Sell to Rent..........Crazy or Good Idea?

csirl said:
I dont know how valuable your current property is and what type of mortgage you have etc., but it would be fair to say that the equity repayment on a typical Dublin property would not be insignificant per annum - €10k per annum would not be unusual even if the mortgage is only a couple of years old. This means that by renting, you will have e.g. €10k per annum less money when you go to buy another property in the future.
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It would want to be a very expense house to be paying off EUR 10,000 in equity during the first few years of the mortgage!

The average house price nationaly is EUR 306,619. Taking a 35 year mortage with an interest rate of 4.5% on this... for the first two years, less than EUR 4,000 will be paid towards the equity per annum.
 
newkid30 said:
Not really, not everyone takes out a 30 year plus mortgage!!
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So what's the average length of new mortgages in Ireland then? I remember reading somewhere that the vast majority are over 30 years but can't find anything to verify it right now.
 
Whatever about the original term the average lifetime of a specific mortgage used to be about 8 years or so - i.e. before people remortgaged, traded up/down/sideways etc. to get another mortgage or clear the original. I believe that this has reduced even further these days with more people switching lenders etc. Not sure what the average initial mortgage term is though although I suspect that a lot of new mortgages are > 20 years these days.
 
On a 30 year mortgage for a 500k house (very modest by Dublin standards), the equity payments would be in excess of 9k per annum by year 4 at interest rate of 4.5%.

Now, assuming the mortgage was taken out at least 2 years ago when interest rates were only 2% and the standard margin was c.0.95%, over 10k in equity would be paid off in YEAR 1. The interest rate on the first day of the mortgage has a big impact on the equity repayments in early years. When interest rates were lower i.e. 2%, the equity is higher from day 1. Note also that when interest rates increase, the amount of equity paid back remains the same - the increase is only on the interest portion of the repayment. Someone taking the same amount in mortgage today when interest rates are higher pays less equity from day 1 - something to think about if deciding to cash in mortgage and rent and then get another mortgage.

In summary, someone who took out a 500k mortgage a couple of years ago when ECB interest rates were only 2% would be paying over 10k in equity in year 1 (10,526 to be exact) and even more in subsequent years.
 
The OP stated that €289,000 will repay their mortgage as well as covering all fees, so it is very unlikely that their original mortgage was for €500,000 which is what you based your calculations on csirl.
 
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