Selling UK property and moving back to USA - how?

This is a bit of a dumb question, but it's got me stumped. We are first time (potential) home buyers. Husband is UK citizen, and I am on spousal visa. We plan to be in the UK for another 5 years, but at which point we are very likely to move back to the United States. Aside from capital gains, taxes, exchange rates (which I've read about), what I cannot figure out is the UK mortgage.

Situation: you buy a house with a 25 year mortgage, which you pay for a few years, then sell the house. Normally you'd either convert your current UK mortgage or find a new mortgage deal. But what if you want to move to the US and buy a house? Can you pay off the mortgage in full in the UK, and use the leftover profit for the down payment abroad (or is this as I fear impossible due to penalties)? Otherwise, is conversion even possible to a US bank? 

Appreciate any advice. Especially as I may have overthought this. Thanks!

Yes, you pay off the mortgage. No problem, just ensure that you explore any early termination penalties when you take out the mortgage.

Hi,

Pretty much as above! You sell your UK property, pay off the mortgage and any fees etc. That money can be transferred to a US bank account if/when you get one (or may still have) and then you use that to purchase whichever US property you go for.

What I'll mention is that you'll also need to pay any taxes due as a result of the sale of the UK asset. It may well be nil or a small amount, but it's best to speak to an accountant for this information based on the rest of your personal tax details.

There's plenty of threads on this forum outlining how to transfer funds. As I'll assume it'll be a large amount of money i.e multiple or tens of thousands/hundred(s) of thousands of pounds, you should look to currency exchange specialists who can get the best rates - these are better rates than high street banks and at large sums, can mean the difference of multiple thousands of Dollars difference.

Cheers, DtM! West London & Slough UK!

Also advisable to research US capital gains liability. If you are on the deed with your UK spouse, your property will be liable for US capital gains because US citizens are taxed on worldwide income / gains.

Your US capital gains liability (if any) will probably depend on a few factors:

1. how much profit you make from the house (if any)
2. the capital gains you've already paid (if any) in the UK

US Citizens do not have to pay capital gains on the sale of primary residences were the gain was less than $250,000 for individuals (or $500,000 for married couples filing joint returns, which you would not because your spouse is not a USC or LPR).

Gain is factored by subtracting how much you paid for the property, including purchase fees; fees you paid to sell the property; and any capital investment you made in the property, like paint and flooring; from how much you ended up selling the property for. You don't owe anything on any gain under the $250k threshold.

If you think you might somehow make more than $250k in gain on the property at the time it's sold, you might consider excluding yourself from the deed, if possible. Do consult your real estate attorney on the ramifications.

If you find that you are having trouble selling the property and leave before it has sold, or decide to rent it out and sell it later, the property ceases to become your primary residence and you would no longer qualify for capital gains shelters in the US or UK. Just something to be aware of.

If you know you're probably going to be moving, I'd say reconsider buying property you don't intend to keep for investment purposes. Consider how much you are paying in rent or if you can live rent free with family. Compare that to your purchased housing cost including purchase and sales fees and any improvements you make to the property. Also take into consideration the risk of not finding a seller or having to sell for less than what you have into the property. Keeping cash on hand could be beneficial. Either way, both cash and real estate assets can be used to meet income / asset requirements for your DH's US visa application.

GL!

Yes, you pay off the mortgage. No problem, just ensure that you explore any early termination penalties when you take out the mortgage.

Want to also just stress checking about the termination penalties of whatever mortgage you'd go with. Make sure you take your current timelines (I.E. moving to the US in 5 years) into consideration.