Mortgages, houses and grown up stuff

#1
Mrs Flashman and I have found a proprty we would like to buy and have had an offer accepted subject to etc.

What I am seeking clarification on is the issue of mortgages. As we are in an MQ and intend to stay in an MQ, is the place we intend to buy still considered as our primary residence as we are in a house provided because of my work and it is not a property we own?

Secondly I am getting a lot of slack jawed answers because I am serving in Germany, despite explaining I pay UK taxes and I am a UK resident etc.

Any assistance would be most gratefully appreciatednand I am sure would be useful to others.
 
#2
MODS appears I have posted this on wrong forum apologies, any chance of being transferred to finance?
 
#4
Do you intend to live there at some point?
Do you intend to let?

Some banks may class you as buy to let, some may not. You need to speak to banks and explain the circumstances.

I have a place that I lived in, and now let. I don't have buy to let mortgage, but the halifax made me sign a consent to lease agreement. Bobs ya dads brother.
 
#5
Bought my first house when I was based in Cyprus.

Was categorically told that it would count as my primary residence, being as I was in the services, and the fact that I could not live in it was due to the needs of the service and no fault of my own.

I trawled through tons of stuff at the time, I can't remember exactly where but as far as I can remember, hidden amongst the tombs on the Inland Revenue website, there is something that talks about the above for service personnel and diplomats overseas.

I never did live in it, rented it the whole time, and sold it 5 years later for a huge profit, no tax to pay due to primary residence status.
 
#6
H_FLASHMAN said:
Mrs Flashman and I have found a proprty we would like to buy and have had an offer accepted subject to etc.

What I am seeking clarification on is the issue of mortgages. As we are in an MQ and intend to stay in an MQ, is the place we intend to buy still considered as our primary residence as we are in a house provided because of my work and it is not a property we own?

Secondly I am getting a lot of slack jawed answers because I am serving in Germany, despite explaining I pay UK taxes and I am a UK resident etc.

Any assistance would be most gratefully appreciatednand I am sure would be useful to others.
Your position with those offering mortgages is that this will be your only property - it is your home. Stay with the big companies, Halifax Abbey etc and they will understand. You will have to tell them that the property will be let (until you can live in it), and they will charge you for the privilege!

Unfortunately, the Inland Revenue can be very strange, and you should write to your tax office, telling them that you have bought a house ready for your retirement but cannot yet occupy it. They demand to know as soon as it is let, anyway!

I hope it goes well.

Litotes
 
#7
H_Flashman,

If its any help I'm a mortgage advisor and would gladly answer any question PM with them and I'll get back to you. :D
 
#8
Unfortunately, the Inland Revenue can be very strange, and you should write to your tax office, telling them that you have bought a house ready for your retirement but cannot yet occupy it. They demand to know as soon as it is let, anyway!
a) Under no circumstances take out a buy to let mortgage: this is your 'principal private residence' for tax purposes. The taxman accepts that you are 'forced by virtue of occupation to live in rental accommodation'. Any decent mortgage broker will understand this: the difference should be at least half a percentage point...

b) However, as Litotes points out,the taxman can be strange. There are 2 issues: firstly, he is interested in the 'intent', not the actuality. By this I mean that your intent is to buy this house as your principal residence, isn't it? (nod head and say yes here...) Accordingly, he will accept it as your main home: you should write to him, and state that you wish to 'establish residence' by virtue of the letter - and keep a dated copy and any reply. The advantage comes should your circumstances change, and you decide to sell in, let's say, 5 years. Normally, you would pay capital gains tax (less annual allowance) on any profit on a second house. However, your principal residence is exempt all CGT. (nb, just in case, buy in joint names - it'll double the CGT allowance if it does become an issue)

Any member of the forces is in a uniquely advantageous position, frankly: you can buy a house with a normal mortgage, get a tenant to pay the mortgage (and maybe give you a little pocketmoney each month, although that's a bonus), and claim it as your principal residence when you sell. It's effectively free money.

2 points that will help: get an agent: let them manage it for you, so that you have no worries when you are posted to some fly-blown sand pit. They will also provide detailed accounts for the taxman. Ask for a military discount, and you should get around 10% fees on the rent. Secondly, get an accountant who does this sort of work: they know all the allowances - mine saved me the cost of about 5 years of his fees in the first year.

This is not financial advice - it's observations from a private individual who is an ex-forces member. As an example, my house, bought in exactly the same way 8 years ago for £70,000 (20k down, 50k mortgage) , has just made me a capital gain (tax free) of £86,000 after all bills. In the interim, I received, after the mortgage payment, bills and maint charges, probably about £50 a month profit from rent. PM if you want any amplification/other points. It's not a short term route to riches, but it is, with a little forethought, a way of getting into the market.

Just consider that the UK market has seen, year on year, an 8% (plus) growth in capital value since before the war. Doesn't sound like much, does it? Well, that equates to a doubling in value within 10 years. To put it another way, every ten years, the size of house you can afford has shrunk by 50%. Provided you aren't stupidly overstretching yourself, it should be a no-brainer for everyone serving.
 
#9
Totally concur with Nibbler.....as long as you intend to live there it's classed as your principal residence. It was overseas commitments that stopped you actually living there. If any questions were asked when you do sell it then your circumstances (e.g. family needs/ better standard of living etc) dictate that it is no longer suitable. I did the same as Nibbler, and it was the I.R. that advised me about the intent/principal residence thing (must have spoken to a rogue advider).

I would also agree with letting through a property manager. It can save a lot of grief if a tennant does a bunk, or leaves the place in sh1t state (happened to me). They also provide invoices etc which are invaluable when doing tax returns
 
#10
Lots of advice here, take it to a mortgage advisor. The bottom line is the residence that you are living in NOW is your principle residence. If that is SFA that you have been renting because you want a stable family life and feel coerced into taking that option - then this is your primary residence for the purposes of tax. The Inland Revenue are not concerned with your job, your wishes, your aspirations or your basic desire for a stable family life. This is your choice and you do not have to exploit this option. If you, like most serving soldiers, live in SFA and have a mortgage, then the mortgaged property will not be your primary residence for the purposes of tax, your contract of employment is irrelevant.

Of course you could do what a lot of serving members do and lie about it, but tax evasion is a crime and you will go inside for it.
 
#11
Lots of advice here, take it to a mortgage advisor. The bottom line is the residence that you are living in NOW is your principle residence. If that is SFA that you have been renting because you want a stable family life and feel coerced into taking that option - then this is your primary residence for the purposes of tax. The Inland Revenue are not concerned with your job, your wishes, your aspirations or your basic desire for a stable family life. This is your choice and you do not have to exploit this option. If you, like most serving soldiers, live in SFA and have a mortgage, then the mortgaged property will not be your primary residence for the purposes of tax, your contract of employment is irrelevant.

Of course you could do what a lot of serving members do and lie about it, but tax evasion is a crime and you will go inside for it.
Sammy: not going to get into a pissing match, and agree that independent advice is useful - but trust me, there is a recognised tax allowance for those who are in things like the forces or the foreign office - I would never recommend anything illegal on a matter like this on a public board: my aim was to help, not give the man a criminal record. Bottom line - as said above - find a good accountant and ask his/her advice. I have the letter from the revenue confirming that my mortgaged property was my 'principal residence', and they wanted no CGT on sale - so they don't quite agree with you. A mortgage advisor may not understand this: it is a relatively specialised area, and you should speak to a property/CGT accountant for expert advice, if you have any worries: but you can establish a house as your PPR if it is your only one, and you are in the forces in rental accomodation - many have done so, perfectly legally. (edit - read oulast's post above - it was the IR that told him this was acceptable - about as close to the horse's mouth as you're gonna get on this one...)
 
#12
If the IFA can find you a non Buy To Let mortgage, you will probably get advantages of lower interest rates, less deposit needed etc. Some banks are happy about you renting the property out, at least for a few years, and will actually give you a letter confirming this if necessary. If you own more than one house (in your name) then BTL is sometimes the only way forward but you pay more interest and charges.
 
#13
Sorry Sammy looks like you are wrong.

Here is the HMRC help sheet on Capital Gain Tax. If you look at page 3, under Job-related accommodation, it explains about main residence and might be helpful to take a copy with you when applying for a mortgage.

http://www.hmrc.gov.uk/helpsheets/ir283.pdf
 
#14
I previously remortgaged on a normal mortgage and due to a change of circumstances moved out and rented it out a month later. All I did was give them a quick call to explain and the mortgage company was fine no change in rates or anything, what I'm saying is that if it's just the one place your after and not a portfolio of properties some mortgage companies can be flexible.
 
#15
Lynxtips said:
Sorry Sammy looks like you are wrong.

Here is the HMRC help sheet on Capital Gain Tax. If you look at page 3, under Job-related accommodation, it explains about main residence and might be helpful to take a copy with you when applying for a mortgage.

http://www.hmrc.gov.uk/helpsheets/ir283.pdf
Not entirely certain I am wrong, the original question concerned buying a property - the help sheet refers to the disposal.

I am willing to concede that I am wrong if the original poster was referring to a disposal of his property.
 
#16
Not entirely certain I am wrong, the original question concerned buying a property - the help sheet refers to the disposal.

I am willing to concede that I am wrong if the original poster was referring to a disposal of his property.
And there's a good pedantic answer: you're not an accountant, are you? :wink:

If you live in accommodation that is job-related and you also own
a dwelling-house that you intend to occupy as your only or main
residence, the dwelling-house you intend to occupy is treated as
actually being occupied by you as a residence during the period in
which you have the intention to occupy it, even if you never
actually live there. This means that you may nominate that
residence as your only or main residence and get relief on the
whole or a part of the gain.
Irrespective of splitting hairs about acquisition/disposal, that seems pretty clear to me, and reflects the experience of others posting here.

Having said that, I'd re-emphasise that I entirely agree with you about legality. The taxman will be (very) interested in your rental income. I have heard of those who decide not to tell anyone, and manage the let themselves with friends paying cash. This is both illegal and stupid. You are risking your career in the armed forces for what might amount, at the very most, to a difference of 2 to 3 thousand pounds per year - and putting yourself at risk of blackmail/coercion from said 'friends' if things go wrong. As I said, get an agent and an accountant, and sleep easy, secure in the knowledge that you are completely above board...
 

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