should we trade up?

Afternoon all. Myself and my Girlfriend are currently thinking of trading up to a "bigger house" here's our situatoin currently.

we are renting an apartment in cork, after a move from dublin, for 1200 per month but we think we could get a mortgage for not much more than this.
we both have investment properties which are rented out (a 3 bed townhouse in cork on a rolling 1 year contract by a family friend and the other is a 1 bed apartment in dublin 18 on a 1 year contact).
the townhouse has approx 60k equity and the aparmtment has 0 equity.
we are thinking of buying a 4bed semi in the same estate we live in, asking price is 470k but there are 11 of these idle since we moved in and are not going anywhere in a hurry. was thinking of paying maximum of minus 30% of asking price.

we currently don't have any savings and are wondering would lenders take into account that we both have investment properties rented and a little equity value or would this not matter in the slighest?

any suggestions much appreciated.

In relation to the mortgage on the new property. You will need to have a deposit of at least 8 to 10% of the property value. You may be able to release this from the townhouse depending on loan to value and your repayment capacity as reflected in your salaries and rental income.

The fact that you have equity in the rental properties will not really matter to a new lender, they will want this equity transferred to the property they are giving the mortgage against.

Yoda01 said:

Afternoon all. Myself and my Girlfriend are currently thinking of trading up to a "bigger house"...

we currently don't have any savings...

Click to expand...

Look at it this way - the fact you have no savings suggests your investment properties are not creating any positive cash flow for you right now. And if you lose your tenants, your cash flow could turn strongly negative.

I'd be surprised if you can find any bank to give you a 100% mortgage anyway.

Could you pay all three mortgages if :

*You lost your tenants?
*You lost your job?

Think about the total monies owed on all three properties if you did manage to raise your 10% deposit by remortgaging. You would have three properties all with = or negative equity. In this market Id think long and hard about taking on that kind of responsibility.

Hi guys, thanks for the replies.

the house we saw offers a rent to buy scheme, where you pay rent for the first 2 years and this acts as a deposit when/if you purchase in 2 years time!

Is this the area you want to live? If so you should sure your renting anyway in the area and then in 2 years you have your deposit to buy, and if the property does drop or rise you have the option to do what suits you,

No real opinion to offer on proposed purchase; but €1200\month seems high for an apartment for a couple in Cork. Surely you could get something cheaper and perhaps start saving a deposit?

The Rent to Buy schemes are nothing but a scam. You agree a price now for something you might buy in 3 years time, its a falling market and i would not be surprised if the market was still dropping in 2011/2012, drops might be smaller per year, but still dropping.

With this scheme you pay more rent than the market average and all the money you pay does not go to the deposit, only a percentage.
The rent market is dropping also, so in 1-2 years time you could be paying considerable more rent than a similar property next door and you will not have an option to negotiate the amount down.
Then in 3 years time you will be given the option of buying the house at 2009 level, which will be higher than the house for sale next door.

So 3 years time, you've paid more money than you would have if you just rented and if you dont buy the house you still have no savings.

Best advice is rent now, save a deposit and buy when the time is right not when some scam is up. If you were trying to buy these house now you could get a seizable discount off the price, with this you dont get any discount. Also banks valuations are coming in lower for house bought maybe only a couple of months ago, do you think you will get a mortgage in 2011 for a 2009 price, i dont think so. The developers in this scheme dont really care if you buy the house by then, you have already paid a sizable amount of their loan and got them trough the worst of the ressession. What happens if the developer goes bust between now and then?
The developers who have come up with this scam must be laughing at people gullible enough to take it up.