Selling investment property in negative equity

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Siobhan1

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Just looking for some of your thoughts/ advice / criticism etc as my head is all over the place at the minute and need a bit of guidance.

Have a low end investment property which we have rented out at the minute. Getting very low rent but excellent tenants. Problem is we are still making up a €350 difference each month in the mortgage repayments. We can manage this at the minute but with interest rates going up (we are with PTSB) our monthly income won't cover the difference and we will have to use our savings.

There are about 30 other houses in the same estate for sale and what we are thinking of doing is underpricing the who lot of them and selling at whatever cost. We are hoping that worst case scenario will be that we lose out on €30,000.

So now my question would be would it be possible to get a loan out for this amount? We have savings of about €25000 and are thinking of putting €15000 of this towards the shortfall and then taking out a loan of €15,000 for the remainder? Would any bank be agreeable to this. Any other loan that I have taken out I have overpaid each month and paid off early . . . I hate being in debt.

Please give me your thought on the above and sorry if it is a bit long winded.

Thanks
 
This is a little off point but leasing out to the Local Authority might get you a higher rent and therefore minimise your monthly shortfall. They'll guarantee 80% of the current market rent subject to it being a property in an area where they need housing. Details here: www.housing.ie/leasing
 
Does the rent cover the interest on the mortgage, even if it does not cover the repayments?

The montly repayment includes interest and capital. That means that you are reducing the amount of the mortgage outstanding each month by the amount of the capital repayment. Therefore, you are reducing your mortgage which is, itself, a form of saving. You should not be concerned if you are running down your savings to cover the capital repayment element of the mortgage.

Say, you have savings of €25,000 and a mortgage of €100,000.

At the end of the year, you may have reduced the mortgage to say €95,000 but run down your savings to €20,000. Your net borrowings are still the same.

If you talk to PTSB, they would probably be agreeable to your selling the house and converting the deficit to an unsecured loan. However, if you have €25,000 in savings, you would be better off using it to pay off the mortgage shortfall. It makes little sense to have a mortgage of €25,000 at 5% while you are getting, at most, 3% taxable interest on your deposit.

You like the comfort of having cash available to you. But do you really need it? If you are not losing money on your repayments, then you can start rebuilding your nest egg again.

Do you own the house you live in? Do you have a mortgage on that?

For tax reasons, you may be better off repaying the home mortgage first, depending on the interest rate.
 
Thanks you both for the advice - food for thought.

Our home mortgage is a tracker - 10 years remaining.

We have two kids and a third on the way and I guess I would just be a lot more content to be rid of the investment property as I'm really not cut out to be a landlord!

Thanks again.
 
Siobhan1 said:
I'm really not cut out to be a landlord!

Thanks again.
Click to expand...

Just to clarify that the leasing arrangement with the local authority makes them the landlord. Your involvement is pretty minimal so it's a relatively hassle-free way of holding on to an investment property without the headache of having to find tenants and then put up with their issues, non-payment, etc.
 
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