Advice required on negative equity/investments

G

giblet

Registered User
Messages
23
Hi All,

My PPP is a 1 bed Apartment : Outstandng Debt: 314k, Monthly Payment: €1180 and interest rate of 2.6% over 34 years.
Negative equity estimate: 140k
Service charge 1400 per year

Investment Property: 3Bed Semi - Outstanding Debt: 250k, Monthly payment 1390, rate of 2.6% over 19 years. Rental income = €900
Negative equity estimate: 50k

I have savings of approx 50k

I am single and currently in fulltime employment

The negative equity is high and my monthly outgoing is approx 1600 pm. My investment property is nowhere near washing its face however I have some savings that could be used to reduce debt&repayments

I was planning to use both places as a pension investment in the future

On looking at my figures does anyone have opinions or good advice on what I should do next to manage this with minimum cost to me over long term

Thanks in advance
 
Lots of other factors to consider, age, income etc. Might be worthwhile having a look at the money makeover page for more advice
 
Hi giblet

Forget the long term - you need to worry about the short term and the medium term.

1) Don't pay off the investment property mortgage as you are getting tax relief on the interest paid on that but much more limited relief on your home loan.

2) Should you reduce your home loan? On balance, I don't think you should. The rate you are paying is very low, so I think you should keep the cash on deposit.

Read Should I use a lump sum to reduce my mortgage?

3) You don't tell us what your income is. However, is €400k worth of property too much? Probably a bit much, but you probably can't sell now anyway.

4) Another reason for keeping the €50k is that if you do get a chance to sell the investment, you would be able to use the €50k to clear the negative equity on it.

5) Yet another reason for keeping the €50k is that either of the mortgage lenders may offer you a deal for paying off the cheap tracker early.

Brendan
 
Thanks for taking time to reply, just to add - 80k gross income, no dependants, 31 years old

Point 1 - excellent didnt factor that in to my numbers
Point 2 - Agreed Im sure I could do better than 2.6% on deposits
Point 3 - Exactly its a bit much but what choice do I have and I can technically manage it
Point 4 - Yes this is good point too, I am wondering if there is any point at this stage to sell the investment - I think it would move as its a good 3 bed semi and priced right at 200k.

Point 5 - Good point I have read about this. I'll inquire about this option and see what they put on the table

Thanks again Brendan
 
At 2.6% and no real distress in meeting the payments I would just sit tight and keep your cash.

I would not approach either of then at this stage re swapping the tracker: with 555k debt and 50k to play, cant see it in your favour much.
Keep the head below the parapet and play on
 
6) Another reason to hold on to savings is for the rainy day. What if you were to become unemployed for a period or need to take a year or two off work because of illness or to look after a loved one etc. It would be wise to keep your savings as an insurance policy to maintain your mortgage payments and other unforseen costs.
 
You said you wish to keep both properties. Your PPR mortgage is on too long a term at 34 years. You should try and make overpayments on this and lob maybe 40K off the mortgage as a starting point, keeping 10K savings.

Very surprised a one bed cost so much, and that it's actually worth 174K?

Presumably at some stage you will need to live somewhere bigger. What is your plan on that? Personally I think the PPR should be got rid of if at all possible. What rent would it achieve?
 
Hi Bronte

Original idea was to keep both - but Im certainly not fixed on that if it makes no sense, however its difficult to get rid of it now that there is so much negative equity that would be realised.

I bought it at the absolute peak in 06 and was in bidding war, ridiculous decision and ridiculous price. Ive no real idea what it is worth now - it would be a nice 1 bed so just above average 1-bed price today (whatever that is)

It would get 850-900 pm , so if I brought it down to approx 275k mortgage I would get rental yield of < 3.4%

Cheers
 
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