Dollar or Sterling Mortgage

[bombo]

The impression I get from following these forums is that most of you have a dollar denominated mortgage. I presume that the majority of your holidaymakers are from the UK paying their rent in Sterling which you then need to convert into dollars to pay your mortgage payment.

I am deciding between a dollar and a sterling loan at the moment and am leaning towards Sterling because:

1) The majority of my rent will be in Sterling (any dollar payments will be kept in dollar account to pay for running expenses)

2) The mortgage is flexible (overpayments) and penalty-free.


I appreciate the timing of any re-sale will be critical as I will be using the proceeds to pay off the sterling loan i.e. converting dollars to sterling.


Am I missing anything? What are the advantages of the dollar route?

Sorry to bring up such a boring subject!


Bombo

[Tracy]

I am certan that we went for a dollar mtg for tax reasons............, perhaps someone with more knowledge can comment on this. We were definitly advised to go Dollar rather than sterling. It is our intention to set up a DD on a monthly basis to transfer sterling to our dollar account through UK currency who will give us the commercial rates for the transfer.

If this isn't the right advice, if we could also be pointed in the right direction it would be appreciated !

[steph_goodrum]

We were advised that as long as the paper trail shows the mortgage to be for the home in Florida it is still fully tax deductible.
The dollar one is just as flexible if not more, when we had a dollar mortgage I overpaid $100 a month and this had cut the term from 30 - 21 years, when we switched we asked about overpayment and were told yes, but it was only on the closing documents we found it is not so flexible you have to make a minimum £500 overpayment and advise them separately you are doing so, you can't just increase the amount you pay monthly. I do find it easier in that the US bookings keep my Us account topped up and the sterling ones pay the mortgage.

[bombo]

Just to confirm.............

The Sterling Mortgage is secured against the Florida property (not my UK home) so there should be no need for the paper trail.
Obviously this would be different if you were using your UK home as the security and you needed to show the taxman proof that you remortgaged to buy the Florida property.

[blott]

quote:The majority of my rent will be in Sterling

That's what I thought when we first purchased our home but... in our first year, the majority of our guests were from USA (so much so that I was beginning to wonder if anyone from the UK rented a Florida home!) and they still remain a fairly high percentage of our total guests. Anyone who pays by credit card for our home also makes payment in US$s. With Europe now in Euros, the only guests who are going to pay in GB£s are from the UK - if you can't accept Euros, then people prefer to pay in US$s.

We have a US$ mortgage and can make any overpayments at whatever level that we wish. You can also make bi-monthly payments and reduce the mortgage term. We also obtained a fixed rate loan for the whole term (which isn't possible in the UK) so we know what our payments will be for the remaining 26 years unless we remortgage.

[steph_goodrum]

Blott
They have just introduced long term fixed rate mortgages in the UK now, the Cheshire is offering something like 5.2% for 25 years, we are thinking of doing it but other matters have taken precedence , our current mortgage is secured on our US property but we may decide to remortgage our home here as we have no mortgage and it would be less than 50% of the value we would need to borrow, that way we would have no exchange rate or interest rate fluctuations to worry about, and our accountant checked that it would still be fully deductible.

[blott]

Steph, I'm talking about four years ago! If they do fixed rate here for long periods now, then that's great. The only problem is that 5.2% in GB£s is more interest than 5.2% in US$s.

Like you, we don't have a mortgage on our UK home and, whilst we could probably do the same as you're suggesting (mortgage it and pay off our Florida home mortgage), the thing that worries me is that we risk losing our home where we live if we can't make the mortgage payments for some reason. Personally, I'd rather be secure where we live than secure over in Florida where we can't live!

It just comes down to individual 'comfort zones' for whatever each person decides to do.

[steph_goodrum]

Blott
That was our thinking originally and we wanted to keep them totally separate so if it didn't work and we lost the money we'd put into it at least we wouldn't be risking the roof over our heads. I think we will probably leave it as it is for this reason but we're exploring the options.
As you say even 3 years ago none of this was available so it changes all the time but if we are going to get hit for more closing costs we'll leave it as it is.

[Gillian-B]

We have a sterling mortgage and they provided a US tax form (1098) showing the dollar equivalent of interest paid. So far, we've had no problems with tax.

Gillian