Every American should think about mortgages in the UK. This article will explain how Americans can invest in UK real estate with or without a mortgage.
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- What are the basics of buying property in the UK as an American?
- Can an American get a mortgage in the UK?
- What are the bad things about getting a mortgage in the UK?
- UK Estate Agents vs US Realtors
- Property Investment Specialist
- What tax issues do Americans have to think about when they buy or sell property in the UK?
- Foreigners Surcharge In UK Property
What are the basics of buying property in the UK as an American?
Americans have been one of the largest groups of people who are not British but buy property in the UK for a long time.
There are no laws that stop Americans living in the UK from buying property there. Foreigners and people who don’t live in the UK can also get a mortgage there.
Americans who have lived in the UK for less than two years and don’t have jobs may have to put down a bigger deposit to get a UK property mortgage. Even if they don’t live in the UK, Americans can buy property there.
It will be easier for Americans to buy property in the UK if they pay cash.
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Can an American get a mortgage in the UK?
If you are an American and want to buy a house in the UK, getting a mortgage doesn’t have to be hard. Some banks ask for more information from Americans who want to get a mortgage in the UK, but Americans can get mortgages from a number of different lenders.
The most important things are that they have a visa and usually at least a 25% down payment on the UK property they buy. Americans can legally buy homes in the UK, whether they live there or not. Banks will make their own rules for each American who wants to get a mortgage.
Some Americans may be given less favourable terms or higher interest rates if they buy property abroad. This doesn’t have to stop Americans who want to buy property in the UK from investing in it.
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What are the bad things about getting a mortgage in the UK?
When Americans try to get a mortgage on a property in the UK, they can run into common problems.
The Foreign Account Tax Compliance Act (FATCA) of 2010 says that US citizens must tell the IRS every year about their financial assets outside of the US.
FATCA reporting comes with a lot of paperwork, which can be scary. Because of this, many high street lenders in the UK are hesitant to give Americans mortgages.
A good number of private lending institutions and non-banking lenders are willing to sign the necessary disclosure agreements and offer mortgages to Americans. Some will do this even if the American applicant’s salary is paid in a foreign currency or if they don’t live in the UK.
It is very important for Americans who want to buy property in the UK to work with a mortgage broker who knows these lenders well. With the right investment partners, you can get a good rate on a UK mortgage.
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UK Estate Agents vs US Realtors
Americans who buy homes are used to working closely with a real estate agent during the whole process.
A real estate agent in the US finds and shows buyers properties that meet their needs. This makes it easier to find a dream home.
In the UK, when a buyer finds a house they like, they usually call the person in charge of selling it to set up a viewing.
This can be hard for Americans who want to buy property in the UK, especially if they don’t know much about the real estate market there or don’t live there.
There is some help for Americans who want to buy property in the UK. Property investment managers can help buyers find good properties and help them through the buying process in the UK.
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Property Investment Specialist
When Americans work with a property investment specialist, they also get help with things like Stamp Duty Land Tax (SDLT) and Land Registry fees, which are extra costs.
Working with a property investment expert in the UK can also give American buyers access to off-market investment properties and private sales.
Americans who have never bought a home in the UK before need to know how the process is different from how homes are bought in the US. It is best to get the money to buy a property in the UK before looking for one.
In the UK, it can take months from the time a deal is made to sell a house to the time the deal is done. Before the contracts are signed, the buyer puts down a 10% deposit and sets a date for the deal to close. A UK property purchase can fall through at any time before this point.
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What tax issues do Americans have to think about when they buy or sell property in the UK?
Americans who buy homes in the UK need to think about the following tax issues: Stamp Duty is a tax that has to be paid up front when a land or property worth more than £125,000 is sold in the UK.
When Americans buy a home in the UK for the first time, Stamp Duty Land Tax can be a surprise.
Since 2016, an extra 3% levy has been added to the basic stamp duty rate, which ranges from 2% to 12% (the highest rate is charged on UK properties worth £1.5 million or more). This is the case when a buyer isn’t buying their first home when they buy a home for more than £40,000.
- Americans who buy a home in the UK but still have a home in the US would probably be caught by this higher tax.
- Americans who buy homes in the UK also need to know about Capital Gains Tax, which is not in the UK but in the US.
- Americans who live outside of the US still have to pay US taxes.
Even if they pay their income tax to HMRC in the UK and are tax residents there, they still have to file tax returns with the IRS.
Americans may still have to pay tax on the money they make when they sell their main home, no matter where in the world it is.
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Foreigners Surcharge In UK Property
Non-UK residents who buy a home in England or Northern Ireland after April 1, 2021, have had to pay an extra 2% SDLT surcharge. If you are an American and you buy a property in the UK that won’t be your main home, you will have to pay both the 2% non-UK resident surcharge and the 3% SDLT charge.
If an American buys a property in the UK through a company and the property costs more than £500,000, SDLT is charged at a flat rate of 15%.
There are a few exceptions to this 15%, such as when a person buys a home to rent it out as part of a business renting or trading homes.