How Will Brexit Impact EU Ski Home Owners?
Since the referendum took place in June 2016 speculation has been rife about what leaving the EU means for those who own holiday homes in the EU. Now with a new prime minister on the way and the new Brexit date of October 31, 2019 slowly creeping up on us, we look at how owning a ski home in the EU could be affected once Brexit has taken place.
Buying & Visiting your Ski Home in the EU
EU Nationals are currently allowed to buy a home in any EU member state and live in it for as long as they like. If Brexit means that Brits will no longer to be able to do this, we can expect that we will be in the same position as non-EU nationals where you can spend a maximum of 90 days in the Schengen area out of every 180 days.
Those that would like to work will have to apply for working visas and access to healthcare is likely to become more difficult meaning travel insurance will have to be taken out each time you visit your EU ski home. Some EU governments are making moves to create legal safe ways for those who own property in the EU so they can still access healthcare services.
Getting a Mortgage
Getting a mortgage for a European property is currently an easy process for Brits with mortgages easily accessible from both UK banks and banks which are local to the location in which they want to buy. After Brexit, European banks may be unwilling to lend to UK nationals as non-EU members are considered to have a higher borrowing risk.
If you choose to buy after Brexit and your mortgage application is successful, the minimum deposit on your new ski home is likely to jump from 20% to 50% which will severely limit the number of people who can buy a ski home in the future. Even things as simple as opening an EU bank account will become harder making the whole mortgage application process more difficult.
If owning a ski home in the EU is something you have always dreamed of, purchasing before the Brexit date or within the transition period is advisable as buying your dream ski home once Britain has left the EU will make it more difficult to obtain the best mortgage for your needs.
The value of the Pound has decreased by 20% since the 2016 referendum and further political uncertainty associated with Brexit means it may drop further. If you are interested in purchasing a ski home in the EU before Brexit happens, a forward currency contract (much like a “buy now pay later” option) is a great way to take advantage of current exchange rates even if you aren’t thinking of buying until a little further down the line, protecting your money from a potentially volatile post-Brexit market. If you already own a ski home in the EU and have a Euro mortgage a drop in the value of the Pound could push up your overall repayment costs meaning a forward currency contract could also protect your finances from adverse moves in the market.
Letting Out the Property
If your time to visit your ski home is limited due to Brexit, renting it out is a great way to help cover the expenses of owning a holiday home and avoids it being empty for much of the year. It is important to purchase your ski home in a resort with strong rental potential so on the dates you are not there it will be occupied by paying guests. Key to this is to find a good letting agency or property manager to ensure both your home and your guests are well taken care of.
If the UK exits without a deal, EU ski home owners may face insurance issues on their holiday homes. Be sure to get in touch with your insurance agent to find out if there will be any changes to your policy.
If you currently own and rent out a ski home in the EU, income tax made from the ski property is payable in both the country the property is located and the UK. To make sure tax isn’t paid twice you are able to claim back income tax paid in the UK by offsetting it against the tax which was incurred in the EU country where your ski home is located. It is currently unclear whether it will still be possible to claim back this tax to avoid being charged twice.
Tax perks enjoyed by EU nationals may also cease to exist for Britons. As it currently stands, EU homeowners pay 19% on gains from renting or selling a property in France compared to 49% for non-EU citizens.
Each of the outcomes we have discussed here are possibilities, not certainties and owning a ski home in the EU is still an attractive investment for many UK Nationals. In fact, now is the perfect time to buy if you are considering purchasing a ski home in the EU as Brits still have access to the low European interest rates when applying for a mortgage.