Moving up, keeping existing property

J

Jimmy99

Registered User
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7
Hi all,
Could use some help with decision were about to make.

Wife and I bought our apartment in Dublin in 2007. Nearly 10 years in, no issues paying mortgage to date. AIB tracker mortgage. Monthly payments are 1k but we have been paying 1500 for a couple of years now. Term left is 19 years. Mortgage left is @285k and apartment worth @250k.

A couple of kids added in and the apartment is no longer suitable so we are looking to move.

Approached AIB regarding negative equality mortgage but the options didn't seem great in terms of what we could buy with the offer so we looking to keep apartment and take on new mortgage.

@100k in savings accounts. Wife's salary is @65k gross and mine is @85k gross.

We now have mortgage approval for a loan of @385k from kbc with us coming up with the 20%, so looking at properties around the 450 - 480 mark.

The potential rent on existing apartment is 1600, so if we reduced mortgage back to 1k everything should be covered.

What do you guys think we should do?

Ideally we could lump savings off existing properties mortgage and increase payments. Would clear mortgage quicker but just doesn't seem plausible to stay put with the family situation.

Jim
 
Stop overpaying your existing mortgage immediately.

You are paying off a cheap tracker and will be borrowing at 3.5% or so. Madness..

While you are in negative equity, the central bank LTV rules don't apply. So NE suits you.

I can't see why aib is not giving you what you want. It should be much better to sell your apartment and transfer your tracker. Can you tell us what aib said?
 
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Agree with Brendan.

I think your current plan looks viable (just) but you're really pushing towards the fringes of affordability. Any extended void period or tenant default on the rental could put a huge strain on your finances.

Make sure you are familiar with the taxation of rental profits - the prospective rent might comfortably cover your mortgage payments but the rental could still be cash-flow negative on an after-tax basis.

You look like obvious candidates for a tracker mover product even if it means lowering your sights somewhat in terms of sort of house you can afford.
 
I also agree. In your circumstances, I would keep the rental property. Those with trackers on their investment properties have a dynamic that we may never see again; ultra cheap finance and a chronic undersupply of properties.

I would look to rebuild your emergency cash reserve pretty quickly though.

You're getting almost an 8% yield with someone else's money. Hard to give up.
 
Thanks for the replies lads.
Admittedly it was last year when we applied to aib. At the time the remaining mortgage was @300k and the neq equity was @50k. We were proposing knocking 20-30k on the neq equity.

The bank were allowing us to keep the amount of the existing mortgage, 300k at the time, at the tracker rate plus 1% and were willing to loan a further 30k bringing the neq equity along too at the SVR, 4.25% at the time. So there were 2 parts to the updated loan of @330/340k.

We just felt that with that amount it wasn't worth pursuing in terms of what we could upgrade to.

Jim
 
It's worth approaching AIB again IMO.

Your NE is now lower, you've more savings and the rate on the "non-tracker" element will be considerably lower.
 
In my experience, Ulster Bank and KBC are the banks that are most "open for business" in the State, and most open to treating second properties sensibly.
 
Jimmy99 said:
Admittedly it was last year when we applied to aib.
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There was a period there where they seemed to require a 20% deposit of the price of the new house. That is no longer the case. They only require 10%.

If you are buying a house for €500k, you will require €50k and they will lend you €450k + the shortfall on your current home. ( Subject to Loan to Income requirements) With combined salaries of €150k, they should lend you €500k relatively easily.

Brendan
 
Our recent experience was better than your offer from AIB. We decided to keep apartment though and plan to rent it out. Doesn't make sense to give up the 1% extra imo and if any investor was offered your apartment at tracker rates they would snap it up. It is a risk, but a good one.

BOI and PTSB most helpful on financing a mortgage with a couple of negative equity apartments already owned. BOI more than PTSB, Kbc, Ulster bank etc absolutely unhelpful and not interested.

If you get a cash back mortgage from PTSB say, buy new house, rent out apartment and see how it goes. Hopefully in 2 or 3 years you think it's working, or it's not but you can sell and remortgage house and move tracker on to it with AIB from a stronger position.
 
Copacetic said:
.. it's not but you can sell and remortgage house and move tracker on to it with AIB from a stronger position.
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Eh, that's not the way tracker mover products work.

I agree that the prospective rental yield and financing rate look attractive in this case but it's important to assess whether the OP has the financial ability to make the investment in the first place, having regard for his other assets and liabilities. Properly understanding the taxation of rental profits is critical in this regard.

It's vital to run the numbers before going into the property rental business. Making it up as you go along is a recipe for disaster.
 
Sarenco said:
Eh, that's not the way tracker mover products work.

I agree that the prospective rental yield and financing rate look attractive in this case but it's important to assess whether the OP has the financial ability to make the investment in the first place, having regard for his other assets and liabilities. Properly understanding the taxation of rental profits is critical in this regard.

It's vital to run the numbers before going into the property rental business. Making it up as you go along is a recipe for disaster.
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I don't think anyone suggested not looking at the numbers?

If the OP comes to AIB in a year or two looking to clear one mortgage but move the tracker portion on to his existing home, by moving that mortgage to AIB also he will find them very receptive to getting the extra 1% on the tracker rate.

Why do you say that's not how they work?
 
Copacetic said:
I don't think anyone suggested not looking at the numbers?
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Well you did suggest that it "doesn't make sense to give up the 1% extra". That's a strong statement to make unless you've worked out the prospective cash-flow position of the OP - bearing in mind that he has a couple of kids and is about to take on significant additional mortgage debt.

Copacetic said:
Why do you say that's not how they work?
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You are suggesting that AIB would allow a borrower to redeem a tracker mortgage with them and would simultaneously agree to refinance a loan with another lender at the redeemed tracker mortgage rate plus 1%.

Why would AIB agree to that arrangement? What's in it for them?
 
I didn't suggest that at all. They would treat it just like any other tracker mover. If house mortgage was 500k and apartment outstanding mortgage was 250k they would provide a new mortgage of 500k, 250k or which would be a tracker mover at 1% over the current tracker rate. The balance at whatever their best rate is for the LTV. Th bank is better off, they have secure business and 1% extra on the 250k. The op is better off aso. It's not rocket science and it's also exactly what the product is designed for.
 
Copacetic said:
I didn't suggest that at all. They would treat it just like any other tracker mover. If house mortgage was 500k and apartment outstanding mortgage was 250k they would provide a new mortgage of 500k, 250k or which would be a tracker mover at 1% over the current tracker rate. The balance at whatever their best rate is for the LTV. Th bank is better off, they have secure business and 1% extra on the 250k. The op is better off aso. It's not rocket science and it's also exactly what the product is designed for.
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That post accurately describes the way a tracker mover works.

However, in an earlier post you stated as follows:

Copacetic said:
If you get a cash back mortgage from PTSB say, buy new house, rent out apartment and see how it goes. Hopefully in 2 or 3 years you think it's working, or it's not but you can sell and remortgage house and move tracker on to it with AIB from a stronger position.
Click to expand...

That suggests that AIB would refinance a loan with PTSB at a tracker rate +1% simply because you had a tracker with AIB in the past but had paid it off in your scenario.

Sorry but that's not the way tracker movers work.
 
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