Should I Rent or Sell NE Property on a cheap Tracker

L

Liam

Registered User
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Hi All,

Following on from my last post, had a meeting with the bank and it was all quite positive in terms of options(x3) given to us.

1.Tracker Mover product was mentioned however both the sale and purchase would have to be completed within a 6 month period.
2.Sell the house, and pay off the NE with our savings and apply for another mortgage.
3.Rent the house out and get another mortgage.

At the moment we are inclined to go with option 3 as we have potential long term good tenants and this would pay down the NE over time.
As regards our accommodation if we do let the house,the plan would be to stay with family rent free until a house we want to purchase comes up.

Outstanding Mortgage €275,000
Negative Equity €45,000(conservative)
Interest 1.15+ ECB
Mortgage Payments €800
Rent Potential €700

So my question with these figures is this the best option for us.

Thanks In Advance.
 
Hi Liam

If I'm reading your figures correctly, you have a house that you estimate would sell for €230k and would rent for €700 per month. Is that correct?

That equates to a gross yield of only 3.65% which wouldn't come anywhere close to compensating you for the risk of retaining a highly leveraged rental property (and that's before you start to consider costs and taxes).

Sell and move your tracker would be my advice.
 
Hi Sarenco,

Thanks for replying. That's correct. House value a worst case is probably €230k and rent potential due to location is €700.
I can afford to supplement the mortgage and the particular tenants would lease for a few years and are known to me.
My way of thinking was rent it for a few years to eat into the NE. Is this mad?
 
Hi Liam

Well the fact that you are currently in negative equity means that a larger portion of your mortgage on your new PDH will be at a lower margin if you sell and move your tracker.

If you retain your current house as a rental and take out a significant mortgage on your new PDH you will be very exposed to any future interest rate increases or future falls in property prices. You might be willing to take on those risks if the rental property produced a decent profit (after all costs and taxes) but that simply won't be the case in your circumstances.

The right move in your case looks pretty clear cut to me - sell up and move your tracker.
 
Hi Sarenco,

Thank you for the response. I may talk further to the MA about the tracker mover however he wasn't pushing this option as he said it would be quite difficult buying and selling in a 6 month period. The main thing is that we want to get this purchase of our future home right and not rushed so we get the house we want.thats my concern with the 6 month period permitted.

I was thinking that option 3 suited us because we can essentially be rent free (apart from the shortfall of the mortgage) for up to 24 months and can continue to save more money for our new home all the while decreasing the NE. If we went with a second mortgage the plan was to borrow no more than €200000 including the deposit so limiting the exposure somewhat. If we were to wait 24 months, it could mean a further €48k saved + €24k current savings so the second mortgage could potentially be less, thus limiting our exposure.

I totally hear you about interest rate rises and property prices and the taxes involved in being a landlord.

Thanks for your advice. Like so many I made a big mistake in the boom so I am going to make a more informed decision this time and this site and people like yourself taking the time to help is much appreciated.
 
Can you only move your tracker if you are in negative equity or can you do it under any circumstance?
 
Hi there,

I didn't query that however I think with the NE the new central bank rules do not apply. The MA said that there has been very little uptake on the tracker mover product so far as the 6 months timescale was quite difficult.
I presume you can avail of the tracker mover if not in NE however a good question. I will have to find out this. Good question.
 
Trying to sell the house in 6 months is awful tight alright. And then only having the tracker for 5 years after that is a bit tight but I suppose it would be a bit of a breather to begin with so it's better than nothing.
 
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