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Old 10.07.2009, 12:51
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Change my Residential Mortgage in the UK?

Hi All

I'm moving to Basel from the UK later this year. I'm currently in a fixed rate deal for a house I own in the UK. Once I've moved to Basel, I plan to rent out my house. The obvious implication is having tenants affects the bank's security i.e. more risk of damage to the house and as such I'm aware that I need to change my buildings insurance accordingly. I'm also obliged to tell my bank of my situation and they are likely to take action which wouldn't be limited to a penalty as well as a possible increase in interest rates. I've seen an independent Mortgage Advisor to get their take and they quite bluntly told me to withhold this information from the bank. They also said that about 90% of properties let out privately in the UK are on residential mortgages and only 10% bother to change the bank

My question for those that own property in the UK (or any country with similar regulations) is what did you do when you relocated? If you put in tenants did you change your mortgage type to a buy-to-let for instance?

Thanks
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Old 10.07.2009, 13:02
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Re: Change my Residential Mortgage in the UK?

Dear JKUser

In the past I have not told my lender that I had rented out the property, taking much the same advice as you have been given. I stayed on the same rate etc and when i sold the property had no problems.

I will have the same situation again soon and aim to do the same thing again.
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Old 10.07.2009, 13:26
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Re: Change my Residential Mortgage in the UK?

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Dear JKUser

In the past I have not told my lender that I had rented out the property, taking much the same advice as you have been given. I stayed on the same rate etc and when i sold the property had no problems.

I will have the same situation again soon and aim to do the same thing again.
Thanks Fozzy, it's good to know that this is more or less the norm.

Do you redirect your mail in that case?
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Old 10.07.2009, 21:13
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Re: Change my Residential Mortgage in the UK?

We also let our UK property and when we forewarned our mortgage lender, they advised that we would have to move to a buy-to-let mortgage at a higher rate. We successfully fought this on the basis that it was being let for a fixed period ie we expected to return after two years and we had a high level of equity in the property, so reducing any risk element.

We also moved our home insurance from our lender to a specialist insurance company.

Letting the property without permission is a breach of your mortgage conditions and if discovered, you may find the bank cease lending and in the current climate, that may be difficult to replace.
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Old 10.07.2009, 22:46
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Re: Change my Residential Mortgage in the UK?

Another point to consider is the tax situation, as discussed on another thread some time ago the Revenue have warned that they are going to start taking a broader view of one's circumstances when deciding tax residency. I could well imagine that you'd have an interesting time, shall we say, trying to explain how you've cut your ties with the UK if you have not changed your house financing and are having your mail forwarded.....

Good luck with that,

Jim.
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Old 15.07.2009, 00:41
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Re: Change my Residential Mortgage in the UK?

Thanks All

Very useful points to consider
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Old 15.07.2009, 10:17
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Re: Change my Residential Mortgage in the UK?

Hello JKUser

Yes we do redirect our mail, it`s actually good value considering it`s all items delivered through royal mail including small parcels. We also use this address for our sky. The point about the tax is a good one and potentially more serious than the question over mortgage lender.
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Old 15.07.2009, 10:26
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Re: Change my Residential Mortgage in the UK?

We rent our UK property out and we informed the lender (First Direct) prior to the rental (initially testing the water by saying we were thinking of doing this to see what their response would be). They said we could remain on the same mortgage (a regular residential mortgage on a low tracker rate) for 2 years from date of rental and they would review the situation when the 2 years were up.

Also we use an agency to find tenants etc, and their terms required us to provide the consent letter from the Mortgage company, so you may want to check this out too if this is how you'd find tenants.
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Old 15.07.2009, 10:29
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Re: Change my Residential Mortgage in the UK?

When we moved to Switzerland in 2004 we informed our mortgage provider (Abbey) who charged us a one-off fee but did not insist on us changing to a buy-to-let mortgage, we just kept our existing mortgage. If I remember rightly, we informed them at the request of the rental agency who are managing the property on our behalf. I guess they were worried about a messy situation evolving if the bank somehow discovered that it was rented.

We took a landlord's building insurance policy with Zurich. When I tried to renew it recently, they wouldn't deal direct anymore unless you have three or more rental properties. FOr just one property they suggested going through this website: http://www.simplybusiness.co.uk/.
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Old 15.07.2009, 10:33
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Re: Change my Residential Mortgage in the UK?

I didn't feel comfortable lying to a lender about a property in the UK being let out on a residential mortgage. The lender (Halifax) said that they *could* increase the interest rate in their T&Cs if the property was let, but in the end they didn't and just wanted an admin fee if the property was let out temporarily.

I don’t believe there is anything on the non-residence pages of the tax return that says that you need to cut ties with the UK to be classed as not ordinarily resident. As long as you have left the UK and your home and domestic life isn’t still in the UK ie your home isn’t still filled with your belongings and you don’t spend more than 183 days per year there. You also need to *intend* to live outside the UK for more than 3 years, but you don’t need to actually live outside for more than 3 years – just intend to do so.

This may help you: http://www.hmrc.gov.uk/worksheets/sa109-notes.pdf

You also need to register with the Non-resident Landlord's Scheme to avoid tax being taken out by the real estate/tenant.
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Old 15.07.2009, 12:05
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Re: Change my Residential Mortgage in the UK?

I told my lender Northern Rock, they wanted a copy of the letting agreement. Because I moved with work (and could move back) I don't think I went to buy to let. I do however recommend some good insurance to cover yourself, if the tennants mess up. We use Letsure Post redirection only lasts for two years but it is worth it.
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Old 16.07.2009, 01:16
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Re: Change my Residential Mortgage in the UK?

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Yes we do redirect our mail, it`s actually good value considering it`s all items delivered through royal mail including small parcels.
Parcels won't be redirected overseas, even small ones, and even on an international redirection, as they won't have the correct paperwork attached for customs (usually the little green ticket, which must be completed by the original sender).

I got SO caught out with this one when, a few weeks over we moved over from the UK, I had an Ebay buying session. All the flippin' parcels - just little things like DVDs for the kids - were returned to their senders. Fortunately, I was on first name terms with our ex-UK postie and had the direct number for the sorting office, and they were kind enough to hang on to them for a couple of days before returning them to give me a chance to contact the Ebay sellers, apologise profusely, and pay the extra to have them sent to my mum's UK address.

Don't get caught out too!

kodokan
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Old 05.08.2009, 15:55
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Re: Change my Residential Mortgage in the UK?

Thanks all....I did the right thing and told my bank and they said it was fine as long as the house remained my main residence whenever I moved back to the UK and within 18 months. They also said they would review this if I decided to stay longer and judging by some of the posts on this forum I will definitely be needing a review

Cheers
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Old 12.08.2009, 14:36
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Re: Change my Residential Mortgage in the UK?

I spoke to First Direct who said they wouldn't do it as they don't have a commercial licence.
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Old 16.08.2009, 11:14
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Re: Change my Residential Mortgage in the UK?

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Another point to consider is the tax situation, as discussed on another thread some time ago the Revenue have warned that they are going to start taking a broader view of one's circumstances when deciding tax residency. I could well imagine that you'd have an interesting time, shall we say, trying to explain how you've cut your ties with the UK if you have not changed your house financing and are having your mail forwarded.....

Good luck with that,

Jim.
Taxation as resident and/or ordinarily resident is based on facts. Taxation as domiciliary is based on facts and intent (animus manendi = intention to remain). See forms DOM1 and P86
http://www.hmrc.gov.uk/leaflets/c9.htm
http://www.hmrc.gov.uk/CNR/p86.htm

If you rent out property while overseas your tenant/agent will be obliged to withhold 25% of the gross rent (you get some or all back when you file a tax return as a nonresident or otherwise). This can be a hardship and can be avoided if you appoint someone to be assessed for tax on your behalf. For nearly 20 years we used a limited company which we established for the purpose and, after lengthy correspondence with the Inland Revenue (as it then was) we paid my spouse director's fees which served to qualify her, years later, for national insurance state pension (which she now gets) and she was also able to put some of the fees into a private pension (a pittance, really). That was because we paid our own firm 11.75% of rent received, which was an expense for us and income to the firm, and then paid to my spouse as a salary. A lot of paperwork with PAYE and NIC, but you get used to it and it's the same year after year. And state pension in the UK is quite generous to the low-paid, with most of the NICs waived.

In general you are resident in any year that you spend 91 days on average (or 183 days in any particular year) in the UK. Keeping a house has nothing to do with it -- that is Canadian tax law, not UK (and the reason for it is that as with France and Denmark when you abandon your Canadian tax residency you have to pay capital gains tax on "deemed sale" unless you elect to postpone it and post a bond for its eventual payment).

As for mail forwarding: The US and Switzerland have EarthClassMail.com which is a terrific way to convert postal mail to e-mail in PDF. They also handle parcels and forward mail that you have scanned, and deposit checks/cheques. Some of the features are not cheap. You can expect this to come to the UK soon:
Web portal: http://www.earthclassmail.com/
Sale of bricks & mortar assets: http://bit.ly/dSaiK
SwissPost deal: http://bit.ly/171m8d

Buy-to-let mortgages have a higher charge and more onerous terms in both the UK and Switzerland (in Switzerland such mortgages have amortization of 1% of principal a year which main-residence mortgages do not necessarily have). As others have said, a mortgagee will probably not make an issue of renting out for a short period. Ordinarily it would not be too risky to omit telling them, but in this market banks want to rid themselves of loss-making trackers (and some of the nationalised banks want to rid themselves of everything except, seemingly, bonuses) and getting a new mortgage may be difficult.

More important is notifying your insurer. UK insurers are notorious for refusing to pay losses, at least major losses, when there has been even minor "misrepresentation". (The law is different in, say, France and Germany; in France you may recover proportionately on the loss, the ratio of premium paid to premium that should have been paid. And in Germany the misrepresentation must be relevant to the loss. In the UK you recover zero. That's how I remember it from my LLM course in insurance law 16 years ago.) Also, a property that is vacant for 30 days must be notified to the insurer.

Residency is relevant to CGT on a non-main residence or investment or commercial property. And if you have lived in the UK and then move abroad and sell something, you must stay abroad for 5 years or the tax will come due. And under some circumstances you may not be eligible for credit on tax paid on the same transaction to another country.

If you are abroad due to employment, those years of renting out do not count against you when you claim exemption from CGT on the sale of your "main residence".

The issue of domicile is relevant to IHT, trusts and other situations. It is very difficult to lose an English, Scottish or NI domicile of origin (defined as your father's domicile when you were born) unless you dispose of all your contacts with the UK. This is relevant to the whole "nondom" issue (which you can Google).
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Old 16.08.2009, 12:45
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Re: Change my Residential Mortgage in the UK?

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If you rent out property while overseas your tenant/agent will be obliged to withhold 25% of the gross rent (you get some or all back when you file a tax return as a nonresident or otherwise). This can be a hardship and can be avoided if you appoint someone to be assessed for tax on your behalf. For nearly 20 years we used a limited company which we established for the purpose and, after lengthy correspondence with the Inland Revenue (as it then was) we paid my spouse director's fees which served to qualify her, years later, for national insurance state pension (which she now gets) and she was also able to put some of the fees into a private pension (a pittance, really). That was because we paid our own firm 11.75% of rent received, which was an expense for us and income to the firm, and then paid to my spouse as a salary.
Gee, you really do things the complicated way. I have never had tax taken from my rental income. You simply register with the Non-resident Landlord's Scheme to avoid tax being taken out by the real estate/tenant.

I did post this, 3 posts ago.
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Old 24.09.2015, 00:05
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Re: Change my Residential Mortgage in the UK?

is this still the case for a lot of people? we left the uk and were also advised not to change the mortgage but that was 5 years ago now. starting to think i need to get in touch with them again
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Old 24.09.2015, 00:34
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Re: Change my Residential Mortgage in the UK?

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is this still the case for a lot of people? we left the uk and were also advised not to change the mortgage but that was 5 years ago now. starting to think i need to get in touch with them again
You should sort this out as your in breach of the terms of the mortgage, they could demand immediate repayment & start proceedings to force a sale.
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Old 24.09.2015, 02:22
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Re: Change my Residential Mortgage in the UK?

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You should sort this out as your in breach of the terms of the mortgage, they could demand immediate repayment & start proceedings to force a sale.
I doubt the bank will care. If they don't know, then they won't do anything. So long as you make your payments, then you're probably OK.
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Old 24.09.2015, 08:06
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Re: Change my Residential Mortgage in the UK?

We changed our mortgage to 'do the right thing' and it made no real price difference, ours is small though.. I also changed the buildings insurance to landlord insurance.

What I did find very strange is that neither the bank or insurance company are interested in where I actually live. I told them on the phone that I live abroad, but neither took my address - so my mail is still forwarded.
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