Mortgage/ loan holidays during lockdown

[KyushuWoozy]

Sure, understand everyone finds their own way. I would probably still go for interest-only (eventually via Ltd company) because I think that would be the best way to slowly start building a portfolio. The money that would have gone in capital repayment instead goes for the deposit on property#2. However I do understand your reasoning that you've chosen the quickest route to have a nice juicy asset fully paid off.

[Wales4rugbyWC23]

Sure, understand everyone finds their own way. I would probably still go for interest-only (eventually via Ltd company) because I think that would be the best way to slowly start building a portfolio. The money that would have gone in capital repayment instead goes for the deposit on property#2. However I do understand your reasoning that you've chosen the quickest route to have a nice juicy asset fully paid off.

Are you sure you can set up a limited company in the UK, if you are a resident in Japan?

[Bubblegun]

Sure, understand everyone finds their own way. I would probably still go for interest-only (eventually via Ltd company) because I think that would be the best way to slowly start building a portfolio. The money that would have gone in capital repayment instead goes for the deposit on property#2. However I do understand your reasoning that you've chosen the quickest route to have a nice juicy asset fully paid off.

Thanks for that.
I have though of that myself.
The money that would’ve gone to paying off the loan is,( imho) actually still there. It’s just locked into (as the bank would say) the asset.
So I am hoping (if the wife is on board) to buy a second property.
The income from flat 1, will be used to pay down flat 2, along with rent from flat 2.
I am hoping to speak to a financial “advisor” ( cough cough), and see if He can find “tax efficient “ way of buying it.
I think if I took out an interest only vehicle the banks might want to know how I’m going pay it off,which still puts me in that “endowment” “ISA”, “investment” product.
I suppose I like the SIMPLE is BEST system.
1: pay off the debt, 2:save some for emergencies/retirement , and 3: wait. The hardest part seems to be part 3.

Are you thinking of buying?

[Bubblegun]

Sure, understand everyone finds their own way. I would probably still go for interest-only (eventually via Ltd company) because I think that would be the best way to slowly start building a portfolio. The money that would have gone in capital repayment instead goes for the deposit on property#2. However I do understand your reasoning that you've chosen the quickest route to have a nice juicy asset fully paid off.

Thanks for that.
I have though of that myself.
The money that would’ve gone to paying off the loan is,( imho) actually still there. It’s just locked into (as the bank would say) the asset.
So I am hoping (if the wife is on board) to buy a second property.
The income from flat 1, will be used to pay down flat 2, along with rent from flat 2.
I am hoping to speak to a financial “advisor” ( cough cough), and see if He can find “tax efficient “ way of buying it.
I think if I took out an interest only vehicle the banks might want to know how I’m going pay it off,which still puts me in that “endowment” “ISA”, “investment” product.
I suppose I like the SIMPLE is BEST system.
1: pay off the debt, 2:save some for emergencies/retirement , and 3: wait. The hardest part seems to be part 3.

Are you thinking of buying?

[Wales4rugbyWC23]

Sure, understand everyone finds their own way. I would probably still go for interest-only (eventually via Ltd company) because I think that would be the best way to slowly start building a portfolio. The money that would have gone in capital repayment instead goes for the deposit on property#2. However I do understand your reasoning that you've chosen the quickest route to have a nice juicy asset fully paid off.

Are you sure you can set up a limited company in the UK, if you are a resident in Japan?

Are you sure that this really gives you really any tax advantages? Stamp duty stays the same, and I think for second properties you still have to pay the higher rate. As for mortgage interest being tax deductible incorporated- which I think is the main perk. As a normal tax payer you are now given a 20% tax credit with mortgage interest- a reduction to what it is, but you still have your income tax allowance of 12,000 pounds which after agent's fees, insurance and management fees, furniture depreciation deductibles you will have to be bringing in quite an amount of rent to be paying any income tax on the rent.

[Bubblegun]

Sure, understand everyone finds their own way. I would probably still go for interest-only (eventually via Ltd company) because I think that would be the best way to slowly start building a portfolio. The money that would have gone in capital repayment instead goes for the deposit on property#2. However I do understand your reasoning that you've chosen the quickest route to have a nice juicy asset fully paid off.

Thanks for that.
I have thought of that myself.
The money that would’ve gone to paying off the loan is,( imho) actually still there. It’s just locked into (as the bank would say) the asset.
So I am hoping (if the wife is on board) to buy a second property.
The income from flat 1, will be used to pay down flat 2, along with rent from flat 2.
I am hoping to speak to a financial “advisor” ( cough cough), and see if He can find “tax efficient “ way of buying it.
I think if I took out an interest only vehicle the banks might want to know how I’m going pay it off,which still puts me in that “endowment” “ISA”, “investment” product.
I suppose I like the SIMPLE is BEST system.
1: pay off the debt, 2:save some for emergencies/retirement , and 3: wait. The hardest part seems to be part 3.

Are you thinking of buying?

[KyushuWoozy]

Are you sure you can set up a limited company in the UK, if you are a resident in Japan?

As far as I know it isn't a problem.

[KyushuWoozy]

Are you sure that this really gives you really any tax advantages? Stamp duty stays the same, and I think for second properties you still have to pay the higher rate. As for mortgage interest being tax deductible incorporated- which I think is the main perk. As a normal tax payer you are now given a 20% tax credit with mortgage interest- a reduction to what it is, but you still have your income tax allowance of 12,000 pounds which after agent's fees, insurance and management fees, furniture depreciation deductibles you will have to be bringing in quite an amount of rent to be paying any income tax on the rent.

Yes, you make good points. I think there is some tax advantage though it may not be huge. Also of course you're right that assuming no other UK income there's the 12k tax threshold you mention. However assuming (?) I reach that figure eventually it may make sense to incorporate now rather than later to avoid paperwork hassle and expense down the road. Actually I discussed this with two housing specialist accountants when I was back in the UK. One said incorporate from the start, one said (following your argument) no need to do it now

Another point always in the back of my mind is that I've always been hopeless at planning my life years ahead. Especially with this virus issue muddying the waters I may end up in the UK sooner rather than later so the tax threshold might disappear pretty quickly if I start earning there.

Anyway, you make some good points as always. I definitely haven't looked into it enough yet to decide definitely one way or another. In the end I'll probably just follow the advice of whichever accountant I end up working with.

[KyushuWoozy]

“tax efficient “ way of buying it.

I guess that would be Ltd company route but see discussion below.

Anyway, capital repayment vs interest-only are both ways of achieving the same goal. I just thought interest-only allows for better cash flow, may (or may not) offer some tax advantage and may help avoid the costs involved in remortgaging. Hopefully your accountant and mortgage broker can give some good advice.

[Wales4rugbyWC23]

Are you sure that this really gives you really any tax advantages? Stamp duty stays the same, and I think for second properties you still have to pay the higher rate. As for mortgage interest being tax deductible incorporated- which I think is the main perk. As a normal tax payer you are now given a 20% tax credit with mortgage interest- a reduction to what it is, but you still have your income tax allowance of 12,000 pounds which after agent's fees, insurance and management fees, furniture depreciation deductibles you will have to be bringing in quite an amount of rent to be paying any income tax on the rent.

Yes, you make good points. I think there is some tax advantage though it may not be huge. Also of course you're right that assuming no other UK income there's the 12k tax threshold you mention. However assuming (?) I reach that figure eventually it may make sense to incorporate now rather than later to avoid paperwork hassle and expense down the road. Actually I discussed this with two housing specialist accountants when I was back in the UK. One said incorporate from the start, one said (following your argument) no need to do it now

Another point always in the back of my mind is that I've always been hopeless at planning my life years ahead. Especially with this virus issue muddying the waters I may end up in the UK sooner rather than later so the tax threshold might disappear pretty quickly if I start earning there.

Anyway, you make some good points as always. I definitely haven't looked into it enough yet to decide definitely one way or another. In the end I'll probably just follow the advice of whichever accountant I end up working with.

This year I was hoping to really start contributing to all the pension schemes that Retire Japan always recommends, and this corona came long and I am just glad I have some reserves to keep our classrooms going.