fromuktous

Hello, looking for some re-mortgaging experience.

My family and I are planning a move to the US for 2 years and rent our home whilst away.

We have a fixed rate mortgage which expires around August next year, once it expires it will move to the bank's variable rate which is about £500 more per month. My current lender has said if the property is rented they will not allow us to select a new fixed rate and not move the mortgage to a buy to let. The only option is to move onto the standard variable rate.

I have also spoken to a buy to let mortgage provider and they said they would not lend if we did not live at another UK residence.

Can I not tell my lender we have rented and simply apply online for a new mortgage August next year? I foresee potential issues with this as we could not show any bills with our names on
Do I suck up the additional £500 per month for a year?

Thanks!

christmasoompa

Hi, welcome to BE.

Another £500 seems crazily high considering how long mortgage rates are at the moment.

You couldn't tell your lender you've not rented the property, I'm pretty sure it will be a condition of the mortgage that you do have to tell them, and it wouldn't be worth risking if they do find out. But could you switch to another lender maybe, one with a cheaper variable rate?

fromuktous

Thanks,

I'm not sure whether another lender would be willing to offer us a mortgage whilst it's rented and we are not in the country.... :-(

christmasoompa

I've no idea, but I'd think it's probably worth a chat with a mortgage broker, they may know lenders that won't mind you being out of the country temporarily. I'm assuming you're moving for a fixed term work assignment on a L1 visa? So you can show it's not a permanent stay if needed, that might make a difference.

Best of luck.

Cook_County

Do bear in mind that if you re-mortgage while a US resident (unless the Pound strengthens significantly from where it is today) that you will need to recognise a large US taxable foreign currency gain.

rebs

You may need to talk to a mortgage broker.

Have a read of the Moneysavingsexpert page regarding choosing a mortgage broker -

Cheap Mortgages - find the best deal - MoneySavingExpert

We used London & Country prior to a stint living in America and they were able to recommend a mortgage provider that was likely to be sympathetic to our need to rent out our home for a couple of years.

Pulaski

With this (above), and all things considered, I would strongly recommend refinancing now While you're still in the UK, then leaving well alone during your time in the US.

fromuktous

I was told that accounting in the US was going to be tricky! How do i calculate what would be open to a currency gain and what the tax on that would be?

Pulaski

The capital gain on the payoff of your mortgage is created because it took fewer dollars to pay off the balance than you received when you took out the mortgage. Say you borrowed £120,000 when the exch rate was $2/£1, so you borrowed $240,000 from the IRS's perspective. Several years later, after you have paid off £20,000 and moved to the US you sell the house and pay off the mortgage. The exch rate is now $1/€1, so you pay £100,000, but at today's rate, from the IRS's perspective, it only cost you $100,000, not the $200,000 (paid down part of what) you received. You have a taxable gain of $100,000!

In short, it's the difference between the current dollar value of the mortgage payoff amount and the dollar value of the mortgage payoff amount at the exchange rate on the day you originally took out the mortgage (or most recent refinance if you have refi'ed previously).