should I buy a home outright or pay off negative equity?

pearlroscoe

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I have inherited half my mother's estate, which amounts to a semi-d in South Dublin, and given current housing market in the area it's bound to get a decent price when we sell in the next few months.

I expect this to give me a sum of money safely under the threshold for inheritance tax for the year of her death.

I am in temporary employment and my OH works for himself, between us we do not earn very much and our income is very unpredictable but it's enough to live on and we live a simple life. We have no loans as such, but we nearly always use our overdraft and credit card totalling €2000, so apart from our mortgage that's all we owe.

We would not qualify for a new negative equity mortgage. We have a two bed apartment (not in south Dublin) in significant negative equity, but it rents out very well and costs us about a month's rent each year to maintain it or switchover tenants etc.

The proceeds of the sale of my mother's house would probably clear our tracker mortgage on the apartment but there would be nothing left.

We think that we should buy a house outright, with the proceeds of the sale of my mother's house, and continue to rent out our apartment until such a time as we can afford to sell it without making a loss or continue to treat it as an investment property for our retirement. We have thoroughly researched the market in the area that we want to live in (rural, outside Dublin) and should comfortably buy the kind of house we want and have funds left over to invest for our kids or unforeseen circumstances.

What do people think about our plans? I really want to settle down in my own place now and get on with raising my kids, but I would also love to be free of the apartment because it's such a hassle at times, but I think we stand to lose too much financially by selling it.

Would love to hear some opinions. TIA
 
Hi there. I'd imagine you will fair a lot better in terms of the quality of feedback you receive here if you complete this and post it to this thread.
 
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OK thanks, I have read the post you suggest Brendan but I haven't a head for financial stuff at all so it has left me reeling a bit. However, I will give more specific details here about my situation. Sorry-I am new to this site and didn't realise that such specific questions were allowed.

I am 41 my husband is 42; our joint annual gross income is currently in the region of €20-25K; variable because of self employment and I have not currently a permanent post.

Monthly take-home pay is approx €1500 but is unpredictable, ie some months as much as €2500 others as little as €1000. We live from month to month.

Our apartment is rented for €750 per month; this comfortably covers the mortgage (€620) and the management fee (€1200 PA) but we probably end up spending about €1000 per annum on replacing washing machines/carpets or repainting or once we had to make a mortgage payment due to a gap between tenancies.

In general we probably spend slightly more than we earn-between us we have an overdraft of €1000 and one credit card of €1000. They are almost always "maxed out" but we regularly manage to pay one or both off and then in a few months they creep up again.

Rough estimate of value of home-our apartment is possibly worth in the region of €80K to 90K but there is nothing selling in the development at the moment so that's completely made up really.

Amount outstanding on your mortgage: We owe €180K on the mortgage and we are paying a tracker of ECB plus 1.15% I think we have 29 years left.

We have no other borrowings apart from that described above

Savings and investments: very little-between us under €2K in the credit union

Do you have a pension scheme? nothing significant, I contributed to a public sector pension scheme for three years in my last post but this has been frozen since due to a compulsory redundancy in 2012

Do you own any investment or other property? As per my original post, I have inherited half a house which is probably worth about €350K but it's in South Co Dublin and prices in the estate seem to be going up by the week.

Ages of children: 1 and 5

Life insurance: just mortgage protection insurance (is that the same thing?!!)


What specific question do you have or what issues are of concern to you? (see above original post) I am wondering if it makes financial sense to buy a house (to live in) outright with my inheritance or to pay off the mortgage on the apartment.
 
The one piece of missing information is- Where do you live ? Do you rent a home at the moment ? If so, buying a house outright will save you the monthly rent.
 
thanks, temporarily rent free but that's a short term arrangement so obviously yes, buying a house outright will save on rent in the long term.
 
In general I think that if you can use the inheritance to buy a suitable family home you should do so.

The mortgage on the apartment is at a low rate, and you seem able to carry it.

Having to deal with the apartment is in my opinion a small price to pay for a mortgage free home.

Who owns the apartment?

Is it you or your husband or both
 
Thanks for your responses, yes we are tax compliant and the apartment is jointly owned as we bought it together. The apartment is really only a hassle when it's a hassle, if you know what I mean, e.g. when the washing machine goes on the blink or tenants change or cause problems. The rest of the time it's just there paying for itself I suppose!

I like the idea of a mortgage free family home because it means if the apartment is ever empty we aren't paying two mortgages and that takes the pressure off having to earn money which is a struggle for us. In the last four years we've both been made redundant and I am only starting to find work now-because of our sectors we've been really badly hit by the recession (him construction, me temporary posts in the public sector).
 
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