[Kieran]

Hi all you fiscal wizards. Does this idea pan out.?
We are moving over to NZ in Sept 07. We are lucky enough to have a lorra lorra equity in our Bournemouth House (approx £270.000)
Now being wimps, we have decided to rent our place out to test the water.
We will get about £1000 a month of which £850 is profit.
We were going to rent for a year and then buy. A rental say at the equivalent of £800pcm. Being tight, I dont want to hand over approx £10.0000 in rent for the year with nothing to show for it. Now hears the cunning plan.
Can I take out a remortgage on my UK house for £200.000 (house is worth £300.000 - Still owe £25.000 on it) and use that money to buy outright in NZ?? THE UK MORTGAGE INTEREST rates nearly half the NZ!!
That way the rent in UK is paying for the mortgage increase and I now own a house in NZ and uk, BOTH rising in value.
Then when we have plucked up the courage to move over lock stock and barrel we can sell the Bournemouth house, pay off the mortgage and still have the addtional equity still in it.(and more if uk prices rise) So we can buy a bigger place or have a nice bit of savings.
Pleeeeeessse tell me this is a brilliant idea and we can live happy ever after.
Regards
Kieran (Trump) Loftus :)

[kanatakiwi]

Hi Keiran

Not sure about how it all works in the UK,but we owned a house in Canada and did almost exactly what you are proposing. We knew, even though my husband is a kiwi, that we would not get a mortgage in NZ, as he had been away for 14 years, so we remortgaged our house in Canada,( friendly banker who had known me for 20 years, was a big help on that part) and were able to buy a house outright here at a very good price. Fortunately our Canadian house had been purchased decades ago when houses didnt cost the earth, so we had a lot of equity. We bought the house here on tender, basically sight unseen! but had my partner's family who are builders and carpenters look it over and declare it sound. It was a do up so we werent too concerned about what it looked like inside, although we knew the house in question and had relatives go through and take photos of every room in the house etc. We won the tender, took possession of the house, came down did some lots of renos (re did kitchen and baths, new floors and painted the entire inside) and then later went back to Canada and sold our house there at the right time.

I would say in your case it depends whether you can buy something here for what you will be able to bring for a mortgage. , as you know houses cost the earth here, and getting a mortgage isnt easy without a job and some credit history. Not too sure about pounds to NZ dollar exchange but I am guessing that would give you $400,000 or more?? If so that would be enough to get something, although in auckland there are not too many places at that price. so i guess it depends on where you plan to live. Most other cities would have housing in that price range.
It was a good plan for us. But we were lucky as we knew the area we were looking at, knew the house, and had family here to help us through it.
G

[Jo Jo]

Yes, you can. That's exactly what I've done - remortgaged my flat in London and used the money to buy a house in NZ. If you don't know much about Buy To Let mortgages then it's worth speaking to an IFA as they will be able to advise you on the best deal.

[incredible hulse]

Kieran - Yes you can do that and it would also give you potential tax benefits to have a higher mortgage (more expenses) on your UK rental property as the book profit would be less each month. The only downside obviously is if you lose tenants for any period of time you will need to find your UK mortgage on a NZ salary

[Diva]

Can I take out a remortgage on my UK house for £200.000 (house is worth £300.000 - Still owe £25.000 on it) and use that money to buy outright in NZ?? THE UK MORTGAGE INTEREST rates nearly half the NZ!!


I'd say generally speaking the answer would be yes. I looked into the same idea last year and was told by my (British) bank that I could have a re-mortgage for up to 70% of the current property value and that the money was mine to do whatever I wanted with. The only slight drawback was the length of time needed to get the money, about 4-5 months if I remember correctly. So if you want to buy a house on arrival you'd better start the process now!

As for buying in NZ, it really is quite easy. I'm a British national who spent the last ten years in Japan. I bought a property in Auckland 2 years ago and was offered an 75% mortgage (via Westpac) even though I have no connection with this country in any way. New Zealanders, bless 'em, don't seem to have any restrictions on foreigners buying up their country.

The only potential downside to your plan would be the volatile nature of the UK. Property prices could well collapse just as they did in the 1980's and interest rates could start to climb. But that's a gamble we all have to take.

What type of property were you thinking of spending your $450,000 on? The potential long-term value of your NZ property might be the most important factor in all of this.

[Jo Jo]

The only slight drawback was the length of time needed to get the money, about 4-5 months if I remember correctly. So if you want to buy a house on arrival you'd better start the process now!



I think you were unlucky with your timescale - it took me less than 3 weeks to remortgage my flat and get the money in my account.

[Kieran]

hi, that has pleased me. Couple of observations made to replies.
1. £200.000 converts to $545.000 not $450.000. I may be able to raise more on a £300.000 house.
2. Why would I need to look for a buy to let mortgage. I already have a domestic mortgage in uk.
3. If I lost my tenants, I would be in the same boat as if I were renting. Luckily I will have savings in case that happened.
Do I have to explain the emergrating thing which might throw a spanner in the works. Or can I say, I just want a second property abroad.
Can I arrange the remortgage in principal in uk and then when I find something over in nz make the call and have the money wired over pronto.
Thanks for your help.

[Moorf]

Check out the Non-Resident Landlord Scheme/Tax too. I rented out a flat in the UK when we moved here and my agents sorted all the tax for me.

Having rented out that flat for over 10 yrs I can honestly say that agents, while taking a fee, were a godsend. After the probs I've had with non-payers, peope who don't give a hoot about other people's property and disappearing tenants I can honestly say that they're worth their weight in gold.

I did it myself for a few years and got fed up with the probs, not everyone has problem tenants but rest assured, if you do they can cause you really big headaches, time and money.

Details of the Non-Resident Landlords Scheme can be found here: http://www.hmrc.gov.uk/cnr/nr_landlords.htm#top

[Diva]

1. £200.000 converts to $545.000 not $450.000.


Yes, it was a typo. The good news is that you'll now be able to buy a 20% bigger shed when you get here!

(and the way the exchange rate is going it might still be $450,000 later this year:wah )

[gonzo]

Hi Kieran,

Good luck with your plan. I suppose the only note of caution might be in the text of your own post "and benefit from price rises in both countries"
Just wonder when people start to believe that the only way is up whether you are right at the top of the bull market. The whole thrust of current NZ government economic policy is to stop the train. Interest rates in NZ may still have considerable upwards momentum and long term rates are now starting to move in tandem with short term rate rises. You will also have to consider the implications of what is a notoriously volatile exchange rate. Missmatching assets and liabilities can be fraught with danger. Don't want to appear as too much of a jeremiah but sometimes makes sense to look at the potential downside.

[incredible hulse]

2. Why would I need to look for a buy to let mortgage. I already have a domestic mortgage in uk.
3. If I lost my tenants, I would be in the same boat as if I were renting. Luckily I will have savings in case that happened.
Do I have to explain the emergrating thing which might throw a spanner in the works. Or can I say, I just want a second property abroad.

Kieran, The lender may see it as purely an investment property and force the buy-to-let option. Maybe worth checking. We didn't need to do this when we rented out our property years ago when we went to Oz but I have heard cases of this happening. When I mentioned losing your tenants I was just trying to indicate that it is harder paying UK debts with NZ funds due to the lower earnings over here. If the amount you rent is equitable I guess that's fine although a budget of approx 2200-2500 pcm would probably get you a nicer place than 540k (from my look at the Welly market anyway) - again something you could look at when you are on the ground.
Good luck either way, but something else to consider is that 270k sterling would probably net close to 15k interest a year if you are after a safe alternative whilst you make your mind up

[jaycee]

If, at the point when you take out the new mortgage, you have sufficient income, then no, you don't need a Buy to Let scheme (actually it's Let to Buy in your circumstance). As you say, that would be like buying a second home. So, if you want to borrow £200k and your bank offers 3.5x income, you'd need to have a salary of around £57k. But if you would need to include the rental income, you will probably not be able to just increase your existing mortgage.

[Kieran]

Thanks to all for replies. Cheers moorf for info.
I am not to happy about the tax issue on my rental. I was just going to pocket it myself.
I suppose I can get profit down on rental and expenses up so i dont lose all my cash.
How did you renters get on were you stuffed for tax or was it not so bad.

[Moorf]

I sold the flat a few months after the tax kicked in, luckily it was the right time for us here in NZ to do so. Not sure what I'd have done otherwise.

I wouldn't consider non-payment if I were you. Tried that in my younger days when I first rented out the flat and 9 yrs later it came back, via the taxman, to bite me on the bum....