# Buying a 2nd property & keeping existing property for rental market



## KMK2019 (27 Mar 2019)

Hi there, hoping someone can clarify whether myself and my partner would qualify for a 2nd mortgage. We bought our first home in 2007 for 395K, current outstanding mortgage is 345K. Property is worth 300K. We want to move out of Dublin to a bigger house so looking at renting out existing house and buying a 2nd property. We could rent out house for 2,500euro per month. Our mortgage repayments are approx 850 per month (We have a split mortgage and got this in 2011)
We have savings of nearly 20K. Partner earns 60K (civil servant) I am self employed and earn 60K (before tax). No loans, credit cards or bad debt (asides from negative equity in property)
Would we be exempt from 20% deposit for buying a new home if we keep existing property and rent it out? We would be looking to buy a property for around 350K. Thank you


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## NoRegretsCoyote (27 Mar 2019)

If you can get €2500 pcm in rental then your house is very likely to be worth more than €300k.

The highest yield for a two-bed house in Dublin is 10% in Dublin 10. This would indicate a value of €300k. Other areas have lower yields which suggest higher values.

7.5% yield in Dublin 20 would suggest a value more in the range of €400k for example.


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## peteb (27 Mar 2019)

why would you be exempt from a deposit??


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## KMK2019 (27 Mar 2019)

We live in an area where rental properties are scarce and in high demand due to large population. It is a 3 bed house and could yield that level of rental income however we have recently had it valued for sale and have been advised that we could only expect to get in the region of 300-330K. 

I have heard some banks offer exemption for 20% deposit and as we are in negative equity would they allow us to have less than 20% deposit? We would sell the house if we could get equity out of it but that is not possible and we are desperate to move for many reasons.


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## NoRegretsCoyote (27 Mar 2019)

KMK2019 said:


> We live in an area where rental properties are scarce and in high demand due to large population. It is a 3 bed house and could yield that level of rental income however we have recently had it valued for sale and have been advised that we could only expect to get in the region of 300-330K.



A gross yield of 30k/330k is 9% which seems very high for a three-bed in Dublin.

In a lot of south Dublin a €30k annual rent would see a value of half a million or so.

I think the EA either has the estimated rental too high or the sale price too low. I would advise you to get a few more valuations on both sale and rent. You really need to have solid numbers for these before you do any planning.


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## KMK2019 (27 Mar 2019)

Thanks for your feedback. We had several valuations done on the property by Estate Agent's and they all said the same thing. I have neighbours who rent out their properties for around the 2500 pcm and I did a quick daft search after reading your post and there are several 3 bed properties in my estate going for around 2250 - 2500 pcm. Not sure what else to say! I was wondering about whether banks will offer 2nd mortgages whilst renting out first home and what is the criteria that you need to meet in order to qualify for such a mortgage...


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## RedOnion (27 Mar 2019)

KMK2019 said:


> I have heard some banks offer exemption for 20% deposit and as we are in negative equity


Only your current bank, on the condition that you sell current house. Otherwise you're subject to central bank rules.


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## sunnywalk (29 Mar 2019)

Hi KMK 2019.
I was in a very similar position to you ( apart from the negative equity on previous "rental "home) and I was able to secure a 10% deposit mortgage under the banks exception scheme, even though I was a second buyer  
I did go through a broker as they know how to present your case in the best possible way.
The bank were extremely thorough in checking affordability and we were stress tested for ability to pay both mortgages. We were also purchasing a house worth half of our rental property ( different part of Ireland) so we needed a reduced mortgage and I think that helped. Definitely worth having a check in with a good broker.
Be wary of the tax you will need to pay on your rental...as a higher rate taxpayer that comes in at over 50% on your rental income minus deductibles ( and only the interest portion of yoir mortgage is a deductible) its cruicifying and now that my previous home is out of negative equity, I am considering selling up and getting out of being a landlord!
But in a nutshell it is possible to get an exemption on the central banks rules.


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## PhDuggan (21 Apr 2020)

Hi I have a similar situation at the moment.
I bought a house 12 months ago for 100,000, now another property near me is available for 260,000.
I want to keep my current property as the mortgage repayment is about 300 per month and rent it out locally (in Galway), thinking I will get about 400-700 euro for the rent.
I have talked to a few banks and they have said as I am a second time buy I will have to get the 20% deposit which will be 52000 euro in this case.
I have 40,000 saved. Im currently on a wage of over 75000 euro, which technically means I can apply for a for an exemption and go for the 10% deposit.
However I have talked to two banks so far and they said I will have to sell before I can buy.
I have asked if I raised the full 52000 euro could I keep the current property , they said no and I wont get the mortgage for the new house unless I sell this one first.

Any advice on this?


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## HollowKnight (24 Apr 2020)

This may be current attitude due to covid19. A friend works for a bank in mortgage approval and said they have changed their criteria and are much stricter with approval.


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## Saavy99 (24 Apr 2020)

sunnywalk said:


> Hi KMK 2019.
> 
> But in a nutshell it is possible to get an exemption on the central banks rules.



Haven't banks  stopped giving out exemptions now or they are being picky as   house values are reported to be falling.


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## JSnowWinterfell (25 Apr 2020)

Do you have other loans or fixed outgoings?  How old are you?

Net Monthly Income is ~4,200 based on 75k salary. 
A mortgage of 208k (80% of 260k) is ~820p/m (30 year @2.5%). 
Current Mortgage 300p/m

According to PTSB you can borrow 250k with a fixed outgoing of 300p/m. 

So if you can raise a 20% deposit and can show you can pay the other mortgage, why would the bank say no? What is the difference between having a 300 p/m outgoing due to a mortgage vs 300p/m for a personal loan?


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## RedOnion (25 Apr 2020)

Saavy99 said:


> Haven't banks stopped giving out exemptions now


Yes, the have effectively now, but they hadn't a month ago when the post was made.



PhDuggan said:


> Hi I have a similar situation at the moment


You're in a very different situation. The OP has a split mortgage and in negative equity.
It'd be useful to start your own thread.

Do you have any other borrowing? Or is what you've posted a complete reflection of your circumstances?
Are you married? Dependents?
Is your job permanent and secure?


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