Financing your US property
It’s important to establish how you will finance your US property at the very start of your journey. Here, the USA Property Guide runs through your options.
Deciding to purchase property is a significant financial decision, which involves careful consideration of a huge number of factors. Once you decide to move this purchase across an ocean, this careful planning becomes even more crucial.
Before you can start scanning property websites, you need to determine how you will pay for the property.
First steps
Your very first step should be to examine your finances to establish whether or not your plans are a real possibility. Kick things off by considering the following:
- How you will fund the property purchase
- Buying costs over and above the property price
- Which pension and tax liabilities will be affected by your purchase
- How you will make your payments to the US
- The cost of on-going maintenance for your property
- The cost of living
- Your maximum buying price
Financing your US property
Before you can start scanning property websites, you need to determine how you will pay for the property. You may have enough in savings to purchase the property, or could be planning on funding it through the sale of your UK property, re-mortgaging, by downsizing in the UK, or a new mortgage in the US.
Make sure you can make the monthly payments on your property before you agree to any mortgage figure.
UK mortgages
Most who buy in the US tend to rely on securing a re-mortgage in the UK. This might work best for you if you’re buying a second home but will remain resident in the UK as you’ll be able to make the monthly payments in sterling.
US mortgages
If you’re moving to the US permanently, you can seek a mortgage over in the States. Currently US mortgage rates are the lowest they have been in three years. The average 30-year fixed-rate mortgage sits at around 3.66 percent, and it hasn’t been more than 4 percent for over 18 months. Despite this, many are predicting that these low rates can’t remain forever and might soon start creeping up as a result of the US economy continuing to recover and the US Federal Reserve raising the base rate as they did at the end of 2015.
Monthly repayments
When considering different mortgage options, always establish exactly how much your monthly repayments will be before you commit. Knowing how much will come out of your account each month allows you to know the exact cost of maintaining your property, and how much you’ll have left over for enjoying your life in the US. Understanding your monthly payments is particularly important if you are planning on letting out the property, as you will need to know for sure that the rent you charge will cover your monthly bill. Chances are that you’re buying in the States to enjoy a better quality of life, or to earn a little rental income – the last thing you want is to stretch yourself beyond your means. Before you commit to anything, make sure you understand interest rates, loan terms, and the criteria used to determine loan-to-value amounts.
We recommend having a mortgage in place prior to commencing your property search, so that you know your budget, and know that you can afford to make the purchase you’re dreaming of.
It’s important to investigate all of your mortgage options to determine the best deal for you and your circumstances, and so that you can fully understand what conditions and restrictions your mortgage option presents. We recommend having a mortgage in place prior to commencing your property search, so that you know your budget, and know that you can afford to make the purchase you’re dreaming of. To be put in touch with a professional mortgage advisor who can help you to weigh up your options, contact the Resource Centre on 020 7898 0549.
Budget for all foreseeable costs
In addition to the purchase price, there will be additional and hidden costs associated with buying in the US that you need to budget for. We run through these in our free guide.
Opening a bank account in the US
We advise our readers to open an American bank account early on in their buying journey. It’s sensible to keep your UK account open alongside it, as you’ll still need to manage your financial obligations in the UK. When selecting a bank, be sure to choose one with a local branch. To find out all you need to know about opening a bank account in the US, download your free copy of the USA Property Guide here.
If you are currently receiving your pension in the UK, you will need to consider whether you want to move your pension to the USA.
Transferring money to the US
You need to consider how you’ll transfer your funds to the USA when the time comes. Any international transfers you make will be affected by currency fluctuations, so you need to manage your transfers effectively to avoid losing money.
To maximise your budget when transferring money to the USA, we recommend consulting Smart Currency Exchange, our recommended currency exchange specialists. They can keep you up-to-date on currency market movements, and secure better-than-bank rates that can result in substantial savings.
Tax liabilities
If you are currently receiving your pension in the UK, you will need to consider whether you want to move your pension to the USA, or if not, how you should proceed to ensure you get the most from your pension pot.
If you are working, or receiving a salary in the UK, you need to assess your tax liabilities, to ensure your tax status is correct and so that you don’t face being taxed twice. We recommend consulting a qualified tax advisor, who will be able to look at your individual circumstances and discuss the best options for yo.
Financial matters after your purchase
Once the property is yours, you need to establish the most efficient ways of:
- Making your mortgage repayments
- Taking care of all on-going costs associated with your property, and
- Funding your time in the US.
It’s also important to factor in the cost of living in the US into your budget as early in the process as possible.
The Property Buyer’s Guide to Currency will help you: