Buying property back in UK - mortgage question
 

Hello all,

I am a permanent resident living and working in the US. My parents still live back in the UK and I want to buy their flat for them so they would continue to live in it without worry. Does anyone have experience with obtaining a mortgage from abroad ? I was told that I would need to do it with a bank in the UK and it seems like several (natwest, Barclays etc) do this through their offshore versions.

Thanks for any pointers!
Andrew

Re: Buying property back in UK - mortgage question
 

I'd suggest consulting a mortgage broker like London & Country.

Re: Buying property back in UK - mortgage question
 

Are you intending to move back at all?
Usually an expat mortgage works on the basis that your time abroad is a secondment and your employer will confirm your return date.
Buy to let are not usually possible unless you already have a UK property (and then not for rental to family members)
What price and loan to value are you looking at?

So broker is your first port of call to go through your situation.

Re: Buying property back in UK - mortgage question
 

You do however face US income tax on future gains plus US income tax on future foreign currency gains on the mortgage. A US dollar denominated mortgage would eliminate the latter.

Re: Buying property back in UK - mortgage question
 

Gains on what? .... The value of the flat? .... That would be capital gains tax not income tax. :unsure:I think a gain on a mortgage is theoretically possible (GBP declines against the USD so reducing your liability, but such losses or gains are calculated on disposal, so unless you pay off the mortgage early there would be no taxable "event"), but how would you calculate it, .... and how would the IRS recognize it, because I have never heard of anyone being taxed on the gain on a mortgage. You are correct, but I suspect that such a product doesn't exist in the UK, or at least not without such fees and charges that make the product unattractive.

Re: Buying property back in UK - mortgage question
 

You don't produce gains on a mortgage since that is a debt and not an asset. When mortgage payments are made, the interest needs to be converted to dollars to use as a deduction but an early payoff is just repayment of a debt.

Re: Buying property back in UK - mortgage question
 

But suppose that due to FX movements that what would have been a payoff of $50k (based on the FX rate at the time the mortgage started), only required $47k, isn't that $3k every bit at much a gain as a short-sale mortgage forgiveness of the same amount, which is taxed? :confused:

Re: Buying property back in UK - mortgage question
 

But that gain would be included in the gain of the asset sale whether a home or a security. I suppose if you didn't sell the asset, you could report that gain as taxable but then you'd have to subtract that gain from the asset gain when sold and that would likely just confuse the IRS.

Also if you refinanced and later had a loss on the mortgage due to currency fluctuations, I don't think the IRS would be too happy if you reported that loss.

Re: Buying property back in UK - mortgage question
 

All told, I agree. It is a theoretical possibility, but I have never heard of anyone trying to calculate gains and losses on the financing independent from the underlying asset.

Re: Buying property back in UK - mortgage question
 

Here is nicely written explanation of US tax rules on repaying foreign currency mortgages (found by googling for Revenue Ruling 90-79):

http://www.expatwomen.com/expat-wome...h-the-risk.php

One cannot deduct a loss at all, as losses on such transactions are disallowed as non-business losses under Internal Revenue Code § 165(c)

Incidentally, Pulaski, the United States does not have a capital gains tax. Capital gains are charged to income tax, although sometimes at different rates.

Re: Buying property back in UK - mortgage question
 

Yeah, we've had that discussion before. ...... Capital gains are taxed, and the tax is "income tax", but taxed at a substantially lower rate than most other income.