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Renting UK house while in US - mortgage company's expectations?

Renting UK house while in US - mortgage company's expectations?

Old Sep 26th 2009, 10:14 pm
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Default Renting UK house while in US - mortgage company's expectations?

This really applies to anyone who moves overseas, but I can't see a Forum that is for general issues re: moving overseas.

Some of you may know I'm trying to get back to the US but, besides the lack of job opportunities, an increasing worry is the UK housing market - either I will have difficulty selling, or would have to take a big loss (£40k+ and growing, which is a big amount for me).

Consequently, one possibility is to rent out my house if I move back to the States (would much rather not, but that's a different story).

I'm wondering, for those who have found themselves having to rent out their UK house, how did the mortgage company respond?

Back in the 80's I seem to recall they really didn't care as long as the mortgage was paid.

Then, in the late 90's, banks seemed to expect you to ask for permission to rent your primary residence while it was mortgaged, but didn't expect much else. Then they seemed to want to charge you a considerable sum for the permission to rent letter.

More recently, though, I have heard of banks requiring people to change their mortgage either to a buy-to-let, or some sort of hybrid right-to-rent mortgage (usually with a huge fee and less favorable terms, like higher interest).

Any experiences with this? I'm concerned I may not be able to take a US job offer simply because I'd be throwing away all the capital in my house (the result of years of saving, not from capital appreciation).

Interested to hear about people's experiences, especially recent ones.
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Old Sep 26th 2009, 11:10 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by dunroving View Post
This really applies to anyone who moves overseas, but I can't see a Forum that is for general issues re: moving overseas.

Some of you may know I'm trying to get back to the US but, besides the lack of job opportunities, an increasing worry is the UK housing market - either I will have difficulty selling, or would have to take a big loss (£40k+ and growing, which is a big amount for me).

Consequently, one possibility is to rent out my house if I move back to the States (would much rather not, but that's a different story).

I'm wondering, for those who have found themselves having to rent out their UK house, how did the mortgage company respond?

Back in the 80's I seem to recall they really didn't care as long as the mortgage was paid.

Then, in the late 90's, banks seemed to expect you to ask for permission to rent your primary residence while it was mortgaged, but didn't expect much else. Then they seemed to want to charge you a considerable sum for the permission to rent letter.

More recently, though, I have heard of banks requiring people to change their mortgage either to a buy-to-let, or some sort of hybrid right-to-rent mortgage (usually with a huge fee and less favorable terms, like higher interest).

Any experiences with this? I'm concerned I may not be able to take a US job offer simply because I'd be throwing away all the capital in my house (the result of years of saving, not from capital appreciation).

Interested to hear about people's experiences, especially recent ones.
I moved to the US in 1995, and have been renting out my house since then. I sent my mortgage company a letter when I left telling them what I was doing. If I recall correctly their rule at that time was that you could be away for 3 years and they would still look at it as a normal, residential mortgage. The mortgage is direct debit, and house has always been occupied with renters, so never any payment problems.

However, last year I moved in the US and sent them a letter telling them my new address (not the first time I have moved). This time they noticed how long I have been away and got a bit stroppy about it.... They insisted that I needed to change it to a buy to let, but that they didn't have that kind of product available, so I should do something about it. By that time it had been 13 years so can't complain.

So.... it was a pain arranging a new buy-to-let mortgage last year. All the companies were very reluctant to write any new policy in 2008-9. But eventually my broker found a good deal and it's all sorted out now with a very nice low rate.

My advice is
1. MOST IMPORTANT - have a professional management company handle everything. It costs 10% of the rent but it's worth it!!
2. Contents insurance - make sure you get a policy that covers the contents when you rent it out. There are insurance products designed for this.
3. Building Insurance - you need to notify them what you are doing, i.e. renting it out, so that they don't have excuse to cut you off if anything happened..
4. Mortgage. Don't know how long you can keep a standard mortgage if you are absent, and renting these days. Maybe someone else can comment on current practice.
5. After all this time away, eventually I am going to have a big tax issue down the road if/when I sell - but that's a problem for another day...

I can recommend renting (with a good professional agent in the UK), the rent pays the mortgage and you don't need to worry about it at all. Occasional maintenance $$ are required. Best of all you can deduct all your mortgage interest, maintenance, service fees, insurance, depreciation etc. as business expenses on your US Tax Returns. Very cool!

H

Last edited by heantune; Sep 26th 2009 at 11:13 pm.
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Old Sep 26th 2009, 11:32 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by dunroving View Post
This really applies to anyone who moves overseas, but I can't see a Forum that is for general issues re: moving overseas.

Some of you may know I'm trying to get back to the US but, besides the lack of job opportunities, an increasing worry is the UK housing market - either I will have difficulty selling, or would have to take a big loss (£40k+ and growing, which is a big amount for me).

Consequently, one possibility is to rent out my house if I move back to the States (would much rather not, but that's a different story).

I'm wondering, for those who have found themselves having to rent out their UK house, how did the mortgage company respond?

Back in the 80's I seem to recall they really didn't care as long as the mortgage was paid.

Then, in the late 90's, banks seemed to expect you to ask for permission to rent your primary residence while it was mortgaged, but didn't expect much else. Then they seemed to want to charge you a considerable sum for the permission to rent letter.

More recently, though, I have heard of banks requiring people to change their mortgage either to a buy-to-let, or some sort of hybrid right-to-rent mortgage (usually with a huge fee and less favorable terms, like higher interest).

Any experiences with this? I'm concerned I may not be able to take a US job offer simply because I'd be throwing away all the capital in my house (the result of years of saving, not from capital appreciation).

Interested to hear about people's experiences, especially recent ones.
We moved to the US in July 08 and have rented out our house in the UK. Once we knew we were moving, I knew we would have to change out mortgage provider as we had an RBS One Account which stipulates that mortgage holders must be resident in the UK.

Knowing we would need a mortgage provider that would be sympathetic to us needing to rent, we used a broker, and explained our circumstances. We used a broker that is recommended on Martin Lewis' site (fee free and whole of market) - http://www.moneysavingexpert.com/index.php.

We ended up with a tracker with Cheltenham & Gloucester. They are fine about us renting out the property, but do state that after 2 years they will want to move us to a buy to let mortgage, which I should imagine will be a higher interest rate.
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Old Sep 27th 2009, 2:30 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

I am here in the usa on a visa so the way I see it am i technically still a uk citizen . I rent my house out and havent felt the need to tell anybody , and i am sure as long as the mortgage is being paid neither will the mortgage company.
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Old Sep 27th 2009, 2:50 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by helmet View Post
I am here in the usa on a visa so the way I see it am i technically still a uk citizen
why would you lose UK citizenship by getting a US visa? Or do you mean resident?
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Old Sep 27th 2009, 7:33 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by rebs View Post
Once we knew we were moving, I knew we would have to change out mortgage provider as we had an RBS One Account which stipulates that mortgage holders must be resident in the UK.
I don't think that is true for maintaining an account.

I am with RBS One account and planning to move soon. When I telephoned them several months ago they said I could keep the mortgage whilst I was in the USA. Their conditions were that I paid a £100 fee and that I would be moving back to the UK at some point in the future.

For some reason this not apply to those moving to Australia.
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Old Sep 27th 2009, 8:20 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by helmet View Post
I am here in the usa on a visa so the way I see it am i technically still a uk citizen . I rent my house out and havent felt the need to tell anybody , and i am sure as long as the mortgage is being paid neither will the mortgage company.
Did you tell the insurance company? If not, your home insurance may be invalid (as mentioned in post #2).
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Old Sep 27th 2009, 8:33 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

Thanks for some of the replies so far. Just to add, renting out a UK house is only an earner for those who have owned the property for a long time, and/or have a high level of equity in the house. In my case, the rent I could charge would hardly cover even the current monthly payments (and I'm on a good lifetime tracker rate). Plus, when you consider insurance, letting agents' fees, repairs, etc., on top of that, these days it's a struggle to cover mortgage by rental income. Used to be that owners could take an annual net loss because they "knew" the value of the house would increase. Those days are long gone.

That's why I posted. The one lucky break I had was mortgaging before the crunch, so my interest rate is only 1.09% (even so, because I bought at the height of the market, the payments are £650 pc.m.). I figure if I rent out at £650 pcm (a stretch around here), I'd make a net loss pcm of about £100 (which is manageable). If the mortgage provider forced me to move to a new mortgage (hard to get below an IR of 4% these days), the figures just wouldn't work out. Having prior experience of renting, it's surprising how many extra costs there are (repairs, occasional redecoration, vacant periods, etc.)

It's a shaky prospect for me in any case, which is why I'm especially interested in whether mortgage companies are forcing owners onto more expensive buy-to-let, or right-to-rent mortgages. Any other experiences gladly received.
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Old Sep 27th 2009, 11:28 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by dunroving View Post
when you consider insurance, letting agents' fees, repairs, etc., on top of that, these days it's a struggle to cover mortgage by rental income. Used to be that owners could take an annual net loss because they "knew" the value of the house would increase. Those days are long gone.
D,

Suffering a "loss" is not in itself a bad thing. If you can afford to subsidise the loss from your US salary you should be able to offset the loss against the tax on your salary. I am speaking (a bit) out of turn here because I don't know the position in the US but certainly in Australia you can. It can therefore have the effect of lowering your overall tax bill.

And whilst at the moment it may seem that you will never get your money back on your property I can almost guarantee that with time you will. We have had a property in London for 16 years and seen ups and downs but even in this depressed market it is still worth more than 3 times what we paid for it. Some would say not the best of returns but we are OK with it - to us it has been a bit like "forced savings".

HTH
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Old Sep 27th 2009, 12:16 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by dunroving View Post
Did you tell the insurance company? If not, your home insurance may be invalid (as mentioned in post #2).
That's exactly what I thought...plus if the mortgage company find out they could pull the mortgage...perhaps putting the owner into foreclosure.
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Old Sep 27th 2009, 12:49 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

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Old Sep 27th 2009, 12:52 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by OzSheila View Post
We have had a property in London for 16 years and seen ups and downs but even in this depressed market it is still worth more than 3 times what we paid for it. Some would say not the best of returns but we are OK with it - to us it has been a bit like "forced savings".
I think, your point about treating property as forced savings is excellent.
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Old Sep 27th 2009, 2:26 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by cranston View Post
I don't think that is true for maintaining an account.
I am with RBS One account and planning to move soon. When I telephoned them several months ago they said I could keep the mortgage whilst I was in the USA. Their conditions were that I paid a £100 fee and that I would be moving back to the UK at some point in the future.

For some reason this not apply to those moving to Australia.
That's true - we still have a regular bank account with them - just not our mortgage ie the same account was converted to a standard bank account.

Originally Posted by OzSheila View Post
D,

Suffering a "loss" is not in itself a bad thing. If you can afford to subsidise the loss from your US salary you should be able to offset the loss against the tax on your salary. I am speaking (a bit) out of turn here because I don't know the position in the US but certainly in Australia you can. It can therefore have the effect of lowering your overall tax bill.

And whilst at the moment it may seem that you will never get your money back on your property I can almost guarantee that with time you will. We have had a property in London for 16 years and seen ups and downs but even in this depressed market it is still worth more than 3 times what we paid for it. Some would say not the best of returns but we are OK with it - to us it has been a bit like "forced savings".

HTH
I agree with that - when we initially moved over our rental income was no where near our mortgage cost - we supplement with our US income. Now that rates are down, we still supplement, but the surplus is building up a savings cushion in the UK for the inevitable time when rates go up again.

Dunroving: I know some other people have moved their mortgages to interest only to keep the mortgage cost in line with rental income - maybe that's something else you could look into?
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Old Sep 27th 2009, 2:30 pm
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by helmet View Post
I am here in the usa on a visa so the way I see it am i technically still a uk citizen . I rent my house out and havent felt the need to tell anybody , and i am sure as long as the mortgage is being paid neither will the mortgage company.
I don't think citizenship has any relevance - just the fact that you are no longer occupying the mortgaged property, but have tenants.

Originally Posted by dunroving View Post
Did you tell the insurance company? If not, your home insurance may be invalid (as mentioned in post #2).
Originally Posted by Jerseygirl View Post
That's exactly what I thought...plus if the mortgage company find out they could pull the mortgage...perhaps putting the owner into foreclosure.
For us, we never considered NOT telling the mortgage company/insurance company etc - not worth the risk.
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Old Sep 28th 2009, 1:16 am
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Default Re: Renting UK house while in US - mortgage company's expectations?

Originally Posted by dunroving View Post
That's why I posted. The one lucky break I had was mortgaging before the crunch, so my interest rate is only 1.09% (even so, because I bought at the height of the market, the payments are £650 pc.m.). I figure if I rent out at £650 pcm (a stretch around here), I'd make a net loss pcm of about £100 (which is manageable). If the mortgage provider forced me to move to a new mortgage (hard to get below an IR of 4% these days), the figures just wouldn't work out. Having prior experience of renting, it's surprising how many extra costs there are (repairs, occasional redecoration, vacant periods, etc.)
Can you confirm that this is correct:

You bought a house that at 1.09% interest rate costs you £650 per month (I'm assuming that is capital and interest?) which can only be rented for, at a struggle, £650 per month?

By my calculations assuming a 25 year mortgage to clear, you are paying about 500 pcm capital and 150 or so interest? Is that correct? (i.e. the house was £150,000 to buy?).

If thats the case, you're not really "losing" that money per month, it is going into an asset (a piggy bank if you like) and will possibly be a nice pension some day.

On the other hand, if those figures aren't the reality and the payments are interest only why on earth did you buy the house in the first place? Why not rent it for so much less money? At 5% interest that is an incredibly overpriced property???
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