Brandy07

So we're all set to move - got the visas back last week. My husband flys out on 4th July to start work and myself and the children will fly out August.
Yesterday my husband had a call with the US tax people his company have employed and we've discovered an issue that we weren't made aware of previously.
As we're coming over there on a 2 year contract we're keeping our house here in the uk but renting it out. However, as our mortgage is a 2 year fixed it will come up to remortgage whilst we're over there. Due to Brexit and the pound falling, the exchange rate says the amount we borrowed let's say was $150,000 now as the exchange has fallen when we remortgage we only now need to borrow let's say $120,000 so it looks like we've made $30,000 which we have to pay tax on even though we haven't as it's the same house and here in the uk the amount we borrow will only be less what we've paid off in the 2 years.
Does anyone have any experience with this? Do we really have to pay tax on money we've never had?
We're moving PA - the suburbs of Philadelphia if that makes any difference.

newadventure

Hello Brandy07,
I am sure others will be along to help, but what you describe is correct as I understand it. I don't know if it is possible break the 2 yr fixed contract and remortgage before you come over? Alternatively, if you do nothing, does the mortgage revert to a standard variable rate? Although not ideal, this MAY not count as remortgaging and therefore you would not fall foul of the situation you describe

Brandy07

I'm not sure. My husbands ringing them up today to find out the date it expires and what penalty costs are involved if we remortgage now. I think it will go onto a variable rate but I think that's quite high.

vickyr

Hi Brandy07, apologies for hijacking your thread but I'm hoping you can help me out! We would potentially be in this situation - we were planning on keeping our UK home and renting it, but we are still paying off the mortgage so would have to remortgage from the US (if it all works out, more than once).

How would paying the tax on the difference work - would you have to report the mortgage as a financial account on your tax returns? Would you (we) face the same issue if the value of our house increased, decreasing out LTV%?

Ecto17

We arrived in the US yesterday and have recently gone through the same situation. The advise you have been given is correct and as frustrating as it is, you would be liable for the tax. You can switch automatically onto the standard variable rate without that being deemed a remortgage and therefore this can be done without the tax implications. It is so frustrating l know but l would recommend doing the simple sums to find out what is the most cost effective solution as you have 3 options, leave and switch onto the variable rate, pay an early termination fee or remortgage whilst out here. The third is the hardest to put an exact figure on but if you pick option one, you still have option 3 to consider. Everyone's situation is different so everyone will make a different choice so let the sums decide!! Lots of people on here that know lots more about tax then l ever will but this is our understanding. Good luck with move.

Pulaski

The advice given is correct, but you may be "saved" from the situation because based on several years of tracking this issue through posts on BE, it is extremely difficult to remortgage a property while you are living outside the UK. The only option I have seen discussed in the past couple of years is a refi with HSBC but the required LTV ratio is silly and the interest rate outrageous. So you should research what happens if you don't refi because it is more than likely that you can't refi.

In the US forum the tax question usually arises in the context of the sale of a home in the UK.

theOAP

Please see the following link in reply:

US Tax on UK remortgage loan

Pulaski

There is nothing in that link that hasn't already been discussed on BE several times in recent years, with the possible exception of the tax code section number.

vickyr

I think theOAP was posting it for my benefit I'd done a LOT of searching but obviously wasn't using the right words or terms to come up with anything useful. Thanks!!

Pulaski

Right, but I don't know why he referred you over there when the same information, and IMO in more detail, is available here on BE.
You haven't seen the threads in BE on the subject? ..... There is a search function, link above, and the topic comes up here on BE every two three months.

If you search for <mortgage capital gain payoff> you will find seven threads in the BE US forum in the past 18 months.

vickyr

Pulaski, I will PM you instead of replying here - it's not really related to the thread and I'd rather not bother Brandy any further!

Brandy07

Thank you