Sell or Keep (rent).....

E

essjay

Guest
Hi guys......

Another one of these should I sell or should I keep threads.....

So current situation:

  • Bought house in D12 for around €290k of which we borrowed €266k
  • Remortgaged in 2008 for €275k (I think)
  • Current mortgage is around the €260k mark I'd guess (no paperwork to hand)
  • On a tracker @ ECB +1.15% so working out at around €1060pm excluding TRS (currently €102). TRS drops to 15% I think next year.
  • Not sure about the time remaining on our mortgage but pretty sure it's 26.5 years
Currently we have a joint income of around the €110k mark but we're looking at the possibility of existing on one salary from next year when child #2 arrives. The single salary will be around the €70k plus whatever tax credits get transferred. Currently monthly income is around €6000 of which we'd probably be down approx €1100 once childcare (ie. we won't be paying it) and tax credits come into play.

So with the family expanding we would like to leave Dublin to be closer to her family, 30 miles away so a managable commute.

What to do next with our current house is stumping us.

  1. We could try and sell our current house and if we're exceptionally lucky, clear the mortgage. Or else be down maybe €10k or €20k.
  2. We could rent out our current house. Without fluctuations in interest rates, the house would cost us just under €13k a year whereas rental incomes in our area vary between €11k and €14.5k a year. The romantic dream would be to keep the house and use it as our pension but I think it would be too much of a drain over the next 25 or so years.
Of course the above rental incomes does not take maintenance or how much tax I'd have to pay (would anyone have some rough tax figures based on the above and how much the actual monthly income minus tax would be?)

The next step then is do we rent or buy? I'm pretty sure that a bank wouldn't be too pleased to see us coming through the door looking for a mortgage on a second house based on the above figures. I think even if we rent for a few years and save some cash, we'll still have the burden of the Dublin house if we ever apply for a mortgage on a second house.

Have I just talked myself into selling my current house if I realistically wish to buy again within the next 5-10 years?
 
Have a look at my questions below – the answers to them might direct your thinking a little.
a) I’m guessing your mortgage might be slightly higher than the 260 k mark you estimate – depending on when in 2008 you started to pay the new mortgage, in the first few years your principal doesn’t move down very much. Check this out?
b) Would you lose your tracker if you rent your house – some mortgages, such as the one I have on my main house (which is with NIB), clearly state that the tracker is only available if you keep the house as your principal residence.
c) I feel you would be very lucky to get the price you estimate for the house – reading between the lines you are hoping to get a min of 240k for it. I feel that there are very few houses in D12 achieving that price in todays market.
d) If you did rent the house you would probably have a hefty enough tax bill to pay. Just to give you a BALL PARK figure, I submitted my tax return yesterday and have to pay €2,400 tax on a rental income of €11,800 (with that I was able to write off a 3,500 in mortgage interest as my mortgage interest is higher than yours). Yours would be somewhere around that mark.

You have a few options open to you and you know these – ie you can keep the D12 house and buy another, sell the D12 house, pay off any mortgage balance and buy another; keep the D12 house and rent another in your desired location.
In summary I think you need to talk to a bank first and get some guidance from them on how they might view your application. Their attitude will depend on your savings, your job security, your credit rating etc. etc. At least by talking to them you will get some rough idea of where you stand.
 

Regardless of whether you sell or rent your current house, you do not need to rush into buying.

There are lots of houses for sale, prices are still dropping and you are moving to a new location.

I know you are moving to your wives home town, but she may not have lived there for years, or maybe decades. She, and her family, may have opinions on where exactly you should buy, but this may not be the correct decision for your family now. ( Buy in haste, repent in leisure).

I would advise you to rent initially, and take your time looking for a house to buy. If the location works out, you could be there a long time, so make sure you have chosen wisely.

This will also make the move less stressful.
 
Cheers for all the info.

I did some math this afternoon and if we were to rent our house for the average rent in D12 (approx €1050pm) it would mean that we're down €321pm for year one (2012) assuming interest rates don't fluctuate. The amount rises as the years go on as obviously the amount of interest on the mortgage decreases. That of course is doing things above board and paying tax.

I based the house value on other listed houses on the street, but I guess those that are selling are going for 10% or 20% less than listed price. We are fortunate that is it a corner house so plenty of room to extend which might add some value to the house.

As recommended above, perhaps the most sensible option might be to rent (we'd rent and also rent out our own house) for a year and see how we get on. She might hate moving home and long for a return to Dublin but even so, I can't see us returning to D12 long term. It would be a stopgap until we can get a bigger house.
 
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