Using Your Overseas Property To Pay Off Your Uk Mortgage
Well, well, well, the irony of it all! Who would have thought that there would come a day when you would be considering releasing the equity in your European second home to pay off your UK mortgage!
Gone are the days it seems when Brits were happily re-mortgaging their British property to buy a home in the sun; today greater numbers of us are more likely to be cashing in the money we have overseas in real estate to get a better mortgage deal on our principal residence back in the UK.
Now that the credit crunch has become a tangible reality rather than just a media label, UK homeowners are starting to realise that the greater issue does actually affect them. It is affecting them in terms of the mortgage deals they can no longer get, and in terms of the increasing division between their wages, inflation and the cost of living.
Not only is this credit crunch issue impacting on the amount Britons are having to pay for their mortgages if they are coming to the end of an attractive fixed rate deal and having to re-mortgage, but it is impacting on the lack of liquid cash that the majority of households have left to play with at the end of the month.
This means that greater numbers of us are looking round for ways we can raise more capital and/or cut back our outgoings.
As there was such a surge in the numbers of Brits buying homes abroad during the recent years of booming real estate prices in the UK, so much of our money actually left the UK to be invested in homes abroad. As a result, a growing number of Brits with international property who are feeling the pinch in the UK are looking at ways of releasing their property capital that is effectively stuck abroad, and bringing it home to make it work for them more efficiently.
The ones who are benefiting most are those with homes in the eurozone where fortunate individuals can benefit from the fact that the euro is riding high against the pound, European mortgage lenders are not quite as reluctant to offer re-mortgages for equity release as UK and US lenders, and because generally speaking, there are more attractive interest rates available on European mortgages than on many UK deals at the moment.
Others who are finding it beneficial to release their overseas property invested cash are higher rate taxpayers who would formally have paid anywhere between 24 and 40% capital gains tax in the UK on the sale of their property abroad. In all the talk about scrapping the 10p tax in the last budget, little mention has been made of the fact that the UK government has cut the rate of CGT payable on the profit from the sales of second homes to 18%.
If you choose to re-mortgage your property abroad or even sell up and release all your invested capital it can make a lot of sense for many people to use the money raised to pay off a chunk of any UK mortgage and secure a better deal in this day and age when good deals are only available for those with substantial deposits, whiter than white credit history or a lot of equity in their home.