Buying a property in America (UK mortgage or US mortgage lender?)?

Question

I'm interested in buying a property in America to rent out to get my foot on the property ladder out there, with a view to later relocating to the US in a few years' time. I'm an American (dual citizen) living in the UK, but am unsure whether it would be better to borrow money from a mortgage lender here in the UK (which would probably be easier, but the interest rates are high), or go with a mortgage lender in the US (where interest rates are frozen for the next 5 years, but I would have to deal with sending money overseas every month if it isn't rented year round). Does anyone have any experience with this? And what kind of deposit is usually needed on say a $200,000 mortgage? Thanks in advance for your help!

Thanks for all of your helpful advice. I realize that the housing market is still falling, but I feel this is the best time to invest in property in the US (because of the excellent exchange rate & the low prices on houses), before the market is due to recover in the next few years.

I do have an SS# (as I am originally from the US) & my credit rating should be good, since I have always paid my debts in full & on time.

The area that I am looking closely at is Florida, mostly because it is touristy & the rental potential is there. I would prefer to relocate to the Gulf Coast (when I actually do make the move back), but from what I'm hearing, this area does not have the best rental potential & have been told that Orlando (especially the resorts) is better from an investment point of view. Though, as Tony stated, as it is a touristy area, it might not be a buyer's market. Any info would be appreciated. I really just want to get on the property ladder & will worry about relocation later

Answer 1

With dual-citizenship status, you have a Taxpayer Identification Number(TIN) already, so - if your credit is good - it should be no harder obtaining a mortgage with a US lender than it would be with one in the UK.

Real estate is always market-specific, so depends upon which area you are looking to purchase in. Most of the country is currently in a "buyer's market", so there are deals to be had, but some of the more popular resort/tourist areas continue to hold their value, or post small gains or losses. Several of the cost considerations you must undertake to determine where, and whether or not, to buy will be location-specific.

Interest rates are not frozen for the next 5 years, but are currently at near-record lows here in the States. Interest rates *are* typically higher for investment properties. As for your having to, "...deal with sending money overseas every month if it isn't rented year round..." well, either way - you certainly wouldn't have the renters sending the rents directly to the mortgage company would you!! Using an electronic direct debit system, it wouldn't matter which country the lender was located in, just make sure the appropriate currency conversion rate is applied, since you will have to pay the monthly mortgage anyway.

Deposits on US mortgages vary widely (there are even programs for 100% loans at a higher interest rate), but buyers usually try to deposit at least 20% of the loan amount in order to avoid something called "PMI " - which is extra insurance that lenders require from most Homebuyer's who obtain loans that are more than 80 percent of their new home's value.

There are federal - and often times, state - income tax and other tax ramifications on properties held for investment as well, but with your citizenship status, you should be able to avoid FIRPTA.

There is much more to consider, including your researching the topic of "Buyer's Agency" in order to have someone advocate your side of the transaction. Remember, the listing (seller's) agent is legally bound to represent the best interests of the seller. A BA will look after your best interests and typically won't cost you anything, as they are paid in a commission split with the seller's agent at closing. Ensure the estate agent you deal with is experienced with International transactions and has a strong network of associated professionals to call in on your behalf.

More resources at cabinquest.com -> Buyer Resources -> International Buyers

Hope this helps, and Good Luck!!

Answer 2

This is a tricky situation as I am sure that you know the dollar has been decreasing in value in relation the pound and other currencies significantly in recent months and years. There is a risk of having a UK mortgage and not being able to pay it off because of this risk (it is called translation risk) if you earn dollars.

However this may work to your advantage because if you have a UK mortgage and the dollar falls then you (if you earn pounds) because you would not be affected by the translation risk. However the property value may not be ask great as when you purchased it (negative equity) if you purchased it using pounds.

This is all very complicated and I am not sure if I have even worded it correctly. The thing that you should be paying attention to is that there is a risk due to exchange rate alterations in this situation and the dollar is not is a good position at the moment so be very careful.

The reason for this is due to oil all oil is traded in dollars this means that people have to buy dollars to buy oil if oil is traded more less or in a different currency it affects the exchange rate for the dollar because the quantity needed by other countries is altering. Therefore it is a volatile situation at the moment to have any investment that is related to the american exchange rate because of obvious current events.

You should be very careful when considering investment between two countries when the investment is not bought out right due to this risk. Unfortunately this is THE worst time for about fifty years to invest in this way with america. You can hedge your bet through purchasing a future, which is a form of derivate that can eliminate the risk of exchange rates, however this may be costly and complicated.

I don't know about the best of the question but I hope this has helped you best wishes

Answer 3

$200,000 mortgage? Where do you plan on buying? In San Diego you could buy a small condo here. You will need at least a 20% down payment. And the interest rates are higher on a rental property then a home you will live in. The interest rates are only frozen on homes that have the prime home loans from folks that have already purchased. Best of luck

Answer 4

It really isn't a very good idea to shop surveyors by price. The cheap ones usually do so many in a day that they can't possibly be doing them correctly or even within legal standards. Usually, a title company or closing agent uses a certain surveyor because they are the least expensive. It is very important to have a correct survey. The lender and title insurance companies require a survey to verify improvements and to make sure that there are no physical or legal encumbrances on the property's title.

Answer 5

Interest rates are only frozen for people who received financing during a certain period. It would not apply to you.

As far as money down, it depends on the type of property. Is it a 1 family, 2 family, 3 family etc.

Its best to borrower money where the rates are lower and you can have a management company over see your investment.

Answer 6

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