Ex-Pat considering buying property back in US

Hi All,

Firstly apologies if this is the wrong area to put this, please move if necessary mods

Basically, my wife (USA) has been here a year with me (Welsh UK res) and things have gone fantastically well.  We are considering buying a property back in the USA (Northern Indiana, Wells County/Fort Wayne) and my wife previously lived at home with her parents and then rented so knows nothing of the process really.

Im just wondering if you guys have any advice on where to start for a UK based couple with one US citizen who are looking to do this, and could you point us in the way of any worthwhile books/literature and any general info regarding the process.  I have found a few e-books to download but really wish to research this subject and the more info the better.

Thanks again guys!

Will you be paying cash?  If so, should be very straight forward.

Many lenders offer international products as well, using an international credit report. Cash is easiest, but if you need a mortgage there are options available. I know HSBC does but that's outside of their footprint, and I'm sure other major banks do as well.

Hi guys,

Thank you very much for your replies.

No I would not be paying for the property in cash, although I do comfortably have the 20% that I have been told is typically needed for reasonable mortgage repayments over there.

So would getting a mortgage from an American lender likely be an issue? or would we require a specialist international lender?

We have a local realtor and a few properties in mind, and have management of the property sorted by family in the area. Just concerned about any hidden pitfalls that could result from acquiring a property internationally.  I'm quite early into researching this, and really appreciate your input!

I can only speak to HSBC, as I worked with their mortgage data for many years. You need to have a banking relationship with them by the end of the mortgage process, but they do offer mortgages for expats and international borrowers. Here's the website if you want to contact them for more information: https://www.us.hsbc.com/1/2/home/personal-banking/mortgages/international

I'm sure other US/International banks offer them as well.

Sounds like you will be renting the property?  If so, that will add complexity to your tax situation.  Just something to be mindful of.

Thanks for that Margo, will definitely look into it.

Yes KFdancer, the plan is indeed to rent it out and hopefully cover the mortgage payments in the process (we have the money for the 20/25% downpayment).

In terms of it adding complexity, am I right in thinking we would be taxed by the USA and not the UK on our income from the rent?  What would fall under UK taxation and USA taxation is something i'm trying to get my head around at present.

Also, my wife is has outstanding student loans in the US and is currently on a repayment plan based on her US income level that links to her tax and as a result repayments are $0 a month (does that make sense to you?).  The loans company actually informed us that the debt would be written off after 20 years should she not return, and we have no plans to.

Resultantly, we would look to put the property under my name (the UK citizen of the duo) so that she continues to have a taxable income of $0 in the USA.

Probably flawed, but that would be the initial plan at least.

You'll pay tax in the UK on the rental income as this is your residence.

https://www.gov.uk/tax-foreign-income/overview

You may still be subject to additional tax in the US.  Better asked on the tax board.  I have a UK rental so know the ins and outs there (have to file a self-assessment and the full rent is taxable starting in 2017).  But I don't know how it works with the US.

https://www.irs.gov/individuals/international-taxpayers/foreign-persons-receiving-rental-income-from-u-s-real-property

I haven't heard of student loans being discharged.  Do you have that in writing?  Student loans are the only loans that cannot be written off in bankruptcy court.  If she has no income in the UK she can defer her payments.  If she has income, she needs to be repaying the loans.

Thank you for that regarding the tax, I will drop a query to the tax forum for clarification in a few days when i've done a bit more reading.

In relation to the student loans, she had deferred them previously but she isn't at the moment...

We were quite surprised with what we were told... basically she had three loans outstanding with different companies; we contacted them looking to make a payment arrangement and when we explained she was in the UK the guy on the phone stated he had set up something similar with a British expat previously and said we had the option of going on an 'income based payment plan,' which would result in us not having to pay anything despite her working over here as the check would be linked to the the US tax paid.

He explained that the only pitfall would be that it would continue to accrue interest so if she was to come home at some point in the future then she would have to pay that inflated amount at that point.

We ended up consolidating the three loans to that one company, but one of the other two companies confirmed that what we were doing was correct.  The company she consolidated to was Nelnet I believe.

And we did see in writing somewhere that after either 20 or 25 years of non payment it would be voided, but I can't remember exactly where.... I believe it was in the terms when we were reading through the stuff for consolidation.  I think its only applicable if nothing at all is paid in for that length of time though.

As I say, we were as surprised as you are, as we were actually calling to set up a payment plan.  Sorry I can't be more specific with the detail as it was about 8 months ago.

...which would result in us not having to pay anything despite her working over here as the check would be linked to the the US tax paid.

You do know that as a USC she has to declare her worldwide income on her US tax return?

You do know that as a USC she has to declare her worldwide income on her US tax return?

Whilst I was involved in helping her with sorting her loan stuff (and can therefore vouch for the above information), the tax return thing was her domain and I have no clue about it.  I was pass this information onto her and she will do a post on the taxes forum for any clarification.

Thanks guys for all the help and advice!

I was pass this information onto her and she will do a post on the taxes forum for any clarification.

That's the best idea.