Moving abroad - what should we do with our house?

Clydefrog

Hello everyone, the MSE forums have never failed us in coming up with brilliant ideas we haven't thought about, or providing valuable insight, so we figured we'll ask for advice about our property.

About the property:

• semi-detached
• valued in the region of 190-200k
• outstanding mortgage in the region of 100k
• due for remortgage this November

About us:

• A couple in mid 30s
• 6 month old baby
• Mum on maternity
• Dad on around 60-70k pa
• Around 20k in savings
• Likely to move abroad within the next 12 - 18 months (we are following the grandparents to Poland)

While the move is still some time away, I figured it might be a good idea to start looking into the options we've got when it comes to our house. Having done a bit of research, read a bunch of articles, spoken to a few landlords, we identified a few possibilities:

1) Get a 2-year interest-only mortgage, carry on living in the property for the next 12-18 months and build up our savings. Sell as soon as we move away. Seems to make the most sense, as the extra money would definitely come in handy when setting up a new home.

2) Get a 2-year capital + interest mortgage, carry on living in the property and build up further equity, Sell as soon as we move away. Not sure if building up equity short-term will be worth it, seeing how property prices are predicted to go down.

3) Once we move, instead of selling immediately, we could rent the property out on an interest-only mortgage. While we will maintain links with the UK and still visit regularly, we're not sure if this won't turn into more of a headache than it's actually worth (seems to be the tune with some of the landlords we know). The monthly rental income should be in the region of £900, excluding the mortgage, agent fees, maintenance costs - probably less than half that after all expenses. The property would then be sold a few years after our move to free up the capital. Suppose this gives us a bit of a safety net, in case we don't settle in or miss Britian.

On a side note, seems like the property market and the prospective value of GBP are all doom and gloom in nearly all the articles we have read. We realise it's like trying to forecast the weather, but on the other hand we're concerned that our property will be worth a lot less in the next couple of years (either because the house prices will go down, or because the pound will lose further value compared to Euro).

As for our move - we anticipate that our savings + a small loan will get us a medium-sized flat close to the grandparents. The initial plan was to see how we settle in, sell our UK property after a couple of years and use the money to fund the purchase of a larger house in Poland. At this point, we're not sure if it wouldn't be a better idea to sell straight away.

Any responses / ideas / opinions will be much appreciated!

need_an_answer

I wouldn't recommend becoming a LL...whilst you will continue to visit the UK you wont be on hand to deal with tenants and all that renting entails.

AnotherJoe

I wouldn't even think about being an absentee LL. Just sell it when you are done and move on.

steampowered

I would stay on a regular mortgage and start marketing the property when I was closer to being ready to move to Poland.

As you might move in 12-18 months, you need a mortgage which doesn't charge a break fee. Perhaps a tracker mortgage rather than a fixed rate.

While Brexit does present risks, no-deal Brexit risk is already factored into exchange rates - the value of the pound has already sunk 25% or so against the Euro since 2016. Given where we are today, I don't think you have much to gain by switching your pounds into zloty now.

Clydefrog wrote: »

2) Get a 2-year capital + interest mortgage ... Not sure if building up equity short-term will be worth it, seeing how property prices are predicted to go down.

Under both Options 1 and 2 you are fully exposed to the impact of changing property prices ! Option 2 is superior to Option 1.

The only difference is that Option 1 will result in you paying more interest because interest only mortgages are more expensive, so you'll end up with less money left over after you sell.

eddddy

If you're thinking about living in Poland, and renting your property in the UK, you should check out the tax situation.

A LL who lives in Poland and rents out UK property tells me that he is double taxed. He has to pay UK tax on the rent, then pay Polish tax on what is left.

And the Polish tax system is harsh on LLs - for example, there's no tax allowance on mortgage interest.

So maybe make sure you'll actually make some money by renting out the property.


(But check all the details. It's quite possible that the Polish LL was just giving me a 'hard luck' story and exaggerating.)

Clydefrog

Thanks for the replies everyone, it sounds like being a remote landlord might be a bad idea in this case. Truth be told, I wasn't particularly keen on it in the first place, seeing how it can promptly turn into a nightmare with the "wrong" tenants.

Under both Options 1 and 2 you are fully exposed to the impact of changing property prices! Option 2 is superior to Option 1.

I'm not sure about option 2 to be honest, it sounds like repaying on a property which is an asset that is likely to depreciate in two ways (stagnating / dropping house prices + weaker pound). Unless I'm missing something. Interest only works out to about £110 pcm, meaning a consideerable amount of cash we can save in the short term, without taking the gamble of "let's hope it sells quickly and for the asking price".

A LL who lives in Poland and rents out UK property tells me that he is double taxed. He has to pay UK tax on the rent, then pay Polish tax on what is left.

I know the two countries have legal agreements to prevent double taxation, at least in respect of income. I have a feeling that they were either exaggerating or simply were not aware this could have been avoided.

getmore4less

Option 1 and 2 are the same end net money in pocket result if you sell.
except you save some interest with option 2 so a bit better off..

edgex

If you definitely are going to move, why not sell now & just rent somewhere for the 12-18 months.
You might be lucky & get a quick sale before having to re-mortgage.

AdrianC

Clydefrog wrote: »

Not sure if building up equity short-term will be worth it, seeing how property prices are predicted to go down.

The only difference will be whether you continue to pay interest on the borrowed money that you could pay off.

3) Once we move, instead of selling immediately, we could rent the property out on an interest-only mortgage.

You'd need consent to let, obviously.
And that's if you can get an interest-only mortgage. Rare things, these days.

While we will maintain links with the UK and still visit regularly, we're not sure if this won't turn into more of a headache than it's actually worth (seems to be the tune with some of the landlords we know). The monthly rental income should be in the region of £900, excluding the mortgage, agent fees, maintenance costs - probably less than half that after all expenses.

So you'll actually be getting a return of about 2.5% on your £200k leveraged asset. At best. Before tax. In an ideal world, where there's no unexpected maintenance costs, no voids, no unpaid rent, no damages.

And that's for an asset that leaves you exposed to what you fear is a falling market, as well as unfavourable forex risks.

Suppose this gives us a bit of a safety net, in case we don't settle in or miss Britian.

That's your strongest argument in favour of keeping a foot on the UK housing ladder. Except you may still need to find somewhere to live if/when you return, if that return doesn't coincide with an opportunity to give notice to a compliant tenant, allowing you possession when you require it.

As for our move - we anticipate that our savings + a small loan will get us a medium-sized flat close to the grandparents. The initial plan was to see how we settle in, sell our UK property after a couple of years and use the money to fund the purchase of a larger house in Poland. At this point, we're not sure if it wouldn't be a better idea to sell straight away.

I know zero about the Polish housing market. But it's rarely a good plan to buy a small property as a toe-dip to see if it all works out, with the plan to sell and upgrade in a couple of years.

The sensible move would surely be to sell the UK house, rent a Polish property and invest the UK equity. Then, if it all works out, buy a Polish property. Which side of the currency divide you invest the money depends on your views about relative forex risks and costs, and your likelihood of returning. Perhaps a 50/50 split between Sterling and the Zloty? Or three-way with the Euro in there too for a safety net?

prosaver

Should keep it incase u want to come back , thats what I would do.
Have you got any relative who could house sit it for you.

Owain_Moneysaver

Clydefrog wrote: »

we're concerned that our property will be worth a lot less in the next couple of years (either because the house prices will go down, or because the pound will lose further value compared to Euro).

That points to sell.

A 5.4% gross return on investment isn't great (but the property should pay for itself). To make money on it you'd either have to keep it till after the mortgage is paid, thereby getting almost all the rental income, or have capital growth in addition to the rental income.

You haven't said where it is, or whether you'd look to return to the same part of the UK if you did return. There are places you can get a reasonable property with good rental demand (i.e. not letting to benefits claimants) for about £100k, so you could split your funds and buy a property in the UK specifically for rent, and also have money towards a property in Poland.

Another point I think not so far mentioned is the emotional aspect of letting out your home. If you let it out, and it gets trashed, would you be upset and would you want to live in it again?