Expat to Buy cash or mortgage?

got2bfunky

Hi all, after some advice here.

I have been an expat for 6 yrs and have no plans to move back in a hurry. We have just sold our home in the UK and together with savings have roughly £225k now to invest which right now is earning 0.05% in a Lloyds offshore account.

My initial plan was to purchase an apt in my home town for circa £115k cash which will achieve a rent of circa £600 a month. This is effectively £600 a month more than we are earning from the money right now.

My question is would you pay cash or get a mortgage? Are there tax implications either way? Assuming that with a mortgage option i could aim to get more than one property.

As you can see total novice here so open to your thoughts.

Thanks

iantojones40

Why is property your only option as an investment vehicle?

csgohan4

got2bfunky wrote: »

Hi all, after some advice here.

I have been an expat for 6 yrs and have no plans to move back in a hurry. We have just sold our home in the UK and together with savings have roughly £225k now to invest which right now is earning 0.05% in a Lloyds offshore account.

My initial plan was to purchase an apt in my home town for circa £115k cash which will achieve a rent of circa £600 a month. This is effectively £600 a month more than we are earning from the money right now.

My question is would you pay cash or get a mortgage? Are there tax implications either way? Assuming that with a mortgage option i could aim to get more than one property.

As you can see total novice here so open to your thoughts.

Thanks

Useful advice from the HMRC and G_M


https://www.gov.uk/renting-out-a-property/paying-tax


http://forums.moneysavingexpert.com/showpost.php?p=67759929&postcount=7


Are you prepared for what being a LL entails, the maintenance costs, the void periods and the cost to evict via the court e.t.c?

AnotherJoe

It will be nowhere near £600 a month once you factor in costs and tax. I think you'd be lucky to get £350. And a lot of hassle regards the legal and management side of being a LL especially not being close. Everything you do will involve delay and extra cost.

Also as said, why is property your only option for what to do with this money ? What is your investment "horizon", e.g. How long will you be investing for ?

got2bfunky

Thanks all.

I should have mentioned we were letting our house in the UK for the past 6 years, however as the area was hit very hard by the recession, we ended up selling it for what we paid for it 10 years earlier. Hence we are looking at a new place that would be in a more likely area to appreciate.
I would buy it with my wife so our profits would not exceed the annual allowance, so aside from maintenance we should be in a positive position.
Would love to know what other vehicles you guys would suggest as over in Dubai, anything that is promoted is purely to make the 'FA' a hefty commission. In terms of length this is a tricky one as we have no confirmed plan for the future, however with the AED/GBP rate as it is we cannot purchase over there so i'd say at least 3-5 years. Thanks again really useful.

booksurr

so you are, in tax terms, UK domiciled (you originate from the UK) but are non resident. A 3 - 5 year timeframe is difficult since that means you could be exposed to UK tax on your gains when you return - take proper advice on that one..

No mortgage
Obviously without the costs of a mortgage your taxable profit will be higher. Tax is however patently still the same % so it is "simply" a question of will be you left with more money after paying tax if you do not have a mortgage to pay compared to you being able to claim tax reduction on the mortgage interest and potentially be highly geared with more than one property bring in income

With mortgage
the tax rules have changed over the treatment of mortgage interest so that if anyone is a higher rate taxpayer then the amount of interest relief they can claim is capped at the basic tax of tax. Also that means if you are highly geared the gross income total may push you into a different tax bracket - you need the numbers to get an idea of your actual exposure.

In principle the gross income you mention from one property is so small that neither of you will be higher rate taxpayers given your non resident status for now and intention to jointly own, and presumably as this is the only source of UK income for either of you it is possible neither would be tax payers at all given personal allowance is (for the moment!) still available to non residents

martindow

got2bfunky wrote: »

Hence we are looking at a new place that would be in a more likely area to appreciate.

Unless someone has got a good quality crystal ball this is not an easy question to answer!