What to do with Primary Residence?

I bought a 3 bed house in early 2005 which I will be moving out of in the next year or so. I am wondering what to do with it.

I suppose I have two options, rent it or sell it. I have a tracker mortgage with 249k and 26 years remaining and currently have two rooms rented under the rent a room scheme.

Option 1: Rent it
Register as a landlord, find tenants etc. The annual rent would be 12-14k and the mortgage repayments are currently 11.6k (17.2k at the peak interest rates of 4.25%).

Option 2: Sell it
Hard to know what price it will be in a year or two. I would probably cover the remaining mortgage anyways so I will assume I would make a small or no profit.

I would like to keep the house and rent it and use it as a long term investment which I would plan to sell in 30 years time.

Any opinions or any other options I am missing?

We are looking at doing this ourselves soon. Keeping the current property as part of our pension as such. But be aware that once you change it from a Primary Residence your mortgage will change to a Buy to Let and you would will lose your tracker. Rates on Buy To Let mortgages vary but AIB is currently 4.2% and they are usually offered over 20 or 25 years max. But if you are letting it, you can go interest only. Remember its not the mortgage repayment as such you need to worry about, its the interest part of the payment you need to cover from your rental income.

Last time I read by Terms & Conditions of my mortgage (with NIB) I dont remember it saying anything about having to change to a new mortgage if renting out the house.

Covering the interest part is all very well, but a good portion of the rent will be taxable.

Perhaps give them a call to be sure, all banks are different?

There is information on this site under "property investment" in regard to tax details and indeed all other issues that goes with it. But you only pay tax on rental income minus interest, agent fees, works that need to be carried out etc.

I think you can ony offset 75% of interest now (budget changes) and it looks like this will be reduced further in the next budget.

Yeah I will have to have a look at my mortgage terms again, if its not in there then that will be fine. The bank can say what they want.

Yeah you are right its 75%

Best of luck in whatever you decide to you.

Hi,

I would be in a similar position in terms of year of house purchase, capital sum remaining, renting two rooms under rent-a-room. Also with NIB tracker!

However, I don't think the current sale price would match the outstanding amount on my mortgage. The do-er upper beside me recently went for roughly 50k less than the outstanding amount. So, the sale is definitely the less attractive option.

What's your situation in this regard, as I imagine it would have a bearing on your final call?

GM

aristotle25 said:

Yeah I will have to have a look at my mortgage terms again, if its not in there then that will be fine. The bank can say what they want.

Click to expand...

Err, it's not there because you explicitly took out a residential mortgage. An Investment Mortgage has a different risk profile and banks charge accordingly. You can do what you want with regards to telling your bank but ultimately you have to cancel your mortgage interest relief through them at which point they may, at their discretion, force you onto a different mortgage.

You also need to change your insurance policy to reflect this change of status. Failure to do so may nullify the policy. The correct mortgage may be required for the policy.

Have you looked at some of the other more mundane implications of becoming a part-time landlord?