tax in Australia, previously we only paid UK tax, but have lodged a tax return in both countries. 

Please check everything I have mentioned.

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You will need to get a consent to let from your mortgage provider.  Most will agree to this for a fixed term, a year for example.  Some lenders will be more flexible than others.  After that you’d be looking to switch onto a buy to let mortgage.  The best thing to do is have a chat with your current provider and if you don’t like their terms have a shop about.  

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Once you are resident in Australia you may well have difficulties re mortgaging in UK. There are a few threads on this but like opening a new bank account in UK from Aus it is extremely difficult if not impossible. They say due to money laundering laws but I asked about moving within my bank (money they have had for many years) to a better savings account. Computer said no as effectively a new account. They could not explain how this could possibly be money laundering. I expect the regulations just put it in the too hard box!
 


So many wineries ......so little time :yes:

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13 hours ago, talktosi said:

Anyone had experience of maintaining a UK mortgage while living in Australia ? 

Not from Australia, but I rented out  a property while I was living in Africa.   I've also rented out properties in Australia while living in Australia.

TBH I can't see one iota of difference between the two.  You still need to find a good agent to manage the property.  Whether you're in the same city or the same country makes no difference.  In all those years, I only had to inspect a property myself two or three times - and these days, you could easily get the agent to take their mobile phone around the property to give you a virtual tour.

The snag is that you'll need to get the mortgage all set up while you're still a UK resident in your UK job, and then you'll be stuck with that mortgage until you sell the property.  Once you're in Australia, you'll have no chance of getting a normal UK mortgage.  There are expat mortgages but the interest rates are nasty.

As Johnny Kash says, you have to take into account that you'll have to do a tax return each year in both the UK and Australia. The double taxation agreement ensures you won't pay double tax, though.  For the first year's returns, you'd be wise to hire a tax agent who has experience in both countries (like @Alan Collett's company) because it's complicated and you'll likely miss out on deductions you didn't even know you could claim, if you DIY.  Once  you see how it's done, you can decide whether to diy for future years.

I wouldn't let the tax situation put you off.  It's a bit of extra hassle, but if the rents are so good, then you should still be ahead.  As for capital gains - if you're not buying another home in Australia, then you won't be liable for any capital gains in Australia if you sell within the first 6 years.

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Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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On 16/04/2021 at 08:45, rammygirl said:

Once you are resident in Australia you may well have difficulties re mortgaging in UK. There are a few threads on this but like opening a new bank account in UK from Aus it is extremely difficult if not impossible. They say due to money laundering laws but I asked about moving within my bank (money they have had for many years) to a better savings account. Computer said no as effectively a new account. They could not explain how this could possibly be money laundering. I expect the regulations just put it in the too hard box!
 

It's not actually the money laundering laws as such. It's the requirement to comply with both UK financial services rules and Australian financial services rules (both of which include money laundering laws). For your original mortgage they didn't have to comply with Australian rules because you didn't live in Australia but for the new loan you are an Australian resident so they have to obey Australian law - including that the person you deal with is the holder of an Australian Financial Services licence. Probably your UK bank don't have a mortgage consultant in the UK with an Australian Financial Services licence (perhaps they do as there are a lot of Australians working for UK banks, but the banks risk managers probably don't know enough about Australian law anyway for them to know what the risks to the bank are). It's not impossible for them to meet the requirements but as you say it's in the too hard box. 

Australian banks incidentally don't give mortgages on property in the UK because they would have to comply with UK law (as well as Australian law) and again that puts it into the too hard box.

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Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

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