Interest Only Mortgage @4.9%

P

Pablo20

Registered User
Messages
7
Hi all,
looking for some options (if any) please.
We have an interest only mortgage of €298K with Haven till 2030.
The interest rate is a whopping 4.9%!
The rent is covering this and the bills with about €80 a month leftover.
We would love to start paying some of this off and will need to sell eventually to pay off the mortgage.
Similar houses in the area are for sale at €420K.
Are there any other lenders out there that I should be talking to, perhaps at a 75% LTV rate if I managed to pay some of the capital off?
Just trying to think outside the box you could say.
Obviously losing the full amount of mortgage relief would need to be considered but any advice would be appreciated.

Many thanks
Palo
 
You have equity of €120k.

The return on that seems to be €960k gross or about €500 after tax.

A bad tenant or a rise in interest rates, and you could be struggling.

Doesn't seem to be worth the risk as you will have to sell it anyway.


Brendan
 
You might knock 1% of the rate by switching, but the costs of switching might not justify it.

Rates | ICS Mortgages | Residential Mortgages

The ICS Brand was established in 1864 and has remained a leading and trusted brand in the mortgage market throughout its 150-year history.
www.icsmortgages.ie

You could knock a bit more off it by getting it down to 60% or even 50% LTV and going to capital and interest.

Brendan
 
Thanks Brendan,

thats very helpful.

I would agree, the exposure concerns me. I'll give Haven a ring and crunch the numbers.

They are also long term tenants and as good as they are, they are entitled to almost 12 months notice to vacate.

So putting it on the market now isn't even an option and the capital gains element is a real pain.

I do feel that the government sees all small time landlords as a blight on society and are very much on the tenants side.

Pablo
 
Pablo20 said:
I do feel that the government sees all small time landlords as a blight on society and are very much on the tenants side.
Click to expand...
This is irrelevant and the wrong way to look at it. You have a gross return of less than 1% on your equity, your return on the asset value is <0.25%. You are carrying all the risks of that mortgage debt without any justifiable reward so you are not a good landlord. You could get a much better return just using state saving

Pablo20 said:
They are also long term tenants and as good as they are, they are entitled to almost 12 months notice to vacate.
Click to expand...
The most they are entitled to is 32 weeks if they have over 8 years of tenancy. Your bigger problem may be Covid related restrictions on ending tenancies. But if selling is the right decision then you need to act soon to get everything moving

Pablo20 said:
So putting it on the market now isn't even an option and the capital gains element is a real pain.
Click to expand...
If you are sitting on a gain and are only getting a net return of <0.5%, you should be selling as soon as you can. I don't see how CGT is a pain

Do you also have a mortgage on your PPR (and what is the interest rate)? If you do, then your rental is very likely to be costing you a lot of money
 
No wishing to sound ruthless but would putting a family member in the house for 12 months avoid the capital gains tax?

Pablo
Yes,
I have a tracker rate of .80% on 170K with 10 years left on it, its kept us above water!
 
Regarding the CGT,

I'm thinking
best case scenario- sell for 420K and make 120K profit
GCT at 33%- €40K?

Would like to avoid if at all possible?
 
Did you pay €300k for it?

It's the selling price less the cost price and not less the mortgage. But if you got a 100% mortgage, that's the same thing.

You are better off with an €80k net profit and cash than with a risky asset with a poor return.

Putting a relative in it won't affect the CGT.

If you decide to sell, have a chat with the tenants. Tell them that you are planning to sell but there is no hurry. You are letting them know as soon as possible, in case they want to make other arrangements. When you actually decide to sell, you will give them formal notice.


Brendan
 
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