Sell up 2nd property or wait ?

F

Foodie1

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Age: 45
Spouse’s/Partner's age: 43
Annual gross income from employment or profession: 78000
Annual gross income of spouse: 28000
Monthly take-home pay: 5,800
Type of employment: Private Sector, Public Sector

Saving per month 500

Rough estimate of value of home 270,000
Amount outstanding on your mortgage: 270,000
Interest Rate 4.5%
Years left 25
Repayment per month 1500 (pay extra 200 pm)
No other borrowings

Do you pay off your full credit card balance each month? Yes

Savings and investments: €40,000

Do you have a pension scheme? Yes me only

Do you own any investment or other property? Yes

Property 1: Value 185000
Rent per month 950
Mortgage balance outstanding now: €185,000
Interest Rate 4.0 variable
Mortgage repayment per month 1050
Years left 23
Costing 400 pm extra to fund between tax, fees, residential fees etc


Age of kids: 7/4 - childcare costs €800 per month

Life insurance: Yes


Question: After 10 years of being accidental Landlords, our 2nd property has finally reached water level. We could sell it now and with fees etc get out now making no profit at all.. Should we do this or hang on to it hoping that property price goes up?
 
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I obviously can't predict future property prices but if I was in your shoes I would definitely sell the rental and apply the freed up cash flow to pay down the mortgage on your PPR as aggressively as possible. It's not even close – no reasonable risk/reward analysis could justify retaining the rental on those numbers.

Once you have developed some decent equity in your PPR you should definitely look to switch to another lender to get a more reasonable rate.

Will you need to use your €40k savings to make up the difference between the anticipated sales price for the rental and the outstanding mortgage? If not, you really shouldn't have that much on deposit earning a minimal return while carrying mortgage debt @4.5%.
 
Sarenco said:
I obviously can't predict future property prices but if I was in your shoes I would definitely sell the rental and apply the freed up cash flow to pay down the mortgage on your PPR as aggressively as possible. It's not even close – no reasonable risk/reward analysis could justify retaining the rental on those numbers.

Once you have developed some decent equity in your PPR you should definitely look to switch to another lender to get a more reasonable rate.

Will you need to use your €40k savings to make up the difference between the anticipated sales price for the rental and the outstanding mortgage? If not, you really shouldn't have that much on deposit earning a minimal return while carrying mortgage debt @4.5%.
Click to expand...

Thanks Sarenco, We expect to sell at 180-185k thereby covering mortgage in full and extra cost for solicitor. 40k in Govt 10 year bonds for kids college. Any advice different to this would be welcome.
 
So the original mortgage was for €225,000. What is the amount outstanding now, just so it's clear for people.
 
Working through the numbers gives you:

upload_2016-8-9_16-50-25.png
So it depends on your outlook for property prices, rent and interest rates. It does not seem to be a good return for the risk and work involved. Sell.


If you sell your second property, you will find it much easier to switch.

If you pay €40,000 off your mortgage, you will reduce the LTV to 85% (230k/270k).

EBS should give you a loan at 3.7% which would be a saving of €1,600 per year. (230k@ 0.7%)
In addition, they will give you 2% cash back or €4,600.

Your target should be to bring the LTV on your home down to €216k (80% of €270k value), so that you can avail of the <80% LTV rates as soon as possible.

Brendan
 
Just to give an update, 2nd property about to go on the market and we will only just cover all cost. Thanks for all the advice.
 
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