Neg Equity, want to trade up - Galway

[JohnB1]

Hi Everyone

We own a house on the east side of Galway City which we bought at peak in 2006. It is rented out, we are currently living abroad and looking to move back this summer. The house is in neg equity, surprise surprise, and we want to get rid of it and buy another property on the west of the city. All details are below. I'd really appreciate response from the contributors on this site - it is a wealth of information!



Income details
Net monthly E.3,500 employed (engineer)
Net monthly E.2,100 employed (teacher)
Child benefit = 4 kids x E.130 each = E.520


Personal circumstances
Two adult family
One car (hopefully!)
Number of children 0- 2 years old: 2
Number of 3 years old children: 0
Number of 4 - 11 years old: 2
Number of 12 - 18 years old: 0
Monthly childcare costs: 1200/month
Montly spend on special circumstances: none



Home loanLender: PTSB
Amount outstanding: E.257,000
Value of home: Last one in estate sold for E.117,000 1 year ago
Interest rate: tracker at 2.35%
Monthly repayment: 1080
Amount in arrears: not in arrears

Summary of discussions and agreements with the bank
Bank unaware that house is rented out for past 4 years. House not in TRS scheme - cancelled that the month we first rented out the house. We also submit full tax returns on the house each year.
Monthly rent received: after agent fees, we get E. 610/month net

Credit Union Amount of shares none
Amount of loan outstanding none
Monthly repayment none
Term left none


Other loans and creditors - delete those which don't apply to you

Term loan Amount outstanding we will have a E.50,000 car loan
Term loan term left: 5 years (from July this year)
Term loan - monthly repayment not sure
Term loan - interest rate guessing about 7%

Other savings and investments
We have about E.140,000 in investments + some cash. Investments currently getting about 8-11% p.a return. Held off-shore and will be declared to Revenue when we return.

Do you expect any lump sums in the medium term future? Redundancy, inheritances, injuries awards.
No.


How important is retaining the family home to you? Which of the following best describes your situation?
I don't care about keeping the family home. We do not consider it our family home at all and would not like to move back. The area is not great and I'm not bringing my kids up there. And its 3 bed so too small for 6 of us


Any other relevant information

What is your preferred realistic outcome?
Sell the existing home and buy a 4-bed in poor repair, with the view to modernizing and extending it slightly> However, I can't see any lender letting us sell when the house is currently in neg equity of about E.140k!

Any advise is GREATLY appreciated!!
John.

 

[Brendan Burgess]

ptsb has a tracker mover product which I think you will qualify for. They will transfer the mortgage to your new home and charge you an additional 1% so 3.35% compared to 4.5% which is well worth it.

So sell your house and the resulting position would be roughly as follows:

You should be able to achieve this, but it may take time and you will have a few problems to overcome.

Term loan Amount outstanding we will have a E.50,000 car loan

Are you serious? When you return, buy a second hand car for €10,000. If you have big repayments on a car loan, you are much less likely to get a mortgage.

You will need to be working in permanent jobs in Ireland for 6 months or a year, before they give you a loan. How easy will it be for you both to get jobs and what salaries can you expect?

It is a condition of the transfer mortgage product that it is your home and not an investment. I think you should be ok on this as you bought it as your home

I suggest the following course of action:
1) Give your tenants notice of your return
2) Move back to the house you own
3) Be prepared to live in it for at least a year, maybe a bit more

When you get permanent jobs, you will know better where you want to live.

You are paying €13,000 a year in repayments. Because of the cheap tracker, you are knocking off €7,000 a year in capital. So the longer you stay, the lower the shortfall.

Brendan

 

[Butter]

The value of the neighbours house which sold a year ago is probably irrelevant now. Why not get an estate agent in to value it now? They'll do it for free if they think you are interested in selling. Get several in & ask for the best & worst case scenarios.

Is the €50,000 car loan a typo? If it's not, then it's crazy. You need to do something about that as a priority.