Purchasing 2nd House - want to keep existing apt as investment

Hi All,

My Wife and I are in the market for a house.
We currently own a 3 bedroom Apartment and our aim is to rent the apartment whilst purchasing a house.

We currently owe 146k on the apartment on a tracker @1.1%. Our mortgage is 790 per month. Rental in the area for similar property as of this morning was 1200 on daft.

We have 100k in savings toward our new home we hope to purchase. We are both in full time work on salary of circa 110kcombined.

What would be the likely hood we could keep the tracker rent the property out and purchase a house.

Please give all angles on what you perceive to be our best choice to make, open to all suggestions and especially the tax implications to consider/cost using a management company to manage rental etc.

What are the best interest rates we could hope to get on our future property looking at loan of 200kish.

Thanks in advance to all for taking the time to read and hopefully respond to my post.

What value is the apartment now ? I would go ahead with the plan. Say nothing to your current bank (i.e. get mortgage from another) and try buying your dream home. Then, if the bank finds out and claims that you can no longer get tracker rate, plan B would be to sell the apartment. Then you have moved with no loss. Only of course if the apartment sale is feasible and not in NE. Also note that it could take up to a year to buy another so how much will the selling price be then.

Thanks for reply

Presume would be in Negative equity at 146k mortgage, not really interested in selling though, aim to keep for rest of my life. I am 35.

1st check your Mortgage Contract - it should say if you lose your Tracker rate if it's no longer your PPR.

If you are getting Tax Releif at source on your current mortgage you will lose this once it is no longer your ppr - 75% of the mortgage interest will be an allowable expens against your rent however as long as you are prtb registered

It is fairly straightforward really.

You will have to pay tax on the rental profit, presumably in your case at the higher rate, and only 75% of the interest is tax deductible, so a lot of tax. There is a lot of talk about tax aspects of rental income, my favourite one was the deductibility or otherwise of the NPPR. But at the end of the day you are taxable on your rental income less allowable expenses simple!

However if you can rent the property for €1,200 and the mortgage (is that full capital and interest repayment) is €790, you should still have some profit after tax. And in time you will own the property mortgage free.

Your mortgage contract with the bank probably specifies that it is a home loan and if you rent out the property they can charge you a (probably very much) higher rate. Unless you tell them what you are doing how would they know.

However realistically if the bank are being paid every month I cannot see this ever being an issue. At the same time if you tell the bank what you are doing they may feel obliged to act. If the bank is named on any insurance policy they are notified by the insurance company, just watch that the policy is called something obvious like "Landlord Insurance", just buy regular home insurance and notify the insurance company that the property is rented.

I would certainly deal with another bank, for a new home mortgage. That is always the best option IMNSHO.

Using a management company depends on whether you consider it value for money, and depends on how much spare time you have yourself. It is a time and cost trade off.

Just don't think that having a management company will prevent problems. Something bad can happen with a management company too, and it will still be your problem not theirs.

A few issues

If you are with Ulster Bank, the will probably allow you to sell your apartment and move the mortgage to your new home. That would be well worth considering.

If you are with Bank of Ireland, they will allow you transfer the tracker for 5 years and a slightly higher margin.

No matter what bank you are with, they may well do a deal with you at some stage in the future on redeeming the tracker early. Danske and BoSI want out of Ireland and it's worth talking to them. Danske's mortgage contract is very clear though - if you rent out the house, they will charge you the investment rate.

Best plan of all is probably to stay in the apartment as long as possible. Your accommodation is costing you around €2,000 a year (€150k mortgage @1.1%). That means that you are paying big lumps off the mortgage every year and you are building up big savings. A €300,000 house will cost you around €15,000 a year in interest - i.e. an additional €13,000. With a 3 bed apartment, I presume it's big enough for some time to come.

If you do rent out the house, it's still worth keeping as much cash availabe as possible in case you get a chance to buy out the tracker mortgage at a discount.

Brendan

Thanks for ll replies but the last two posts are close to the way of thinking i was having.

Basically I would reqire a mortgage of 200k which very roughly is 9k interest but that would be also be dependent on breaking even on renting my apartment I currently live in and also leaving us with no cash reserve.

The option to remain leaves us paying interest of 1500 with 100k reserves. Long term though the 2nd home would possibly provide security although Im sure their are better investments out there.

First thing to do is to find out if it's a tracker whether it's PPR or investment. Some banks are charging very high interest for investments as they seek to recoup losses on their trackers.

Don't use a management company to do the rentals.