Mortgage in homecountry and moving to the ME?

[ChiCotje]

Hello, I was wondering how other people organized this when they moved to the ME. Do a lot of people still have their home at their homecountry or is this a rare thing? I own a home but I think I want to keep it for the future. Is it a wise thing to keep it or is it better to sell it? What do you guys think. Cheers

[BigGeordie]

Absolutely keep something at home. Rent it out if needs be but one of the biggest mistakes people make is to sell up everything at home. Your priority should be to pay your mortgage off ASAP so you have somewhere to go if your dreams turn to, er, sand. The Middle East will never, ever be 'home'.

[ChiCotje]

Yeah I was thinking the same. Should be easy to pay off with the salary from the ME that if you can handle money. Renting out is a good option. Only to professionals tho. Not to students etc they will destroy my home! I hear and read alot about ppl going to the ME but never how they handled their homes in their country.

[seven3seven]

Keep your house in your home country for sure. Just send money back to pay the mortgage. As long as its being paid I don't think the banks will care where you are in the world.

[Toruk Macto]

The question is when should you start looking to buy a second place in your home country .

[Espada III]

Keep your house in your home country for sure. Just send money back to pay the mortgage. As long as its being paid I don't think the banks will care where you are in the world.
They do and will.

Your mortgage is based upon the fact of you living there. If you move out and let it to third parties, you have breached the terms of the mortgage. You must obtain permission from the mortgagee to rent the property out. Don't bury your head in the sand with this one; it will come back to bite you. So deal with it now. The interest may well be a little higher, but this is something mortgage companies are used to dealing with and they will work with you.

It is also relevant for insurance. You must take out different insurance as you are becoming a landlord and the tax authorities in your home country need to know your rental income. Use a local accountant and a competent letting/management agent, preferably one who is a member of a reputable regulatory authority - in the UK it is RICS.

[seven3seven]

Permission from the bank to rent out my property? Oh bull**** it has nothing to do with them.

[BigGeordie]

I think you need to read you mortgage agreement VERY carefully. You don’t want to upset your lender or life can get expensive and difficult quite quickly.

[Emma Royds]

Permission from the bank to rent out my property? Oh bull**** it has nothing to do with them.

I had to get 'consent to lease' approval from my lender and it was an approval that was subject to periodic renewal. As BigGeordie said, it might be worth looking at this one in more detail, as it's not uncommon for approval to be required from your lender.

[seven3seven]

Guess your country is different from mine then.

[Bill Macgillivray]

Why not try a banking or accounting forum? We are only pilots!!

[Scooter Rassmussin]

Keep your property, but transfer it to your wife’s name so she will pay lower tax on the rent , ie remains a resident in home country for tax reasons , and have the rent paid directly into the mortgage, if your happy to leave the furniture you will make more rent and not have to pay storage . If you have proper insurance it doesn’t matter what anybody does to the house it can always be repaired or replaced , the value is always underlying .

[777AV8R]

Have you thought that this Forum is mostly pilots, who have departed for foreign lands because of finances? So, get the real information and talk to a foreign tax specialist in your home country. The last surprise that you want is to return and find that you are eligible to pay full taxes because of poor exit tax planning.

[bringbackthe80s]

Keep your property, but transfer it to your wife’s name

Ahahhahah great piece of advice!!

[Farrell]

Permission from the bank to rent out my property? Oh bull**** it has nothing to do with them.

In my case, the bank is a co-owner of my property, so it has everything to do with them.
The terms and conditions on my mortgage say that I require consent before I let it out.

[thatsme]

In most European countries you will find that you need to have permission from mortgage provider AND insurance company for renting out your property. So you will need an buy to let mortgage ( about 1.5% more interest) and a buy to let insurance ( 20% up). Or just rent out your place and wait till they burn it down and get zero from your insurance company. As always READ the fine print.

[ExDubai]

Ahahhahah great piece of advice!!
Depends from which country you are. In my case renting out under my name was not possible because of tax issues. So I had to do it. 4 years later my marriage was history :}

[Avenger]

Certainly in the UK you should advise the mortgage company of your intentions and most likely they will agree and simply ask for Landlords building insurance and the tenancy is via an assured agreement through an agent. As noted, Buy to let loans often have a higher interest rate and lower loan to value, so they could ask for a chunk of money to align the loan with their products, chances are, for a short deployment they won't . If you just jump ship and put a tenant in, they could, quite legally, get the hump and say you are in breach of contract. It is quite tricky to get a mortgage in UK if your salary is paid abroad and not in GBP,. Best bet, play it straight. You cannot transfer the mortgage to your wife unless she earns enough to support the whole loan amount, and you cannot transfer a mortgaged property unless the mortgage provider agrees.

[tonker]

Does having a mortgage in the U.K., but residing the majority of the time abroad have any tax ramifications?

[777boyo]

Tonker - this is purely my understanding, based on my experience with HMRC and my Accountants over nearly 40 years as a UK expat with mortgages (now history, thank heavens!).

Most importantly, you need to seek Professional advice before making any decisions - expat tax is a minefield.
Here's my take on your question though. I don't believe the simple fact that you have a mortgage with a UK bank or Building Society on a UK property would affect your Resident/Non Resident status with HMRC. (It could potentially affect your status as Domilciled/Non Domiciled, but that is a much more complex issue). However, if your wife/kids continued to occupy the property in UK, and/or the property continued to be available for your occupation on visits to the UK (even a single room) then your tax status and liability could be affected. Secondly, if you rented out the property once you'd moved overseas, and kept the mortgage, as a landlord, you would not get tax relief for the mortgage interest which you pay - that was removed last year. I'm open to correction on any of the last paragraph - if anyone has any more definitive information, I'd be interested to hear it.
Finally - go to the HMRC website (hmrc.gov.uk), and look at the documents referring to "Residence/Non-Residence", and anything relating to the "Statutory Residence Tests". More effective than OM-A for those nights when you need to sleep before a flight, but very informative if you persevere! But as I said - get Professional advice!
Good luck,
7B

[Skyjob]

The solution for one in the UK is to create what is known as a SPV, a Special Purpose Vehicle, essentially a company-style run paper exercise which works in its simplest form like this:
- You set up the SPV with the sole intention to purchase and rent out your property;
- You hold 100% of shares in the SPV (or distribute them at your choice to others);
- As you run it as a company interest relief as per above remains valid as company is based in UK;
- Additional corporate expenses can be subtracted from running your SPV, think of required travel costs for (bi-)annual inspections, running costs, insurance;
- As per any corporate entity in UK, the SPV can reinvest or pay its shareholders;
- Residency does not have value in this case as the reinvest option allows moneys to be reinvested into another SPV in future for a separate purchase;
- Shares can be in future transferred to wife and/or children or others as you wish;
- SPV remains free from inheritance if constructed properly;
- SPV can get mortgage as a corporate entity, your living status is not a problem, a UK family member could set up a SPV for £1, additional shares then made available to you;

[777boyo]

Skyjob - a good plan if the SPV is set up prior to buying a property, and you complete the purchase/mortgage arrangement as the SPV, rather than as a "personal" purchase. However, as I understand the situation, once you (as an individual) own a property (with or without a mortgage), a subsequent transfer of that property to an SPV would require the sale of the property to the newly set-up SPV, thereby incurring Stamp Duty once again. This might not be too painful on a single property - £10,000 on a £500,000 property,for example, but on a buy-to-let or second and subsequent properties the Stamp Duty would be £30,000 on a £500,000 property. There would also be the additional set-up costs for any "new" mortgages required by the SPV. Total cost involved would be possibly acceptable on one property, but for more than one it could become an expensive exercise.
Once again, I'm open to correction on this, and would be interested to hear other opinions.
7B

[Avenger]

777, yes that's correct, the existing mortgage would need to be settled, the new purchase completed via the SPV and then the land registry title completed. As you observe, this is a costly exercise, SPVs work well if you have a chunk of cash to buy outright or with minimal loans, if you wanted a new mortgage via an SPV you would need to get a buy to let and the deposit could be north of 30%. The other sting is the interest rate SPV rates tend to be about 2% higher than standard rates. Even if you have an SPV in the UK you will need to fill a self assessment and and declaration under the non-resident landlord rules or the should stop tax from the rental. For one property, it's much easier just to declare the income and pay the tax... if any Profit exists after regular maintenance and service costs, improvements are not tax deductible.

[ironbutt57]

Permission from the bank to rent out my property? Oh bull**** it has nothing to do with them.

it ain't yours if there's a mortgage, it's THEIRS

[hunterboy]

The only other thing to watch out for is once you haven’t been living in your UK property for 3 years, you lose the tax free exemption if you end up selling it. It is worth getting the property valued when you leave the UK and after the 3 years for a baseline to be used when calculating any capital gain due if you sell it.