Financials to Consider When Moving Abroad: Should you sell your current home?
Obviously if you are relocating with a company then most of your relocation costs will be covered by the company. You also have a job to go to, so really you can decide whether to keep or sell your current house.
If, however, you are paying for the move yourself, and don’t have a job to go to, what should you do to minimise the risks involved, and to make sure you have enough money to enjoy the move and settle in?
The answer to this is: you need to plan ahead if you don’t want to end up with very little money or savings when you move. The more you can do in the time before you move, the better off you will be.
You may think it is a good idea to cut your ties and sell up if you own your own home. Not necessarily.
If your home is rising in value, then you might like to consider keeping it while you are moving abroad.
You need to pay off as much as possible of the mortgage before you leave. As long as your property is rented out, you should be able to cover the remainder of the mortgage, additional costs, and have some income to support you in your new life abroad. You also have an additional asset for your retirement if you hold on to it.
I only advise doing this if your home is in a good area, increasing in value, will easily rent out, and the rent is going to give you some positive cash flow. All management costs need to be taken into account in your calculations (typically around 10% for an agent to manage a property), as I do not recommend trying to manage a property from abroad unless you have a friend locally who will manage it for you.
Remember that when you sell a property you will incur estate agent fees, legal fees, etc. which will reduce the amount of cash you have to spend on a new home, so keep your cash invested until you are established in your new home country.
And of course, if things haven’t worked out in the new country, you have a house you can return to.
Renting initially when moving abroad is a good way not to commit too much and you can also find out if the area you thought you wanted to live in is indeed where you should be. I have friends who have had to move from the place they originally bought abroad because they could not find work or clients where they had chosen to live, so renting initially will be a less risky option for many of you.
When you are ready to purchase in your new country, you should be able to get a release against the equity in your old house from a mortgage broker, or from your bank, as you will be able to show that it is an income generating asset. This re-mortgaging will however have a significant impact on the income you will now receive from the rental property, so you need to be established financially in your new country before you do this.
Of course, if you have settled in, have a great life, and know you will be happy where you are now living, then you can now consider selling up your old home, and using that money to invest in a new home for you and your family.
However, if you can re-mortgage your old house to get enough for a deposit on a new house, then that way you will have a new home you are funding from your salary, and your old home will be funded from the rental income. This way you are using financial leverage to build your retirement nest egg into a bigger pot, and spreading risk by having two properties in different places.
If you are taking the step of selling, or re-mortgaging, then remember to start talking to currency brokers as soon as you can to ensure that they advise you over the months it may take to complete the deal when is the best time to buy a forward contract, to maximise the amount to send money abroad.
To learn about maximising your currency deal read this previous blog by clicking here.