Moving up with a negative equity tracker?

Hi,
Looking for advice here please.. I'm in negative equity on a tracker mortgage with Ulster bank and looking to move up to a bigger house. Wondering if it's possible or a good idea to hold on to my current house which I bought on my own. Here are my details:

Age: 30
Married, no children.
Single salary: 70k gross, 7 years permanent.
Bonus: Typically 10k gross
Savings: 85k
House value: ~160k
Outstanding mortgage: 250k
Negative equity: ~90k
Mortgage rate: 4.95% expires July '13. Tracker ECB +1.15% thereafter.
Term remaining: 30 years
Monthly mortgage payments currently: €1.1k after TRS
Monthly mortgage payments from July: estimated €850
Estimated rental value: €800 / month pre taxes, expenses.

We are in no huge rush to move, but would like to start a family soon and move from our 2 bedroom house to a 4 bed house. Our ideal type of house is currently in the €300k region but would consider a house that ticks not all the boxes in the €200k region so we could keep our current house to let it out, and hopefully sell it in years to come when it returns to positive equity.
BOI told me they would consider lending €120k for a €200k property, with us keeping our current house to let. There is no clause in the Ulster contract that prevents me losing my tracker due to letting it.

So, options are:
1. Buy slightly bigger house for 200k with new mortgage, keeping current house to let + keep tracker. Sell current house in years to come if value picks up and probably move again to our ideal house.
2. (Preferred) Sell current house later this year or next year and move to 'ideal' house for life for €300k. Use savings of 90k to hopefully cancel the negative equity, so I can move tracker mortgage to new house mortgage (Ulster Bank only allow tracker transfer for positive equity mortgages), borrowing the balance on standard rate.

I think option 2 makes most sense, but hate the thought of accepting the 90k loss. Would anyone advise option 1?

Is option 2 even possible in the format described? I would want to keep the tracker if I moved, but plugging the 90k neg equity with savings would leave little to nothing to put money towards the 300k house. What are the chances of Ulster putting up the full 300k (100%)? They are doing negative equity mortgages after all which are effective >100% mortgages.

Any advice appreciated.

Whilst they may be doing neg equity mortgages, redeeming your mortgage means you will lose the tracker. So option 1 probably makes the most sense! I'm sure a more mortgage minded person will come along later with a better thought out explanation!