Slightly off but help desperately required
 

Life is strange they say!
We have our PR, horrah... we have just found a buyer for our house.. horrah
we have asked for our fixed term loan to be terminated early by the building society, cost £8,000
Please can anyone suggest a route we can take to get this amount lowered.
We are desparate, so much for a new start etc
we just don't see how we afford that amount of money

Re: Slightly off but help desperately required
 

We are in the same situation. It is one of the reasons why we have decided to rent our house out initially, rather than sell it. Halifax will let us do that without changing the interest rate or charging the early redemption penalties.

It you need some of the equity from the house you can remortgage to release it.

We also figure that if things don't work out in Australia we won't have lost out in the UK property market.

The factors to consider include:
How easy is it to let your house from the other side of the world?, How long before the redemption penalties are over?
How much equity you have in the house.

It will also affect what sort of accommodation you can afford in Oz.
We are going to rent a place in Sydney until we sort out work, schools etc.

What do you think?

Re: Slightly off but help desperately required
 

Hi Gerard

The reason we changed onto this fixed rate was 18 months ago we decided to rent our house out when we moved.
In the interim we have changed our mind and would rather give ourselves every chance down there by having the collatoral available.
We live in Jersey and the housing market here is very volatile, if our 'bent' tax laws change or the finance houses pull out chances are we will be in negative equity and we decided it wasn't worth the risk.
Lastly if we rented the house out for say 2 years and then decided to sell, we feel it would be very difficult to do from the other side of the world and also we would need tenants out whilst we have people looking therefore for those months we would have to cover the mortgage which at the mo is around £1000 a month
I dunno I suppose we will just have to stomach it, its just a mare as I reckon in Brisbane that will proby be a years salary for me.
Ah well.

Re: Slightly off but help desperately required
 

8 months interest sounds rather high for a redemption penalty. When does the penalty
reduce/expire?

One option you may want to consider is to sell your house, and leave the money (or
enough to cover the amount of the mortgage) in an interest earning GBP account until
the redemption penalty period expires. Once you can redeem without penalty, do this,
in the meantime you'll have been able to take the equity in your property to
Australia.

You're still in for some sort of loss on the interest, as what you get on term
deposit won't add up to the mortgage interest, and I'm not sure how the Australian
tax position would work out. So it may or may not be feasible - maybe Alan Collett
can add something to this?

Jeremy

    >On 16 May 2002 14:20:20 GMT, jasmin <[email protected]> wrote: Hi Gerard
    >
    >The reason we changed onto this fixed rate was 18 months ago we decided to rent
    >our house out when we moved. In the interim we have changed our mind and would
    >rather give ourselves every chance down there by having the collatoral available.
    >We live in Jersey and the housing market here is very volatile, if our 'bent' tax
    >laws change or the finance houses pull out chances are we will be in negative
    >equity and we decided it wasn't worth the risk. Lastly if we rented the house out
    >for say 2 years and then decided to sell, we feel it would be very difficult to do
    >from the other side of the world and also we would need tenants out whilst we have
    >people looking therefore for those months we would have to cover the mortgage
    >which at the mo is around £1000 a month I dunno I suppose we will just have to
    >stomach it, its just a mare as I reckon in Brisbane that will proby be a years
    >salary for me. Ah well.
    >
    >
    >
    >--
    >Posted via http://britishexpats.com

Re: Slightly off but help desperately required
 

I can't see the finance company letting you sell the house without redeeming the mortgage. After all that is their security.

If you have a £200K mortgage, the £8K is only 4% which is not usual as a redemption penaltyin the early period of a fixed rate loan.

Re: Slightly off but help desperately required
 

Good point. I was just thinking aloud, but on refection it sounds like you are right.

Jeremy

    >On 17 May 2002 13:20:23 GMT, Gerard2 <[email protected]> wrote:

    >I can't see the finance company letting you sell the house without redeeming the
    >mortgage. After all that is their security.
    >
    >If you have a £200K mortgage, the £8K is only 4% which is not usual as a redemption
    >penaltyin the early period of a fixed rate loan.
    >
    >
    >
    >--
    >Posted via http://britishexpats.com

Re: Slightly off but help desperately required
 

There has been quite a furore in the last year or two about the charging of early redemption penalties, and ultimately it seems to come down to whether or not the charging of an early redemption penalty is "unfair" in terms of the contract.

If you are keen on a fight with your lender this site in particular is probably worth looking at:
http://www.financevictims.co.uk/mort...-penalties.htm

However, on balance I would expect that you willl have to take the redemption penalty "on the chin" - after all you have had the benefit of the fixed rate.

I don't think Jeremy's idea of selling the property and leaving the proceeds on deposit until the early redemption period is a runner - somehow I can't see the solicitor for your prospective purchaser allowing their clients to buy your property when a loan is secured on it.

The only option worth pursuing in my view is to look at renting out your property in the UK until the early redemption period expires, and rent a property in Australia (always a good idea at the outset anyway) until you can sell your home in the UK and redeem the mortgage free of penalties.

Inevitably there are tax consequences attaching to this as a strategy, but with £8k at stake it is probably worth looking at this as an alternative.

Not sure whether this helps ...

Re: Slightly off but help desperately required
 

Alan

    >On 17 May 2002 16:20:54 GMT, Alan Collett <[email protected]> wrote: However, on
    >balance I would expect that you willl have to take the redemption penalty "on the
    >chin" - after all you have had the benefit of the fixed rate.

If it's a fixed rate then it would often be unreasonable to expect the financial
institution to redeem early, as then anyone could simply take out fixed rate finance,
keep it if variable rates rise, and redeem it variable rates fall. But the bank will
probably have a fixed rate deal on the other side of its balance sheet that it will
have to keep financing, hence the redemption penalty.

It's a different story with extended lock-ins that go beyond the
fixed/discounted period.

Another point to note is that the poster I think lives in Jersey - does the Unfair
Contract Terms Act apply there?

    >
    >I don't think Jeremy's idea of selling the property and leaving the proceeds on
    >deposit until the early redemption period is a runner - somehow I can't see the
    >solicitor for your prospective purchaser allowing their clients to buy your property
    >when a loan is secured on it.

It's not a runner - it didn't consider the security aspect on the loan and should
have stayed in my 'draft' folder :)

    >
    >Inevitably there are tax consequences attaching to this as a strategy, but with £8k
    >at stake it is probably worth looking at this as an alternative.

Perhaps a general point coming out of this is that people should try to be as
flexible in their financial arrangements as possible. Fixed rate finance deals have
their attractiveness, but they reduce flexibility to cope of circumstances change. As
for products like endowments which demand a 25 year commitment to have any chance of
a reasonable return, it seems amazing that they are still being sold in this day when
more flexible alternatives (unit trusts, ISAs etc) are available.

I guess one big influence is going to be how much is £8k when compared to the value
of or equity in the property.

If the redemption penalty period expires in the near future, another option might be
to simply validate visas in Australia and postpone the move proper until the house
can be sold without penalty. But if the housing market is volatile, any movement in
the price or in the exchange rate between GBP and the A$ could easily exceed GBP8k -
so it looks like there is no easy way out of this dilemma.

Jeremy

Re: Slightly off but help desperately required
 

Alan

What are the tax implications of renting your house out in the UK whilst living in a rented house in Australia for 1-2 years after migrating and then selling it whist still being resident in Australia?

Thanks
Gerard

Re: Slightly off but help desperately required
 

Hi Gerard.

The short answer is "it all depends on how long you are out of the UK." Here's an example of how complicated it can get: you leave the UK on 01/07/2002 to live in Australia and have a UK property which you let out. You then sell the property after the tenants have been in the property for a couple of years - say on 01/07/2004. You then decide that actually you'd like to return to the UK and do so on 01/07/2006.

You would have had to consider UK income tax on the property rental for tax years 2002/03, 2003/04, and 2004/05.

You would have had to include the UK net rental income on your Aussie Tax Returns for income years 2002/03 and 2003/04.

You would have to compute the capital gain arising over the period since your arrival in Australia to the date you sell it, apply a 50% discount to the net gain and include this in your assessable income in Australia in the income year that you sell the property.

And to complicate matters further, because you have returned to live in the UK within five complete tax years of your original departure the UK's anti-avoidance tax laws may well require you to include the capital gain arising on the disposal of your property (computed with reference to exempt periods, letting exemptions, etc) in your 2006/07 Tax Return.

To be frank it's very involved, and not a subject for the faint-hearted (as is so much when dealing with tax issues arising on a move to Australia ...).

There's a tax factsheet on my website that discusses the issue in a bit more depth. Go to http://www.collettandco.com/factsheet.cfm
and select the factsheet on Moving Overseas and Letting a UK Property.

Hopefully I haven't ducked the question but I really can't give an answer that's specific to you without knowing more about your situation, plans, etc.

Hope this helps.

Re: Slightly off but help desperately required
 

Thanks Alan

I have ordered your leaflet.

I have looked at the Australian tax guide at the main residence exemption. I thought I would be able to rely on the following:

Quote:
"If a dwelling that was a taxpayer's main residence stops being his/her main residence, the taxpayer may choose to continue to treat it as a main residence. The maximum period that the dwelling can be treated as a main residence is six years if the dwelling is used for income-producing purposes while the taxpayer is absent."

I couldn't find out whether foreign property can be classed as a main residence.

Re: Slightly off but help desperately required
 

look guys you cant have it all ways, just sell the lot and go. pay everyone you need to and dont come back. if you go holding on to things then i dont think it helps you to think negitive. youll have all your money to start your new life with. perhaps thats why alot of people come back because they didnt GO to begin with. good luck all lor

Re: Slightly off but help desperately required
 

Lor

Thanks for that but if you look at the rest of the thread you'll realise it going to cost us a lot a money to sell up at the moment.

Re: Slightly off but help desperately required
 

sorry will look at all the thread in future Lor

Re: Slightly off but help desperately required
 

You're not the first to tell us we are being negative by keeping the house in UK. I'll end up clouting my Dad if he mentions it again.