Leaving the country...

mea2000

Hi MoneySavers,

My wife is South African and I am British: we have decided to leave the UK for a while (maybe forever?) to live in SA.

Interest rates over there are around 10.5% and we want to buy a property. However, we are homeowners in the UK and don't want to relinquish our property here.

In order to get a decent home over there, we would need to borrow around £50k-75k. I am wondering what is the best way to finance this and implications. We have about 50k in capital in the UK invested in property.

Options I have been thinking of are:
a) Secured UK loan for £50K at around 7-8%
b) Remortgaging releasing all capital (£50K) and a un-secured loan for remainder
c) Taking SA mortgage at 10.5% - transferring capital when a favourable exchange rate exists.
d) any other ideas.....?

Basically, you can tell I am trying to avoid the 10.5%. However, I know that I am not going to get the lower monthly payments on a normal loan because of the shorter loan period and I have to consider exchange rate fluctuations - I could take the high SA APR and wait for a really good exchange rate which could save me loads.

I am thinking re-mortgaging here is the best option and maybe borrowing a lower interest rate any other capital.

Please don't comment on why we are moving, but any financial suggestions are welcome!

Mark.
p.s. please igonore the implications of a loan based in the UK when we are in SA as I run a business where theorectically I am constantly between countries and could still be domicilled in the UK.

Martinslovechild

You could try looking at banks which operate in both UK and SA. For instance, a friend who wanted to purchase a property in New Zealand but keep his UK property was able to get a mortgage with HSBC because they operate in both countries.

BUT

Insurance is usually the issue - you can only leave your property empty for a maximum amount of time (3 months I think). My friend was able to rent out both properties for the periods they weren't living there so overcame this obstacle, but you'll need to definitely bear it in mind.

Rafter

Be careful about comparing interest rates between the UK and SA.

Part of the reason that interest rates are higher over there is inflation.

Over time the value of your SA mortgage versus your SA salary (or its sterling equivalent) will go down so the true cost to you will be less.

The difference in interest rates suggests that the £ is going to rise versus the Rand and therefore you £ mortgage versus the value of your SA property may mean you end up in negative equity with all your borrowing in £ and your assets in Rand.

If I were you I wouldn't try to second guess interest rate and exchange rate movements. You are better off spreading your risk by having a mortgage in both currencies and on both properties rather than mortgaging yourself to the hilt in the UK speculating things will work in your favour.

Good luck. Very jealous. South Africa is a beautiful country.

R.