To sell or to rent - head wrecker

Hi there was wondering if anyone could comment on the following...apologies for the rambling nature but my head is wrecked from it....

Existing tracker mortgage: €150,000 at 1.9% with repayments of €690 per month. Parents gave €50k loan during for purchase of the house in 2003 that will need to be paid back over medium to long term.
Realistic House Sale Price: €150,000
Original House Purchase Price: €260,000
Realistic sale value of wife's property (owns 50%): €110,000 (her portion)
Wife's portion of the mortgage: €130,000
2 steady jobs with annual income of €110,000.

Here is the delema....She has to sell her house as her co-owner of the house wishes to sell and so the agreement is we have to sell also. We are also looking to move to Galway over the next 1-2 years, if not sooner. On top of all that, I am looking to start my own consultancy business over the next 2 months also.

Option 1: Sell both houses. Therefore we will be €20k in debt with her house sale and €50k in debt to my parents with the sale of my house. We have enough savings to pay off the €20k debt but not the €50k....this will have to be paid off over the medium to long term. The benefit of this option is that we no longer are indebted to the banks, will have no mortgage and will therefore possibly be in a position to get a mortgage in the future in Galway. The drawback is obviously being €50k in debt to my parent who will need the money as they get older.

Option 2: Rent out house to lodgers or the RAS scheme. RAS have said they would be interested and would be able to rent for 5 years...the first 2 years would be €890 per month (which is almost market value) and a rent review after 2 years which is likley to reduce it further according to market trends. However, if I rent out the house, i would loose my tracker mortgage and be lumped with a variable rate of 4.3% ish. Given the likely increases in interest rates over the next few years and likely decrease in rent from RAS in 2 years, we would be loosing money on the house.

Regards
Nicholas

Have you approached your bank and asked what they will offer you to come off the tracker rate? I think some are offering customers lump sums to go from tracker to variable (I'm open to correction here).

If they are willing to offer you a lump sum you could take that and then reassess your options in relation to selling or buying ! !

pmac said:

If they are willing to offer you a lump sum you could take that and then reassess your options in relation to selling or buying ! !

Click to expand...

Sorry that should have read "selling or renting" . . . .

Are you SURE that you'll lose the tracker if your rent or do you just think so? It really depends on the terms & conditions of your mortgage, not everybody is losing the tracker over renting.

Also what are your long-term plans, are you definitely relocating to Galway on a permanent basis? Is there a possibility that your move won't go ahead or that you'd come back later?

Also if you quit your job and start your own business, it may be a long time before banks would give you a new mortgage.

All these issues have to be taken into account before you decide what to do with your house.

Why would you give up a steady job to go into consultancy.

Your combined salaries are quite high and your debt levels fine. Will the houses actually sell? That's an issue for some people. I think you should sell your wife's property first and pay down the negative equity. I'd be saving hard in case it's a greater negative equity than 20K.

Don't get the bit about you having to sell if she sells?

As you are not moving to Galway yet and you have a very low mortgage rate you'd surely not be paying less then your current amount in rent so don't see why you'd sell the house you live in. You've pointed out the trend in property prices so you should start vastly overpaying your mortgage which with your levels of income should be easy to do.

You might also consider starting to pay a set amount by direct debit back to your parents, vague statements about paying them in their old age doesn't seem fair. Being parents they are probably being nice and trying not to put pressure on you but you have to consider what is the right thing to do.

In relation to RAS, you'd nearly need a separate thread on that alone. There are many threads about it on here so have a look there as a start.