Buying with Partner – Should I Sell or Rent Out?

M

mazmaz

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I'll start by summarising the facts about the situation and will provide more detail below:
  • I bought my apartment myself 3 years ago.
  • The current value is roughly 330k, for which I have 60k equity.
  • I am on a green mortgage rate of 2.15% for another two years.
  • Neighbouring apartments are renting for around 2.3k per month.
  • Partner and I can get a mortgage of 580k and have a decent deposit saved.
My partner and I (early 30's, together 10 years, not married), would like to buy a place together in a better location. I'm personally not happy with this location, I thought that I could adjust, but need to be more central. Partner lives at home, but stays over frequently. It's too small for both to live here comfortably full time.

Partner and I are both in stable employment, earning similar wage (i'm on about 15% more). Partner has a large deposit saved, I have equity (~60k) plus a small amount of savings and investments. Both contributing well to pensions at max where employer will match.

Q1: Is this a clear-cut case where keeping the apartment as a rental investment is the best option? For those who have been in a similar position, did you find renting out a property more trouble than it was worth?
Q2: Do I have an obligation to notify the bank about a change in circumstances, i.e. buy to let? I've seen mixed responses on this.
Q3: I had a chat with a broker, and she stated that whether I keep or sell my apartment, it will not change the loan amount. The bank will presume that you will be taking in the market value of rent. Is that correct?
 
Probably worth starting with this key post...

Key Post - Keep property as Rental or Sell?

Updated May 2020 The question regularly comes up on AAM whether somebody should keep an apartment that their family has outgrown as a rental or whether they should just sell up. Borrowers often run projections on the anticipated rental income from an apartment with a cheap tracker and conclude...
www.askaboutmoney.com
And don't be a joint buyer of a property that doesn't suit the two of you and not just one of you.
 
I think you will run into a problem with the lender as they will probably not let you have two PPR mortgages at the same time.

So you either have to switch the apartment to buy to let mortgage interest rate or let your partner buy on his own.

If you switch to a buy to let interest rate on the mortgage this reduces quite a lot your return and also limits hugely what any lender will give you on a PPR mortgage in conjunction with your partner.

And there is no spoofing this as all of your borrowings are visible to any mortgage lender on the Central credit register.
 
Dr Strangelove said:
I think you will run into a problem with the lender as they will probably not let you have two PPR mortgages at the same time.
Click to expand...
Most people use a different lender for the second mortgage, banks don't watch the register, so long as they are being paid they're happy. It is likely a contravention of the terms of the original agreement, but everyone seems happy playing along and ignoring that unless there are payment issues.
 
mazmaz said:
  • The current value is roughly 330k, for which I have 60k equity.
  • I am on a green mortgage rate of 2.15% for another two years.
  • Neighbouring apartments are renting for around 2.3k per month.
Click to expand...

This Key Post sets out the methodology

Key Post - A systematic approach to deciding whether to keep your home as an investment after trading up

This has been covered before a few times, most notably in this Key Post, by Sarenco. This post updates it and tries to put a systematic framework on the issue. If you decide to keep your home as an investment, it is a decision which you should review every few years to see if it's still...
www.askaboutmoney.com

Applying it to your case:

Rental income: €27,600
Interest on mortgage - €270k @ 3% €8,000 (Use the expected rate over the longer term rather than your current very low rate)
Other costs: Say €4,600
Profit before tax: €15,000
Profit after rax: €8,000

If you sell the apartment and set the €60k equity against your home loan, you will save about €2,000 a year interest.

So this is a profitable investment and if you are happy to do the work and put up with the hassle of tenants, then keep the apartment.

Brendan
 
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