Buying a new home - what are our options?

L

Lookingtomove

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Hi, I'd appreciate some views on our current situation. We are hoping to buy a property valued at €260K and are looking at our options regarding keeping current property & renting out or going down the negative equity mortgage route or any other suggestion someone might have!

Current Mortgage -
Mortgage Interest Rate – Tracker =.75% (AIB)
Current Monthly Amount - €580 (including TRS €45)
Outstanding €178,000
Current Value – Approx. €150,000

Rental Market - €900 p/m
Incomings & Outgoings
Salary 1 - €41k
Salary 2 - €27k (Job Share)
Monthly Take Home - €3925
Monthly Bills (not incl mortgage)- €1,410 (childcare, management fees, insurance, utilities)

We have a small amount in savings and are looking to build this up over the next couple of years. Taking the above price of €260k for a property into account, how much savings would we need for a deposit, stamp duty etc? Will we get a sufficent mortgage on our salaries? Are we crazy to think this is a realistic option? We have 2 kids in a 2 bed apartment and need to move soon!

Thanks in advance
 
If you keep your current property & buy another at €260k you've exposure of approx €440k on a joint salary of €68k. That looks high to me & questionable as to whether you'd even get it now with the new rules.

Your monthly repayment looks low - is your mortgage over a long number of years or are you paying interest only?

In your shoes I'd be talking to AIB about a negative equity mortgage & trying to transfer your tracker rate to a new property.
Do you want to play landlord? If not, don't do it.
 
Thanks for the reply Butter. No, we are not interest only, with the tracker rate that's out montly repayments. We over paid for a number of years but received advise to stop doing this as we are getting ourselves out of negative equity.

I guess the reason we would like to keep the first property is it seems a good investment - i re-checked the rental value at the weekend and similar properties are currently fetching €1150 per month so seems a good return on a small mortgage?

Do you think approaching AIB is a good idea? I'm always anxious around our tracker rate and the possibility of playing our hand too soon with them? Any advise they give will obviously have their best interests at heart and not ours.
 
If I were you there's a couple of things I would do.

1) Approach AIB & ask about buying another property with a negative equity mortgage, if you sold your current house. I wouldn't mention keeping the current house. Look at the potential repayments on the new property & do a budget spreadsheet. Are you comfortable with the budget & outgoings?

2) Approach another lender to ask about keeping the current property & buying a second. See if another lender would agree to this. Run the numbers through a budget spreadsheet looking at income, expenditure on two properties, upkeep of two houses, income tax & associated costs of being a landlord. Can you afford to do it in good times & bad & when interest rates start to rise?

From experience what can look good in theory can look somewhat different when you drill down into the numbers & look at best & worst case scenarios.

Your repayments on €178,000 even with that tracker look low, so I am guessing the mortgage has a long period to run still. Is that the case?
 
Thank you so much Butter - it's great to get some advise! I suppose at the moment we need to sit tight and keep saving, we just want to have a plan in place and some potential options open to us. At the moment i work part time, there is the potential to return full time in a few years increasing our salary by €27K so that needs to be kept in mind too.

I believe we have approx 20 years left on the mortage, not 100% on that. We are both mid-late 30's so again this will have a bearing on things.

At the moment we do not have enough saved to move, would you advise still approaching the banks and discussing our options or waiting until we have money saved first?
 
I don't see any harm in making the enquiries now. That way instead of guessing what you might be able to do, you'll know with a degree of certainty & you'll have an idea of costs.

Moving is actually an expensive operation when you add up solicitor's fees, maybe estate agent's fees, stamp duty, removal company/van hire. You do need savings to pay for these costs.

I would really recommend an excel spreadsheet & a comprehensive budget. It really can bring clarity to your options.
 
Thanks Butter.

One final thing. We are currently arranging an appointment with a Financial Adviser costing €100 to discuss all this. Would we get the same information from a meeting with AIB and possible an alternative lender, KBC to discuss our options also?
 
I recently used a broker for my KBC mortgage and it cost me nothing.
You could arrange your own appointments to speak to someone in AIB & KBC and it won't cost you €100.

Ask KBC about about keeping your current house & buying another.

Ask AIB about a negative equity mortgage first & get their response. You could always ask later about keeping the current house.
 
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