NIALL and Susan are about to move to Hong Kong for two years. They want to buy a £200,000 flat to live in for the duration of Niall’s work assignment. The couple have a home in Cornwall at present, which they will let while they are away. It is worth £400,000 and they have a £90,000 repayment mortgage with Northern Rock. They are paying their lender’s standard variable rate (SVR). They need about £160,000 for the purchase of their Hong Kong property, and want to know how best to raise the finance: either by raising the equity through their home in Cornwall, or getting a mortgage on the Hong Kong property. When they leave Hong Kong they will sell up completely and move back to Cornwall.

Simon Jones, of Savills Private Finance, says: The interest rate that Niall and Susan are currently paying — Northern Rock’s SVR of 6.84 per cent — is very high. As they are free of redemption penalties, it would be wise for the them to remortgage as soon as possible.

As the couple plan to move back to Cornwall after two years, they will not necessarily have to take out a buy-to-let mortgage on their Cornwall home, even though they will be letting it out. As long as the property is their sole residence in the UK, there are lenders who will be happy for them to take out a standard residential mortgage. But they will have to check this with their mortgage lender and obtain permission from the lender that it is happy for the property to be let.

Niall’s income will rise when he starts to work in Hong Kong. Most lenders will be happy to lend him 3.5 times his salary, especially as the mortgage amount is only 61 per cent of the value of their home.

As the couple will sell their Hong Kong apartment when they leave, it may be wise for them either to take a deal that allows them to pay down their UK mortgage with lump sums, or to find a deal that ends in two years so that they can pay off some of their mortgage with some of the proceeds of the Hong Kong sale.

It is very important that Niall and Susan check what taxes they are liable to pay, and in which country, as early on as possible.

Savills Private Finance: 0870 9007762

Miranda John, of Propertyfinance4less, says: If Niall and Susan decide to fund their new purchase by taking out a mortgage on the Hong Kong property rather than remortgaging their UK home, they will have the choice of a mortgage in US dollars, sterling or Hong Kong dollars. As a general rule they would not be able to borrow more than 70 per cent of the property’s value, so they would need to take this into account with the deposit available.

Lenders in Hong Kong usually apply a margin of 1.5 per cent above the base rate or borrowing cost. At the current time, interest rates in Hong Kong are considerably lower than those in the UK. The type of loan available would be on a variable basis: at current rates that would give a pay rate of about 2.5 per cent although this is assessed on each individual case The bank would charge an arrangement fee, which would cost between 0.5 and 1 per cent of the loan amount.

Niall and Susan would need also to allow for the valuation cost and the associated legal fees as well as life assurance, which would be required. There are no early redemption penalties, which will be important if Niall and Susan intend to sell within a few years. To qualify for a mortgage in Hong Kong, they should be prepared to provide proof of earnings and bank statements. Also, as Niall is starting a job with a new company, the probationary period must have been successfully completed before any application can be made.

Propertyfinance4less 020-7594 0555

LUCIA ADAMS

FANCY A MORTGAGE MAKEOVER?

Email: property@thetimes.co.uk with your daytime telephone number. You must be prepared to state your income and be photographed.

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers