UK buy-to-let mortgage for Aussie Resident (UK citizen)

[Ausvisitor]

Ok looking for a bit of advice on where to start looking (as a Google search always says - of course we can - right up until you've filled out the form!)

So we have some properties in the UK (owned outright - no mortgage or other finance on them).

We want to raise about £100k from one of them (it's worth about £190k).

Who would entertain a buy to let mortgage application from an Aussie resident based on the rental return? (For clarity the person owning the property has no income other than rental income, whereas the other partner - who isn't on the deed - has the job)

 

(Realise this is probably in the specialist advice needed category, but looking for where to start which could be talking to the right person)

Edited December 19, 2023 by Ausvisitor

[InnerVoice]

On 20/12/2023 at 09:25, Ausvisitor said:

So we have some properties in the UK (owned outright - no mortgage or other finance on them).

We want to raise about £100k from one of them (it's worth about £190k).

Who would entertain a buy to let mortgage application from an Aussie resident based on the rental return? (For clarity the person owning the property has no income other than rental income, whereas the other partner - who isn't on the deed - has the job)

(Realise this is probably in the specialist advice needed category, but looking for where to start which could be talking to the right person)

Would it not be simpler just to sell one of the UK properties and buy your next rental property in Australia? The tax incentives in over here are much better for property investors than in the UK, not to mention you'd be transferring sterling into Australian dollars while the exchange rate was rather favourable.

[Ausvisitor]

It's to release cash to buy in the UK for family member still over there. Otherwise I'd agree on it makes more sense here

[Cheery Thistle]

You can get expat mortgages but I’d bet you’ll get a lower LTV ratio and also pay a higher interest rate. You will also need a broker. If you don’t have one I could possibly point you in the direction. Our broker has run our BTL mortgages by our existing lenders. All are happy to let us hang on to the deals we have for now but will not do a product switch at the end of the fixed term. We are not there yet so haven’t got to the next step of looking at expat mortgages. Not sure we even will - at that point we’ll assess the lot and see what we think. Honestly, being a landlord in the UK is barely worth it any more, especially if you are a higher rate tax payer who has mortgages. Not quite so bad if you own outright. 

[Ken]

On 21/12/2023 at 20:07, Ausvisitor said:

It's to release cash to buy in the UK for family member still over there. Otherwise I'd agree on it makes more sense here

Yes, but you said you only wanted to release about 100K. If you sold the property you'd release the full amount some of which you could use for the deposit on a BTL property in Australia. The interest on the mortgage for the remainder would be fully tax deductible as it would be being used to buy the property. If you were to find a lender to refinance the BTL property in the UK, none of the interest would be tax deductible as the loan is not being used to purchase the property but is for a family member.

In either case you could end up with a mortgage the same size as the amount you are lending to the family member, but the mortgage would be looked at completely differently for tax.

[Cheery Thistle]

Lenders are also funny about you renting to family members so you’d want to think about that. 

[Marisawright]

16 minutes ago, Cheery Thistle said:

Lenders are also funny about you renting to family members so you’d want to think about that. 

So is the Australian taxman.  AFAIK if you're renting to a family member then it doesn't qualify as an investment property

[Ken]

21 hours ago, Marisawright said:

So is the Australian taxman.  AFAIK if you're renting to a family member then it doesn't qualify as an investment property

No, it can still qualify, in fact if you are making a profit, I don't see you have any choice about declaring the income, but if you are making a loss you would need to prove the rent you are receiving is an arms-length price.

Edited December 27, 2023 by Ken

[InnerVoice]

22 hours ago, Marisawright said:

So is the Australian taxman.  AFAIK if you're renting to a family member then it doesn't qualify as an investment property

 

1 hour ago, Ken said:

No, it can still qualify, in fact if you are making a profit, I don't see you have any choice about declaring the income, but if you are making a loss you would need to prove the rent you are receiving is an arms-length price.

But if you rent to a family member do you still qualify for tax relief on your mortgage interest repayments?

[Ausvisitor]

On 26/12/2023 at 10:18, Cheery Thistle said:

Lenders are also funny about you renting to family members so you’d want to think about that. 

First thanks everyone who has given advice, lots to think about.

Bit of clarity in my ask.

The properties in the UK are all owned outright at the moment. Due to the pull of London for our about to graduate kid, they will be living in London.

We are about £100k short of buying something in London outright, and thought we could remortgage one of the already let properties to release that £100k.

Can then gift the cash to the kid to buy outright in London (it would be easier to get a mortgage on the new property but as it will be in their name not ours we can't do that - and as they are not yet even employed {have job to go to but haven't graduated yet} they can't get one in their name either)

The rent on the exiting property would more than cover the repayments and we realise we would have to live 7 years or there might be some fun & games on tax due on the cash gift (but not planning on checking out anytime soon)

[Ken]

17 hours ago, InnerVoice said:

 

But if you rent to a family member do you still qualify for tax relief on your mortgage interest repayments?

If you are making a profit, or can show that even though you are making a loss it is an arms-length price, then yes. But don't forget the requirement that the mortgage was to purchase the property. If you refinance to release money to spend on other things, that interest is not deductible whoever you've rented to. Also, to qualify as an investment property neither you nor your dependents can live there, so your 'family member" can't be a dependent (but if they're living independently and able to pay the rent then logically they couldn't be a dependent).