Living in UK, should I sell my Irish home on a tracker?

[Chubbed-again]

Hi all,

Could do with some advice on whether to continue to rent out our property in Ireland or sell it.
We have been living in the UK for the last three years and would like to save a deposit to buy there.

Property Details :
Location : Virginia, Cavan
Property Type : 4 Bed Detached House on 3/4 of an acre.
Bought in December 2006 for €314,000 - mortgage €255,000
Mortgage Remaining €214,000 (due to finish Nov 2037)
Monthly Repayment €989.00
Current Interest Rate : ECB + 1.68% = 1.73%
Currently Rented out @ €675.00 pmth - with intention to increase to €750.00 this June which was advised to tenants at last rent review in June 2015 but this may not go ahead as a result of the government's new legislation.
Estimated value €200-220,000 (increased about €25k in the last 3 years)

Would it be better to continue topping up the rental income by about €700 pmth (LPT, insurances, mortgage protection, repairs/maintenance) or try to sell and start all over again in the UK. Since we're probably no longer in negative equity is the bank likely to want the full €214,000 outstanding, or is a deal for repaying a tracker 20 years early likely?

Any insight/advice would be very much appreciated

 

[Brendan Burgess]

Let's look at this as an investment.

I don't know what the tax position is for you as a UK resident.

You are paying €12,000 a year in repayments, but this is comprised of €3,600 interest and €8,400 capital.

So you are reducing the mortgage very quickly due to your cheap tracker.

So your best way of saving is probably to keep your investment in Ireland. You are "saving" €8,400 a year.

It is also a fairly tax efficient investment. Any increase in value up to the price you paid for it, will be free of Capital Gains Tax.

No lender is doing deals for the early repayment of trackers, and it's unlikely that they will do deals. But it's possible and it's another minor reason to hold on to it.

Your plans may change and you may decide to return to Ireland at some time in the future. Most lenders in Ireland allow borrowers to port their trackers to a new family home. So, yet another reason to hold onto it.

So should you use your savings to pay down this mortgage? Probably not. The interest rate of 1.68% is probably lower due to tax relief. If you were Irish resident, the net interest rate after tax would be 1%. ( 1.68% - 50% of 75% of 1.68%)

Can you get a tax-free return higher than 1% in the UK? I think you probably can.

Other reasons for not paying down your mortgage

• You may be able to get a mortgage in the UK without selling your Irish property, so the more cash you have the better
• If you do return to Ireland, you will not want to have paid down a cheap tracker
• If the lender does do a deal on the tracker, the higher your LTV the better.

So save your money elsewhere.

 

[Chubbed-again]

Thanks for that Brendan, much appreciated.

We are definitely not returning to Ireland and so the temptation is to sell up in Ireland and then save the same amount as we are currently paying off the capital - €8400 per year - in a bank account in the UK for a deposit for a UK property. Prices are rising steadily where we live and we can't save a deposit for a UK property AND pay the €8400 per year for the Irish property too. We have no savings at all.

The value of our property also hasn't gone up very much - €0-25k possibly - in the 3 years we've been gone, whereas an investment in a UK property would have gone up 5% or more each year where we live. That makes selling up seem like more of a safe option than to hold out and see what happens in the Irish market.

On the other hand mortgage rates are 3.5-5% in the UK so that's a factor too! And we'd need around £20k for a deposit - £200k purchase price, 25 year mortgage.

If we view both options purely on which is the better investment (rather than home) would your advise change at all?

 

[Brendan Burgess]

we can't save a deposit for a UK property AND pay the €8400 per year for the Irish property too.

I wonder if you are missing the point? By paying €8,400 a year off your mortgage, you are saving. If you sell the house now, I think you will save less because you won't be making the profit you are making at the moment.

If you need £20k for a deposit, that means that you will have to wait about 4 years. I would think that your best strategy is to continue with your Irish property for around three years and then sell. You will have the equity to put towards a deposit on a house in the UK.

I can't tell whether house prices in the UK will rise faster than house prices in Ireland over the next three years. You can't afford to buy a house in the UK at the moment, so it's not really relevant whether they do or not.

Brendan

 

[Chubbed-again]

Thanks Brendan, you're right I was missing the point! I see now - thanks for the explanation and it's made me feel a whole lot better about the current situation. I was so focussed on wanting to cut ties and move on but it feels much more positive to say that I'm saving €8400 a year! Cheers, much appreciated thanks so much.