Keep or sell PPR

Age: 38
Spouse’s/Partner's age: 34

Annual gross income from employment or profession: 90K
Annual gross income of spouse: 110K

Monthly take-home pay circ 9k after all deductions

Type of employment: Permanent

In general are you:

(b) saving?

Rough estimate of value of home: 480K
Amount outstanding on your mortgage: 140k

What interest rate are you paying? 2.25%

Other borrowings – None

Do you pay off your full credit card balance each month?
Yes

Savings and investments: circ 150k

Do you have a pension scheme? Yes, both making AVC's but not maximising the contribution limits for our age

Do you own any investment or other property? No

Ages of children: 4 & 2

Life insurance: Mortgage protection & death in Service


What specific question do you have or what issues are of concern to you?

We are currently in the process of moving out of Dublin and wondering whether to keep our current house as an investment. It's based in South Dublin so has potential to be used in future if our children were to go to college in Dublin. By selling the house we will end up with no mortgage and circ 100k in savings. If we keep the house we will have a new mortgage of 350k on top of the current mortgage. The current mortgage will move to a higher interest rate as it is no longer our PPR. The rent will cover the mortgage on the current home and doing some rough estimates we will make a small profit each year when taking all expenses into account but the cashflow will be circ 2k negative due to capital repayments on the mortgage.

Is it advisable to sell our current house and invest our surplus cash into something more diversified fund like and ETF or to keep the house as an investment?

Have you read this to see how to approach it systematically

In your shoes I would sell it while it's still your PPR and exempt from CGT. LandlordING is not worth the candle imo and if Sinn Fein are elected I predict it will be even less so.

It's hard to be certain your children will go to 3rd level in Dublin. Who knows, 15 years from now physical 3rd level institutions could be gone the way of the Dodo.

If you want exposure to property you could buy into a REIT along with other sectors for diversification.

I'd sell now.

I was in a similar position and chose to sell. 1yr later, I am fully satisfied it was the right decision.

I would echo Horatio's comments, and think selling would be your best option here.

One key question to ask is whether the projected rental income from the house, after all expenses and taxes, will exceed the projected interest savings by not having a mortgage on your new home.

I suspect the answer will be "no" but here's a framework for addressing this question–

"The current mortgage will move to a higher interest rate as it is no longer our PPR".

Are you sure on this? Does it say this in your mortgage agreement?

I'd echo the question BigBoots82 posed.

The only reason you'd lose the PPR rate would be if you wanted to release equity on it in order to put towards the deposit of the new property. As long as the mortgage gets paid each month, no questions will be asked. That's been the experience of many people I know.

However, as outlined by other contributors, there are more points to consider.


Good luck!

Fahrenheit said:

As long as the mortgage gets paid each month, no questions will be asked.

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Banks have no way of knowing who lives in a mortgaged property. You can even have a different correspondence address than your PPR.

If you tell a bank, however, it may trigger a clause in your contract that would move you to a different rate.

Banks actually can know if a property is rented out by simply checking the public database of the RTB. But they dont seem to do it.

aristotle said:

Banks actually can know if a property is rented out by simply checking the public database of the RTB. But they dont seem to do it.

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But they could start doing it next week, or next month.
Are you in breach of mortgage contract if you rent it out without telling them? Will your insurer note that the policy is for a rented property when they confirm insurance to the bank?

Your house insurer wont tell the bank. You are thinking of a mortgage protection policy where the bank will be noted on the policy but that is a life insurance and nothing to do with whether you have rented the property or not.

If you are in breach I guess the bank could sue you for all the missing interest you should have been paying at a higher investment rate.

aristotle said:

Your house insurer wont tell the bank. You are thinking of a mortgage protection policy where the bank will be noted on the policy but that is a life insurance and nothing to do with whether you have rented the property or not.

If you are in breach I guess the bank could sue you for all the missing interest you should have been paying at a higher investment rate.

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With any home insurance, the insurer will ask if the property is mortgaged. They notify the mortgage issuer that cover is in place. If the issuer gets no notification of cover being in place, they should follow up.

So the question is whether this notification would reference that a rental policy is in place.

If you're in breach, could they, if they were in a bad mood, call in the mortgage and look for repayment?

My rented property insurer do not ask who the lender is. Why would a house insurer notify a lender unless the lender is a beneficiary on the policy?

But the lender does ask for evidence that the property is insured and I send them a copy of the policy.

aristotle said:

My rented property insurer do not ask who the lender is. Why would a house insurer notify a lender unless the lender is a beneficiary on the policy?

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The lender has an interest in ensuring that cover is in place, in case the property gets burnt down. A mortgage on a charred shell of concrete is pretty useless. If it is currently a mortgaged residential property, the insurer will be notifying the lender that cover is in place.
If the insurance policy is switched from residential to rental, I'm wondering if this gets flagged on the notification to the lender.

Here's the 123.ie online form for insuring a rental property.

Yes, it's standard practice for the insurer to ask if the property is jointly owned and if it's mortgaged. I have never seen them not ask these questions.

Aviva tell you explicitly that they will notify the lender - rented property

RetirementPlan said:

Aviva tell you explicitly that they will notify the lender - rented property

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The issue is (I'm guessing) that address data in Ireland is historically really poor. My mortgage provider has us at a slightly ambiguous address and no eircode so very hard to run a matching exercise with insurance data.

Over time these databases will be populated by eircodes but it will be decades to get the data cleaned.

NoRegretsCoyote said:

The issue is (I'm guessing) that address data in Ireland is historically really poor. My mortgage provider has us at a slightly ambiguous address and no eircode so very hard to run a matching exercise with insurance data.

Over time these databases will be populated by eircodes but it will be decades to get the data cleaned.

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I'd be very surprised if they're not matching already, whether automatically or case by case. Lenders need to know that a house is insured, and should be following up if they don't have confirmation of this.