Negative equity want to sell

[BrigidC]

Hi,
Hope you can advise me please. Own a house in negative equity, have mortgage of 240,000 property currently valued at 170,000. Together we earn 82000 gross.We have a small loam of 3000. Savings of 10000.We can currently save 1000 p/mth.We have 2 children but low child minding costs with family.I do use most of my overdraft of 1000 but planning not to from this month on.We rent out our own house for 850 & pay additional 250 to mortgage.We rent from my mother in law's second property for last 5 years she will gift us part of the property when we buy it.This house is valued at 22000. We would like to be able to pay her 180000.What is the best way to achieve our goal please? We have a tracker with ptsb of 3.25%. Thanks

 

[Brendan Burgess]

ptsb will require you to have at least 10% of the value of the house you are buying So if you want to pay €180,000, you would need €18,000 as a minimum.

What is the hurry? If you are living in the house you want to live in and you have the option to buy it at some stage in the future, then you don't need to buy it until you can afford it.

Your present house is breaking even, if the following is correct:

If you sell it, you will have a shortfall of €70,000 to clear.

You have a tracker rate, which you will effectively lose, if you buy a new house.

You are paying €13,000 a year in repayments, of which €5,000 is capital. So you are effectively "saving" €5,000 more a year.

It probably doesn't make much sense from a tax point of view to be paying rent. You get no tax relief, and you MIL pays tax on the rent received, depending on her circumstances. It would probably be better for her to give you the property rent free and you pay more for the house when you buy it.

You will build up your deposit a lot quicker.

Given that there is no hurry, you should clear your loan and overdraft out of your savings.

You should also consider paying down the mortgage. However, this isn't clear as if you apply for a new mortgage while you are sill in negative equity, you won't be affected by the Central Bank restrictions. If you are no longer in negative equity, you will need a deposit of 20%.

 

[BrigidC]

Thanks for that,will work on what you advised for now.