Advice on Mortgage Options

W

wall

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Just looking for opinions
Have 3 bed house - 270k left on mortgage,25 years left,worth 260k on market. Variable interest rate 4.5%
Want to trade up- have 240k in savings.

Have mortgage application approved by different bank- 4.1% variable LTV less than 80% as long as we rent 1st house which we can in the area it is in.

My question is whether to put a sizeable sum towards 1st mortgage i.e 30-40k to reduce repayments as interest rate higher? Rent would leave shortfall of 100 euro per month plus management fee of 700 per year or just keep capital for future house.
 
Are the bank telling you not to sell the 1st house and hold it as a rental or is that your own decision?
 
The bank don't care as it's not their mortgage so they deem it to be another bank's problem. They just want guarantee it will be rented so a letter of estimated rental income.
 
Hi Wall
Pay off the new home loan first including reducing the amount you need to borrow if neccessary. The other loan which will become a rental will have 75% of the interest deductible against the rental income. Before you decide to rent the other property you need to consider what is the gross rent and the net rent. There are alot of deductions that need to be made from the monthly rent payable (Tax, PRTB, Sinking Fund, Etc) If this leaves you in a position of affordability then it could make sense and hopefully the property may increase in value over time (you need also consider what your first property was bought for in terms of capital gains tax if you sell it in the future) but to answer your question re lump sum make any lump sum you have payable to the new home loan as there is no relief on that loan. Hope this helps Padraic
 
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