Uk mortgage

[Marisawright]

@Ben12345, have you looked into remortgaging?   You can't get an ordinary UK mortgage, but you could get an expat mortgage. 

Expat mortgages are more expensive than ordinary ones, so most people are reluctant to take one on.  However, in your circumstances, they could be cheaper than what you've got.

 

https://propertyhub.net/expat-mortgages/

https://www.expatriates.co.uk/mortgages/index.html

https://www.expat.hsbc.com/mortgages/products/buy-to-let/

[Ken]

7 hours ago, Marisawright said:

@Ben12345, have you looked into remortgaging?   You can't get an ordinary UK mortgage, but you could get an expat mortgage. 

Expat mortgages are more expensive than ordinary ones, so most people are reluctant to take one on.  However, in your circumstances, they could be cheaper than what you've got.

 

https://propertyhub.net/expat-mortgages/

https://www.expatriates.co.uk/mortgages/index.html

https://www.expat.hsbc.com/mortgages/products/buy-to-let/

He's already said he has negative equity. That means his existing mortgage is for more that the the property is worth. While some mortgage brokers will quote that they can get you up to 95% LTV on an expat mortgage that's still not going to be enough to repay the existing mortgage. It's normal for people with negative equity to be unable to remortgage - why would a bank that relies upon security against a loan lend more than the property is worth?

Edited September 6, 2021 by Ken

[Lavers]

1 hour ago, Ken said:

He's already said he has negative equity. That means his existing mortgage is for more that the the property is worth. While some mortgage brokers will quote that they can get you up to 95% LTV on an expat mortgage that's still not going to be enough to repay the existing mortgage. It's normal for people with negative equity to be unable to remortgage - why would a bank that relies upon security against a loan lend more than the property is worth?

Exactly, that was the trouble with the together mortgage, they where giving you a 125% mortgage then we had the recession.

I had the same problem, couldn't remortgage and got stuck paying higher interest rates when northern Rock went bump, hence the solicitors looking at making claims for everyone affected.

[Ben12345]

On 29/08/2021 at 11:41, Marisawright said:

The first thing to check is whether overpayments will reduce the principal.   If they do, then it's worth doing, because that will also cut your interest payments for the future and reduce the burden.  

 Let's say you're paying 5% interest on the mortgage and you've got $20,000 here, earning 3% interest.  That means you're making a loss of 2% on those savings, compared to if you paid it into the mortgage.   And that's not taking into account the fact that it's compound interest.

The downside, of course, is that you may not be able to withdraw the money if you need it. 

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/#

Yea I can overpay as much as I want to reduce the principle. That’s a good point about the interest, its 4.38. variable. I was told by an accountant to not over pay and keep my saving and try to get depreciation tax on it but I don’t think that would make me better off. 

[Marisawright]

1 hour ago, Ben12345 said:

Yea I can overpay as much as I want to reduce the principle. That’s a good point about the interest, its 4.38. variable. I was told by an accountant to not over pay and keep my saving and try to get depreciation tax on it but I don’t think that would make me better off. 

I don't know how depreciation tax works, but since you can't officially admit to renting it out, that makes it a bit difficult to claim expenses on it as an investment property....

[Tulip1]

2 hours ago, Ben12345 said:

Yea I can overpay as much as I want to reduce the principle. That’s a good point about the interest, its 4.38. variable. I was told by an accountant to not over pay and keep my saving and try to get depreciation tax on it but I don’t think that would make me better off. 

Terrible interest rate.

[Ken]

15 hours ago, Marisawright said:

I don't know how depreciation tax works, but since you can't officially admit to renting it out, that makes it a bit difficult to claim expenses on it as an investment property....

What you admit to the bank needn't be the same as what you confess to the ATO/HMRC! While banks are typically required to report information to the tax agencies anything you tell the tax agency is confidential and they can't share it with private agencies such as banks (but they do communicate with other tax and government agencies). Whether or not the bank knows about it makes do difference to the procedure for claiming expenses on an investment property. That doesn't mean that having high expenses is a good idea though as any tax reduction (or refund) is only going to be a percentage of what you spent (even for a high rate tax payer) and so will never cover the whole amount.

[Chortlepuss]

I got a depreciation report on my UK property from Washington Brown. My property was built in 2015. The difference is has made to my Australian tax return has been incredible. This year it was worth $6k against tax. If you have a newer property it is much better. You could also offset the loss of mortgage payment and expenses  v rental income against your income here. So any way you could disclose your UK income from your property to the Aus  tax office would work in your favour if you earn here. Many Australians make a loss on their rental properties here and the system seems set up to support that.

[Marisawright]

2 hours ago, Chortlepuss said:

I got a depreciation report on my UK property from Washington Brown. My property was built in 2015. The difference is has made to my Australian tax return has been incredible. This year it was worth $6k against tax. If you have a newer property it is much better. You could also offset the loss of mortgage payment and expenses  v rental income against your income here. So any way you could disclose your UK income from your property to the Aus  tax office would work in your favour if you earn here. Many Australians make a loss on their rental properties here and the system seems set up to support that.

You are absolutely right.  I meant to say I don't know how depreciation tax works in the UK.  I'm very familiar with how to claim depreciation on your tax in Australia.  I was the same as you - thanks to depreciation, I paid absolutely no tax on the income from my rental property and even got a few thousand dollars lopped off my PAYE tax.

If, as Ken says, it's "safe" for @Ben12345to claim landlord's expenses on his Australian tax return, it could make a massive difference.  He could claim 100% of the mortgage payment because it's interest-only, and get a depreciation report done on the property so he can claim depreciation too. 

[Parley]

On 07/09/2021 at 21:35, Tulip1 said:

Terrible interest rate.

How times change. Twenty years ago you would be ecstatic with that rate. About thirty years ago some people were paying 18% interest.

4% still sounds really cheap to me as it is lower than any rate I ever had I think.

[Tulip1]

6 hours ago, Parley said:

How times change. Twenty years ago you would be ecstatic with that rate. About thirty years ago some people were paying 18% interest.

4% still sounds really cheap to me as it is lower than any rate I ever had I think.

I remember my mortgage rate hitting 17% at one point in the very late 80’s.  Just after those terrible rates when they were still quite high, many locked into long term fixed rates, often for 10 years.  At that time the promise of 10% for 10 years seemed a great idea.  Those people went on to pay so much more than those that didn’t as rates tumbled and for most on those long fixed rates, the penalty to get out of them was so high they were stuck.  They are so low now and have been for a long time.  I no longer have a mortgage but I was paying about 1.5% when I last did.  These low rates are great for borrowers but terrible for savers. 

Edited September 10, 2021 by Tulip1

[Parley]

48 minutes ago, Tulip1 said:

I remember my mortgage rate hitting 17% at one point in the very late 80’s.  Just after those terrible rates when they were still quite high, many locked into long term fixed rates, often for 10 years.  At that time the promise of 10% for 10 years seemed a great idea.  Those people went on to pay so much more than those that didn’t as rates tumbled and for most on those long fixed rates, the penalty to get out of them was so high they were stuck.  They are so low now and have been for a long time.  I no longer have a mortgage but I was paying about 1.5% when I last did.  These low rates are great for borrowers but terrible for savers. 

That is cheap. I don't think it ever got that cheap here. My account is still open with a zero balance. The interest rate is 3.52%. I left it open just in case i need to do a redraw one day.

[Ben12345]

10 hours ago, Marisawright said:

You are absolutely right.  I meant to say I don't know how depreciation tax works in the UK.  I'm very familiar with how to claim depreciation on your tax in Australia.  I was the same as you - thanks to depreciation, I paid absolutely no tax on the income from my rental property and even got a few thousand dollars lopped off my PAYE tax.

If, as Ken says, it's "safe" for @Ben12345to claim landlord's expenses on his Australian tax return, it could make a massive difference.  He could claim 100% of the mortgage payment because it's interest-only, and get a depreciation report done on the property so he can claim depreciation too. 

How can you claim 100% if it’s interest only? In the past I was told I could only claim on the different between the rental income and the mortgage payment and any home Improvements.  

 

[Marisawright]

28 minutes ago, Ben12345 said:

How can you claim 100% if it’s interest only? In the past I was told I could only claim on the different between the rental income and the mortgage payment and any home Improvements.  

I don't know how it works with UK tax.  On your Australian tax return, you declare the full amount of your rental income in the Income section, then you claim the interest, depreciation and other expenses in another section.  You don't just work out the difference and enter that figure. 

The reason depreciation is so valuable is that you're getting an allowance for wear and tear on your property even if you haven't spent any money on improvements.

Edited September 10, 2021 by Marisawright

[Ken]

16 hours ago, Ben12345 said:

How can you claim 100% if it’s interest only? In the past I was told I could only claim on the different between the rental income and the mortgage payment and any home Improvements.  

 

You can only claim the interest portion of the mortgage payment and not the capital repayment, but if it's interest only then 100% of the mortgage payment is interest.

Note however this does only apply for mortgages for the purchase of an investment property. If you took out a new mortgage for an equity release then only the interest on the amount you spent on improvements to the investment property (or to repay the balance on the original loan for the purchase) would be allowable and not the interest on any amount you pocketed.

Note also that these are the rules in Australia. The UK has far stricter rules that restrict the amount you can claim both to the amount of income you are receiving and to the basic level of income tax.

Note that any claim for depreciation will eventually cause you to have a larger gain for CGT purposes when/if the investment property is sold, but provided the 50% discount on the gain remains in place you should still be better off overall.

[Canada2Australia]

Not sure what go is in the UK, but in Canada people who are on the cusp of foreclosure with regards to mortgage payments have an option with something call 'Deed in Lieu of Foreclosure'. This option allows the mortgagor to hand over the Land Title of the property to the mortgagee in exchange for being forgiven of the mortgage debt. In essence, you turn over ownership of your property to the bank and walk away from all your property-related debt. The only thing you lose is the equity you payed into the property. There is also little to no effect on your credit rating for going this route, so you are not punished for doing so. End of story. It's a last resort but far better than going through foreclosure or bankruptcy. 

If the UK has this option and it works similarly to how it works in Canada, you should seriously consider going that route if you are in that bad of a situation.

Edited September 11, 2021 by Canada2Australia

[Ben12345]

On 11/09/2021 at 12:46, Ken said:

You can only claim the interest portion of the mortgage payment and not the capital repayment, but if it's interest only then 100% of the mortgage payment is interest.

Note however this does only apply for mortgages for the purchase of an investment property. If you took out a new mortgage for an equity release then only the interest on the amount you spent on improvements to the investment property (or to repay the balance on the original loan for the purchase) would be allowable and not the interest on any amount you pocketed.

Note also that these are the rules in Australia. The UK has far stricter rules that restrict the amount you can claim both to the amount of income you are receiving and to the basic level of income tax.

Note that any claim for depreciation will eventually cause you to have a larger gain for CGT purposes when/if the investment property is sold, but provided the 50% discount on the gain remains in place you should still be better off overall.

Thanks Ken. I bought the property to live in initially so does that mean I wouldn’t be able to claim on it? 

[Ben12345]

On 11/09/2021 at 18:55, Canada2Australia said:

Not sure what go is in the UK, but in Canada people who are on the cusp of foreclosure with regards to mortgage payments have an option with something call 'Deed in Lieu of Foreclosure'. This option allows the mortgagor to hand over the Land Title of the property to the mortgagee in exchange for being forgiven of the mortgage debt. In essence, you turn over ownership of your property to the bank and walk away from all your property-related debt. The only thing you lose is the equity you payed into the property. There is also little to no effect on your credit rating for going this route, so you are not punished for doing so. End of story. It's a last resort but far better than going through foreclosure or bankruptcy. 

If the UK has this option and it works similarly to how it works in Canada, you should seriously consider going that route if you are in that bad of a situation.

That’s the problem. There’s no equity in there so I doubt they would allow this. They would lose money. 

[Marisawright]

8 hours ago, Ben12345 said:

Thanks Ken. I bought the property to live in initially so does that mean I wouldn’t be able to claim on it? 

Makes no difference 

[Ken]

On 13/09/2021 at 12:52, Ben12345 said:

Thanks Ken. I bought the property to live in initially so does that mean I wouldn’t be able to claim on it? 

As Marisawright has already said that doesn't make a difference. Although I said "to buy the investment property" you can have have bought it to live in and it can have become an investment property later. In that case you can only claim the interest from when it became an investment property of course. The point I was trying to make is if any remortgaging took place (before or after the property became an investment property) to release capital for holidays, buying cars or any other personal use then the percentage of interest that relates to that equity release isn't tax deductible because you didn't invest that borrowing in the property. It's something that seems to catch a lot of people out but if you understand why the tax deduction exists it's obvious that the deduction doesn't apply to the interest on this sort of borrowing as there is no connection with the income.

[Canada2Australia]

On 13/09/2021 at 19:47, Ben12345 said:

That’s the problem. There’s no equity in there so I doubt they would allow this. They would lose money. 

As mentioned, that would be irrelevant to a bank. 

[DIG85]

On 14/09/2021 at 19:26, Ken said:

As Marisawright has already said that doesn't make a difference. Although I said "to buy the investment property" you can have have bought it to live in and it can have become an investment property later. In that case you can only claim the interest from when it became an investment property of course. The point I was trying to make is if any remortgaging took place (before or after the property became an investment property) to release capital for holidays, buying cars or any other personal use then the percentage of interest that relates to that equity release isn't tax deductible because you didn't invest that borrowing in the property. It's something that seems to catch a lot of people out but if you understand why the tax deduction exists it's obvious that the deduction doesn't apply to the interest on this sort of borrowing as there is no connection with the income.

It should be noted that it was for many years HMRC practice to allow all interest on released capital as a deduction against rental income (up to the value of the property at the time it became an IP). HMRC appears to have amended its manuals recently to stop this.

Edited October 14, 2021 by DIG85

[RiNye]

Property Equity 

Hi everyone, My wife and I bought and lived in our flat in London 2011-2018 before emigrating Down Under (Melbourne). Been renting it out since then. Now we’re looking at the market forces for buying in Melbourne vs London (we just rent here, haven't bought)  and, amongst other UK-London pull factors, think it’s a good time to return and buy again in London. We’d like to keep our flat and to take out equity from its worth to enable us to buy a new home big enough for us + our 2 kids. Not looking to become property magnates or buy-to-letters, just a slightly bigger place and keep the old flat as an asset for our kids etc. We’ve been advised by our mortgage lender that UK property law asks that you must have lived in your property as your primary home to free up this equity and this period is for minimum ‘6months’. We have all the info on ‘things to consider’ when using property equity to buy second homes (Stamp duty etc) but I cant seem to find any info online that corroborates this stipulation, or similar information on this.

I wonder if anyone else has moved back to UK/London and borrowed against their old property for this reason and if so how long did you have to live in it before getting your mortgage lender to provide the equity? Sparing the gory details, we’d like to avoid/minimise moving back to our property as we had a nightmare neighbour who really hated the fact we had two young kids running around (they adopted a campaign of intimidation for which the Council and Police did zip) ); so don’t want to put them through that again! But without using our properties equity we’re not going to be able to afford a new home.

Any advice/resuorces on equity borrowing in this situation, or insights into similar experience greatly appreciated.

Thanks for reading.