2 Mortgages - Residential & Investment Properties - Consolidation

P

Paddyfagan

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Hi
Id appreciate some advice on the following:-

Ive a residential mortgage on the family home of €215,000 Fixed rate of 2.8% for 2 years - 9 months into it- monthly repayments of €1,300
The Home and property is conservatively valued at €450,000 even in todays market

Ive an investment property mortgage of €180,000 its a tracker mortgage at 2.5% interest - monthly repayments €930 - rental income/monthly €600

Is it worth my while trying to consolidate the two into one main mortgage to lessen the monthly payments? Would the bank even consider it do you think?
ie Remortgage the residential mortgage to €395,000 and pay off the investment mortgage

Reason: My salary has been cut considerably and Im finding it v hard to meet both mortgages

I could try sell investment property but I would only expect to get max €160,000 in present market

I would appreciate any advice on what my best options are based on the above?
 
Consolidation in itself does not lessen repayments, the only thing that reduces payments is interest reduction or term extension.

Several other issues with this are you might have a breakage penalty on the fixed rate one, you will probably lose the tracker on the investment one and you may have to pay legal fees.

A non-runner in my opinion.

Is there an option to extend the term on either one to reduce payments bearing in mind couple of years extra reduces it very little or alternatively get interest only payments for a while.
 
I am not entirely sure but I think you may lose tax relief on the interest on the investment mortgage if you pay it off, even if you take out another mortgage (on you main home) to do so.

It seems much better to try to scrape through this difficult times by getting mortgage terms extended/interest only and reviewing your other expenditure to see where you can make savings.

Would it be possible to move into investment property yourself for a while, renting out your main home? As your main home is much more expensive than the investment property, you may get much higher rent coming in this way. When your circumstances improve, you could move back.

Of course, if your investment property is too far from your work, or if it is a one-bed apartment and you have a large family, that would rule it out:)
 
Paddyfagan said:
I could try sell investment property but I would only expect to get max €160,000 in present market

I would appreciate any advice on what my best options are based on the above?
Click to expand...

If possible, I would sell the investment property even for a reduced price of €140K or less if necessary. Given the substantial equity you have in your PPR the bank might agree to the shortfall being added to your PPR mortgage.

Your current mortgage repayments are €2230, paying off the investment and adding the €40K shortfall to your existing mortgage should only increase it by €227 (assuming 19 years left), new monthly payment €1527, a reduction of €703.

Apart from subsidising the shortfall between rental income and mortgage payment, there must also be additional costs such as insurance, maintenance, letting agents, PRTB, NPPR etc that you would no longer have to pay if you sold the rental property.

If you are struggling now it will be worse at the end of your fixed term when your rate increases. Further salary cuts, upcoming budget, unexpected expenses etc should also be considered.

There’s always the possibility you won’t be able to let the property, or even worse, you could have tenants who just won’t pay.

A rental property is a burden you could do without.
 
Hi Paddy

Good advice so far.

It's not a good idea to replace your cheap investment property mortgage with a more expensive mortgage on your home. ( You would not lose interest relief though as money borrowed to replace a mortgage also qualifies, even if it's secured on your home)

If you sell your home for €160,000, you will save interest of €4,000 a year. You are getting €7,000 a year in rent, so you would lose income of €3,000 a year before tax and changes in property prices.

The problem for you is that you are paying capital off both your mortgages which you can't afford right now.

On your home, the interest charge is €500 a month, so you are paying €800 in capital each month. You should be able to move to interest only on this.

The lender may agree to reschedule the investment mortgage but could insist on you surrendering the tracker.

Sit down with the lenders and tell them your problem. It's likely that they will come up with a solution.

The lender on the investment property would be delighted to see you selling the house and paying off the cheap tracker early. Ask them if they will write off some of the shortfall if you sell the property for less than the mortgage. They are refusing at the moment, but they might start seeing sense soon.

Don't forget to tell us how you got on.
 
Plenty of options there.

I don't think going interest only on the investment property (even if it were possible) is anything other than a very short sighted solution to your problem, though.

The most sensible advice I've seen is to the sell the investment property. You have way too much property exposure and are not in a position to take risks such as increases in interest rates and/or the possibility your property goes through any period of time without a rental income.
 
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