Sell house or not?

Falcarragh

Registered User
Messages
2
I have a house in an Irish city with a small mortgage(approx 30%ltv if even that). The mortgage repayments are small and the property is let at the moment. Rent covers all expenses associated with the property. The house is in a good location and an EA told me it would sell easily. We hope to apply for a mortgage in the next year. We both have good well paying jobs(My OH especially) and quite a high income overall but there are one or two blips in my credit rating in the past. I realise that this will go against us but my query is in relation to this house. Can anybody tell me am I better to sell my existing property(I realise that I will pay CGT in this case) or keep it and will a lender see that property as a liability or a positive in terms of our application? We have a few years solid renting history, OH has good credit rating, and savings are ok too.

I have heard that some banks hold a second property against you but others don't. I don't have a problem putting the house up for sale if needs be, I just want to do whatever would be most favourable from a mortgage application point of view. Any advice would be appreciated or if somebody had the recommendation of a person that we could sit down with and thrash out our situation, that would be great too. Thanks.
 
It seems very clear to me that you should sell it.

No lender will consider it an advantage, and some will lend you less because you have outgoings. So there is no disadvantage in selling it.

But there are huge advantages in selling it. First of all you will have more cash. This means that you will have a smaller mortgage when you buy a house. So you will need to borrow less. If you are borrowing less, then you will have a lower LTV and will pay a lower rate of interest for the duration of the loan.

The blips on your credit record may prevent you from borrowing at 80% LTV or may restrict the lenders who will lend to you. They might be more open if they are lending say 50% LTV.

I presume you are married? If not, then hold off getting married as it seems as if your OH might qualify for a mortgage on their own.

Is there any reason for holding onto the rental?
Without the numbers, it's hard to be definitive.
If you have a cheap tracker, it's possible, but as it's only 30% LTV, then it's unlikely to swing the decision.

You should consider using your OH's savings to pay down your mortgage.
If you are paying 4% on your mortgage, it's costing you about 3% net after tax relief. Your OH is probably getting a maximum of 0.5% after tax in deposit interest. If you view your finances as one, it makes sense to pay off the mortgage. You can always pay the interest to your OH instead. But watch out for any tax implications of this.
 
It seems very clear to me that you should sell it.

No lender will consider it an advantage, and some will lend you less because you have outgoings. So there is no disadvantage in selling it.

But there are huge advantages in selling it. First of all you will have more cash. This means that you will have a smaller mortgage when you buy a house. So you will need to borrow less. If you are borrowing less, then you will have a lower LTV and will pay a lower rate of interest for the duration of the loan.

The blips on your credit record may prevent you from borrowing at 80% LTV or may restrict the lenders who will lend to you. They might be more open if they are lending say 50% LTV.

I presume you are married? If not, then hold off getting married as it seems as if your OH might qualify for a mortgage on their own.

Is there any reason for holding onto the rental?
Without the numbers, it's hard to be definitive.
If you have a cheap tracker, it's possible, but as it's only 30% LTV, then it's unlikely to swing the decision.

You should consider using your OH's savings to pay down your mortgage.
If you are paying 4% on your mortgage, it's costing you about 3% net after tax relief. Your OH is probably getting a maximum of 0.5% after tax in deposit interest. If you view your finances as one, it makes sense to pay off the mortgage. You can always pay the interest to your OH instead. But watch out for any tax implications of this.

Yes, we are married. We also have a young family. Existing mortgage is not a tracker. We have high childcare costs and our rent is significant but we have managed fine even when on unpaid leave. We need a significant deposit to buy a family home because of house costs here which is what we are saving towards. Selling my property would definitely allow us meet the deposit requirement and also have additional money to put towards a house purchase. My credit rating is unfortunate but I am in a much better position now then I was back then and I learned my lesson. The mortgage on my existing property was always paid on time and in full since I first purchased the house irregardless of any other situation. Our current joint net monthly income is approx 10k excluding bonuses. Our current rent is a bit higher than a mortgage repayment for any property that we would like to buy. We are in our late thirties so would like to buy in the next year or so if possible, as we don't want to leave it too late such that we are too old to get a mortgage. My poor CR aside, I just want us to look as good as we can in every other way when we approach any institution so that we might be actually considered by one of them.
 
Why are you waiting to buy if you are in a position to buy now?

At the moment the market is reasonable in that you can sell easily and buy easily. In times of rapidly falling prices or rapidly rising prices, it can be difficult to have a smooth sale and purchase.

You are in a good enough position now, and should try to do so as soon as possible.

If the mainstream lenders refuse you, you may get a mortgage from Pepper at a slightly higher rate. But when your ICB record is restored, you can switch to a cheaper lender, or maybe Pepper will give you a reduced rate.

Brendan
 
Back
Top