poolfanabc
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Expected rental income per annum = 14400
Mortgage interest per annum = 3200
Estimated housing expenses (30% of rental income) = 4320
Taxable income = 14000-3200*0.75-4320 = 7680
Tax to be paid on income (52%) = 3994
Annual mortgage payments = 13032
Don't worry too much about %age yield
Income: 14,400
Interest 3,200
Expenses 4,320
Tax 4,000
Net profit after tax: c. €3,000
If you sell the property now, you will have a shortfall of €17,000
So you are getting a return of €3,000 a year on a negative investment!
This property is worth keeping.
However, which lender is the tracker mortgage with?
If it's with one of the lenders still doing business in Ireland, they will allow you to transfer your tracker (and negative equity) to the new property and charge an additional 1% interest.
This would be by far the best option.
Brendan
Hi
That makes no sense at all.
Could you give us the figures?
How much is the new house?
How much of a deposit do you have?
What mortgage do you want?
How much did BoI offer you and how much did the other lenders offer?
Sometimes banks make no sense, and BoI is the most conservative lender, but this just sounds as something has not been communicated correctly.
presumably in the future, if BOI sti
ll offer that package, I could then move the 2nd mortgage to BOI,
Very unlikely. If you want to move your tracker, now is the time to do it.
in summary, I have a tracker mortgage on a house, however now hoping to purchase a 2nd house to cater for family with separate mortgage (already approved in principle without need to sell 1st property).
What I hope to do is rent out the current property for a few years, hopefully until out of negative equity and then sell on to reduce property exposure. The figures on current property are as follows:
Current property value = 230000
Remaining mortgage = 247000
Expected rental income per annum = 14400
Mortgage interest per annum = 3200
Estimated housing expenses (30% of rental income) = 4320
Taxable income = 14000-3200*0.75-4320 = 7680
Tax to be paid on income (52%) = 3994
Annual mortgage payments = 13032
Based on the above, (assuming 100% tenancy)
Can someone please comment on interpretations that can be made on above figures.
- From other threads, I see calc for yield is 14400/230000 = 6.3%. Don't understand relevance of this value to my situation really. Anyone care to explain?
- My net spend on property would be €6945 (13032+3994+4320-14400), however the mortgage amount is reduced by 13032-3200 =€9832, which is a form of saving.
- If I could continue for 2years, I could consider to sell without any negative equity shortfall to make up.
- However for only a net property value gain of €2887 (9832-6945) per year, I leave myself open to additional risk of 2nd mortgage during this time.
I make it 83k rather than 183k!!Brendan - can you explain the 183k net equity value you have in table, as don't follow what this refers to..
Brendan - can you explain the 183k net equity value you have in table, as don't follow what this refers to.
1) If mover tracker, then €417k mortgage (i.e. 400k new mortgage with 17k negative equity) at tracker +1% rate for 5 years = 2.3%. For a 25yr mortgage = 1829/month. = 22k per year.
2) If have 2 mortgages, then have 247k@1.3% = 1237/month, and 400k@3.8% (25yr mortgage) = 2067/month, total = 3300/month mortgage repayments, then allowing for ~300/month gain from rental, outlay is 3000/month = 36000/yr.
So cash flow difference is huge at €14k.
We looked at a similar possibility last year poolfanabc.
I ran all the numbers - with the idea of holding the first house on a tracker rate for a few years & borrowing 90% on our next house at an SVR. The bank gave us the go ahead to do it - although there was one difference - we weren't in negative equity & had a decent equity cushion.
I started off very gung-ho about doing it - even for a few years - but the more I looked at the numbers the more reluctant I got. It was all do-able - even with stress testing the mortgages & taking account of void periods. We're not clueless about property investment either & have experience as landlords.
But the extra tax bill was going to be substantial & I felt that in the event of interest rate rises &/or dodgy tenants then our own lifestyle & spending could be impacted. So we decided against taking the extra risk & put our house on the market in order to move & have the money to do up & extend the new place.
I'm not saying your circumstances are the same but I would say that a spreadsheet of all outgoings/ savings/worst case scenarios/interest rate rises/loss of a job etc should be really looked at before you decide. €140k is a decent income but you're looking at high borrowings with little equity if you keep both properties.
Plenty of people need to sell in order to buy - it's not impossible. The new lending restrictions will make it more common with fewer people able to keep a house & buy a house in the future.
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