# In negative equity want to trade down and buy new house for cash



## toni_mrphy (20 May 2014)

Income details
Net monthly (i.e. after tax) Income self: 2868
Income history: e.g. Permanent employment for the last 8 years 
Net monthly income partner/spouse: 3716
Income history: Permanent employment for the last 14 years ( same company as spouse) 
Amount of child benefit received (Should be €130 per child) n/a 
Amount of Mortgage Interest Supplement received (MIS is the social welfare payment to unemployed people, don’t confuse with TRS) 0


One adult family or two adult family 2
Do you need a car for work or do you use public transport?  2 cars required 
Number of children 0- 2 years old:0
Number of 3 years old children: 0
Number of 4 - 11 years old:0
Number of 12 - 18 years old:0
Monthly childcare costs: 0
Montly spend on special circumstances: e.g. exceptional healthcare costs 0



Home loan
Lender: PTSB
Amount outstanding: €193,684 
Value of home: 120k - at best 
Interest rate: specify whether tracker or SVR or fixed rate. Tracker ECB +0.80% -1.05%
Monthly repayment 749 ( incl life insurance ) 
Amount in arrears 0
Original term 420 months. Remaining term 293 months


Other savings and investments 
Spouse currently has 48k in shares with another approx 33k due in the next year or so . 
14K in low interest PTSB savings account. 

Bought 3 bed Semi- D  house in 2006 , it is not in the nicest area ( but was the only place we could afford at the time ). 
We would love to be able to move in the next 2-3 years . 

We thought of using the share & savings money to buy a smaller house outright ( one that is in need of repair somewhere around the 70-90k mark ) & doing it up over the next 1-2 years . 
Once we get it in an ok condition we either 

Sales the house ( ideal outcome ) 
or 
Rent out the house . 

I am just wondering what peoples thoughts on this would be . Would the bank have an issue with it ? 
Could they transfer the balance on the mortgage to the “new “ house ?


I am looking for peoples opinions on this , there seems to be a lot of knowledgeable people on here .... 
Is it doable ?
Would the bank agree ?
Any major pitfalls I haven’t thought of ? 

Thanks


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## Butter (23 May 2014)

Are you hoping to buy in a different area? Is €90k a realistic figure for a do-er upper & will you have the spare money to do it up while living in your own house? 

If you buy this second house outright & go to sell the current house - if there is still negative equity, I think the bank would convert that into a term loan rather than a mortgage. I can't see how they would transfer it to a house that is owned outright. The term loan would be a much shorter duration than the mortgage. 

You could rent out the house in the future & move to the new one when it's finished. What is the rental potential like in the area? Bear in mind that you will have paid a lot of the interest off that house when you do that & won't be able to claim much on interest on your tax return. 

Your current mortgage is relatively low in relation to your incomes. You could pay down the mortgage to reduce the negative equity. What are you saving a month? You should be saving a decent amount as your mortgage is low.


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## Brendan Burgess (5 Jun 2014)

Toni 

You have a good income. 
You have a sustainable mortgage in that you can easily afford the repayments. 
You have a very cheap tracker. 

ptsb will allow you to transfer the tracker to a new home 

See this Key Post 

Analysis of new ptsb tracker mover 



> Personally, if it were me, I'd overpay the mortgage by 1500/month, reducing the term by about 17.5 years



No, no, no, no - a thousand times no. 

http://www.askaboutmoney.com/showpost.php?p=783549&postcount=2


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## niceoneted (5 Jun 2014)

I'd be aiming to save as much as possible to make this happen in the next year or two. Your current mortgage payments are low. Can you live of your wage and save the bulk of the €3716.  It could be doable. You'd get a lot of cash together.


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## toni_mrphy (5 Jun 2014)

Hi Guys 

Thanks for the replies . 
Firstly we would struggle to rent out the house area isn't great lots of empty houses around. 
I do think we need to sit down and go through savings again we currently only save about 400euro a month. 
That said we eat out a lot , take about 4 holidays a year have nice cars etc ete. 

The only issue with moving the tracker mortgage is my credit rainy de to some bad decisions a year or two ago it is not good so doubt they would allow this 
Thanks again 
T


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## Brendan Burgess (6 Jun 2014)

Hi Mr Derp

You raise a very valid point, which I do not pay enough attention to. 

I have split off the tracker bit from the "should I overpay my mortgage" thread . The split is here: 

Should I overpay my tracker mortgage?

I had covered it here


> *Reasons you might pay a lump-sum off your tracker
> 
> *1) You are concerned that the deposit in the bank might not be safe.
> 2) Ireland might pull out of the euro. There is a risk that if Ireland  pulls out of the euro, your deposit might be converted to punts while  your mortgage stays in euro.
> ...


but I think I need to emphasise point 4 better.  A good reply from you would add to that emphasis.


I have rewritten the Key Post to highlight the points you raise 


> *While the correct financial decision is not to overpay your mortgage, it is better to overpay it than to squander it
> 
> *If you are good with money, it's better to have a €300k tracker  mortgage and €100k in a deposit account, than to have a €200k mortgage.
> 
> However, if you the presence of €100k tempts you to squander the money, then you should pay down the mortgage.


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## Brendan Burgess (6 Jun 2014)

MrDerp said:


> Personally, if it were me, I'd overpay the mortgage by 1500/month, reducing the term by about 17.5 years (clear it in 7 or so). Then after 3 years you'd be in positive equity, be able to sell cleanly, and still have all of your shares and other savings as a new deposit. If you continued the overpayments for the 7 years, you'd have the money to buy another house outright, and you'd save a bucket in interest keeping that tracker - the flip side being staying put in your current house which isn't what you want




The reason I reacted so negatively to this is that it's the wrong financial advice.   It's confusing in that you tell him to repay the tracker to  "save a bucket"   As financial advice, this is just plain wrong. 

However...



> That said we eat out a lot , take about 4 holidays a year have nice cars etc ete.
> 
> The only issue with moving the tracker mortgage is my credit rainy de to  some bad decisions a year or two ago it is not good so doubt they would  allow this



Given Toni is not good with money, maybe paying down debt is the correct advice. 

If I am advising someone on investing their long term savings I will usually say "The safest, best long-term home for your money is a diversified portfolio of shares. However, if you can't handle the volatility of shares..." 

So I think it's best to give the right financial advice and then put in the caveat. 

So the correct financial advice for the OP is "Do not overpay your tracker. However, it's better to overpay your tracker than to squander it".


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## Brendan Burgess (6 Jun 2014)

toni_mrphy said:


> The only issue with moving the tracker mortgage is my credit rainy de to some bad decisions a year or two ago it is not good so doubt they would allow this



You seem to have a lot of cash. How come  you made bad decisions which affected your credit rating? 

Go into the bank and apply for approval to move your tracker.  Don't assume you will be rejected. 

If they refuse you, then reapply with a proposal to pay a lump-sum off the tracker. That might well swing it for you. 

Brendan


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