Advice on second mortgage or loan

We would like to trade up to a 4 bed home currently on the market at 135k
My husband currently has a mortgage on the 2bed house we live in of 60k.

We have the following options...

Option1-
We have 105k cash and could get a loan off the credit union to buy the house

Option2-
remortgage property1

Option3
Should we take out a 15yr mortgage for 55k?.. monthly repayments approx 500.
and keep some savings.

Also, if we keep our first house and rent it ... should we keep it in his sole name? and would we be looking at paying much capital gains in the future if it's sold?

Hi Lillymay

1) Why do you want to keep the current house? How much is it worth? Is it a tracker mortgage?

If it's a tracker mortgage with one of the live banks, you may be able to sell the house and transfer it to the new place.

2) You should not borrow from the Credit Union. Their rates are much higher than mortgage rates.

3) Whether you remortgage Property 1 or take out a new mortgage on Property 2, will depend on the interest rate.

Assuming that the rates are not too different, then it is much simpler to take out a new mortgage on Property 2 which will be in your joint names. There are downsides to remortgaging Property 1 to fund the purchase of Property 2 e.g. they might want cross security.

4) It does not make sense to keep €20k savings. Effectively, you are borrowing at around 3.5% to put money on deposit at 0.5%. Unless you have a definite plan for the money in the next couple of years.

But you will have the rental income from Property 1 and you will have lower repayments because you have borrowed €20k less, so you will start building up your savings again.

You might wish to keep €10k to one side initially in case of unforeseen expenditure on the house. But when you have settled in and have no need for the money, pay it off the mortgage.

4) Make sure to take out a variable rate mortgage, so you can pay it off as quickly as possible without penalty. If you have a fixed rate mortgage, you will face penalties if you want to pay it off early.

Brendan

thanks Brendan,

House 1 in negative equity there was a lot of money spent on it and is probably worth 55k now it's on variable.
If rented it would pay for itself but we are just worried about Capital Gains Tax in the future.

We would need a loan of 30k to buy property2 don't think banks give mortgages that small??

If the bank's minimum mortgage is 50k, borrow 50 on variable and when you draw it down pay back lump sum of 20k if you want to end up with a 30k mortgage.

While the mortgage rate would be lower than Credit Union rate you would not have the legal costs associated with taking out a mortgage, also you could get secured loan rate rather than ordinary loan rate. If you have the capacity to clear the loan earlier on a shorter term which you might have judging by your savings it might suit you to borrow from CU, might be a lot easier too.