Buying property in UK when already a homeowner here

eth0_

I'm thinking of buying-to-let an apartment, however i'm going to be moving to the UK in the summer where I hope to buy a property which I would occupy myself.

Can this count against me? i.e can the UK bank see that I have a mortgage in Ireland? Conversely, can I use the buy-to-let apartment as collateral against the purchase of a home in the UK?

Help appreciated!

threebeards

eth0_ wrote:

I'm thinking of buying-to-let an apartment, however i'm going to be moving to the UK in the summer where I hope to buy a property which I would occupy myself.

Can this count against me? i.e can the UK bank see that I have a mortgage in Ireland? Conversely, can I use the buy-to-let apartment as collateral against the purchase of a home in the UK?

Help appreciated!

Do you already own a property? If not, I'd be inclined to purchase the apt here inititially as an owner occupier and not mention to whatever bank you decide to get your mortgage from about moving to the UK at all.

There are a few reasons for this - as a buy to let purchaser, you're likely to have your interest rate loaded or increased by as much as 0.5% with some lenders. If you mention the UK, questions will be asked about (and more than likely proof required) what employment you will have in the UK, what level of salary you'll have, whether or not you'll be likely to be able to rent the property here when you go, whether you intend renting or buying in the UK.

Once you have your apartment here, it will put you in a different position when it comes to moving because then you can start to bargain as regards using the property as a deposit (but that will be very dependent on the loan to value of your property in Ireland).

Bank of Ireland are just after introducing a product whereby they'll fund the purchase of a property in the UK but I don't know any more about it. It would be cheaper for you to fund it from this side as interest rates are much lower. I think IIB might offer funding for the purchase in the UK as well.

If you go down another road and try to fund the purchase of the UK property from over there, to answer you question as to whether the mortgage over here can be seen or not, your bank statements will show the DD for your Irish mortgage (unless of course you have 2 bank accounts).

I hope this helps. Good luck.

antoinolachtnai

If you are borrowing to buy property in the UK, you should borrow in Sterling. It would be extremely unwise to do otherwise, unless you feel you are in a position to take a massive punt on the future weakness of the euro. You would leave yourself highly vulnerable to currency swings. If BoI offer a product, it will be on the basis that the borrowing is in sterling at UK interest rates, I would imagine.

Bluehair

threebeards wrote:

Do you already own a property? If not, I'd be inclined to purchase the apt here inititially as an owner occupier and not mention to whatever bank you decide to get your mortgage from about moving to the UK at all.

Just to play devils advocate on this be aware that if you purchase a property as an owner occupier with the actual intent of renting it out you are commiting fraud.

There are obvious and very significant financial advantages including massive stamp-duty savings etc and as threebeards describes the typical interest rate for buy to let is always higher than owner occupier.

If you purchase as owner occupier and rent it out within five years you will be eligable for a huge stamp duty clawback as well as having to pay 20% capital gains tax on any potential increase in the property value if you sell(that is if you believe property will continue to rise in value, something else to consider).

By keeping things 'off the radar' as it were you also lose the opportunity to write the mortgage interest off the rent which could have been quite a saving.

You also should be aware of the new Residential Tenancies Act 2004. Just to give you a taste of it.. "The registration of a tenancy is a legal requirement on the landlord. Landlords failing to register a tenancy may be guilty of an offence and upon conviction shall be liable for a fine of up to ?3,000 and/or up to 6 months in prison, along with a daily fine of ?250 for a continuing offence."

A tenancy must be registered with the Board before the landlord can avail of the Board?s dispute resolution service.This restriction does not apply to tenants wishing to avail of the service.

The PRTB will rigorously enforce the tenancy registration legal requirement.Where the PRTB has reason to believe that a tenancy exists that ought to be registered it may require the tenant(s) to supply it with any information the tenant(s) have about the landlord?s identity. Failure to co-operate is an offence."

Sorry to be putting a downer on the idea but I've had mates with similar ideas "i.e. ah sure the mortgage costs x amount and the rent is fifty a month more than that sure I'll be gettin a free house down the road"

Buy to let is a serious commitment if you're not letting youself in for major problems later on. Ask yourself can you afford to subsidise the mortgage if you only get 9 months rent a year?, if rent goes down slightly?, if interest rates go up to 5 or 6% over the next few years?. Far from being unlikely these are all probable scenarios.

Property is cooling down at the moment in the UK so my advice would be to save your money towards a deposit when you get there and spend some time researching the market in the area you'll be living.

Having said all that I'm happy to advise further on the ins and outs of buy to let here if you still want to do it just be ready to go into actual figures..

antoinolachtnai

I agree with almost everything you say Bluehair - it's pretty dumb to think you can keep a property investment 'under the radar' anymore - but who exactly would be getting defrauded by the actual act of purchasing? I just can't see who would incur the material loss, providing you played it straight with the revenue and if appropriate the bank when you started renting.

Bluehair

antoinolachtnai wrote:

I agree with almost everything you say Bluehair - it's pretty dumb to think you can keep a property investment 'under the radar' anymore - but who exactly would be getting defrauded by the actual act of purchasing? I just can't see who would incur the material loss, providing you played it straight with the revenue and if appropriate the bank when you started renting.

Absolutely you're right, keeping things above board with both the revenue and the bank is realistically the only way forward but you would then have to question the return on the investment at this point anyway (esp with the slowdown in the market and the obvious oversupply in apartments in certain areas). The questions I asked regarding loss of rent, increase in interest rates etc would need to be examined closely.

The material loss would be to the revenue (and indirectly to the taxpayer) if he decided to buy as a owner occupier(as threebears suggested) but really for buy to let. Stamp duty wouldn't be paid and he'd likely be free from cgt when he sells on (if you're claiming owner occupier you might as well go the whole hog and claim it's your ppr as well).

Overall though as you rightly point out keeping a buy to let investment out of sight of the revenue these days is at best a challenge and at worst extremely costly and foolhardy when you're pulled up.

Everyone and his dog seems to thing property is an easy way to get rich these days. It's not but unfortunately for those of use who've now grown up with double digit appreciation and cheap as chips credit for almost a decade it's hard to imagine the good times ever ending.