-140k.Will i get a second Mortgage.

S

sidb

Registered User
Messages
44
Hi

Current situation.

Apartment 0we 290k
Value 150ish k
-140k Neqitive equity
Tracker 1.5%
repayments 1000 a month
29 years left.
Rented out at 1200 a month.
Looking for 240k with 60k deposit.
2 salaries equal 95k basic with 10k bonus/OT
Just married
2 kids.
No loans.
Broker has said PTSB will have a look at my case but wondering if I would qualify and any tips before I go in to them. If im refused we are stuck in apartment for 10years then if I sell I will break even and will then require 20% for a house worth 500k at this stage over 20 years which I think is a really dumb move to do. I was living in rented accomadation with my place rented out but landlord has told us they are selling and we need to move out. Rent is through the roof and don't want kids moving house to house so only option is to buy and keep apartment.
 
I see you have posted the figures. Some. How much tax are you paying on the apartment. How much are you saving, what rent are you paying, how much will you borrow from CU and what will it cost.

That's great your tracker, any chance of losing it if you get another property - check your contract.
 
Current rent 1350 a month
Save 1000-1500 a month
Total 2350-2850 a month for mortgage/potential new mortgage
Borrow 30k from CU.
Pay back min 300 a month
If i borrowed 240k its works out around 1200 a month and add CU repayments of 300 month i would pay out 1500 month compared to what i am paying a month now. The would add 1% to the tracker i would think so i need to add this to the apartment per month. The first 3-4 years of servicing the mortgage and CU loan would be the hardest in which i can manage no problem and after that it would get easier. Just hope the banks use the same figures as i know they strength test at a high rate. I believe i should have a case?
As for the tax on apartment i know nothing about.Im gonna look in to this.
 
sidb said:
As for the tax on apartment i know nothing about.Im gonna look in to this.
Click to expand...

I suspect you will find that your plan quickly falls apart when you do.

You must be accruing a significant tax liability as things stand - bearing in mind that you can only deduct 75 per cent of your mortgage interest (not principal) payments in calculating your taxable rental profit.
 
Well sidb, you initially asked if your plan to mislead your mortgage provider would work and you have now told us that you want to keep your rental property but have no idea how it will be taxed.

Are you genuinely looking for advice or are you simply looking for somebody to confirm that what you are proposing is a good plan? In my opinion what you are proposing is reckless and will go horribly wrong as soon as you get a bad tenant or a run of higher than anticipated expenses.

There is an obvious solution to your problem - a negative equity mortgage. You get to buy a suitable property to house your family at a very attractive interest rate for the life of the mortgage. No tax complications and no need to mislead anybody. Why over complicate things?
 
Fair enough Sarenco. If I get a negative equity mortgage and I sell apartment for say 150k and I owe the bank 140k. My needs for a house in my location would be 300k mark other wise im buying a first time buyer house that wouldn't suit our needs. So now my new mortgage is 440k. My repayments would be 1800-1900 (after 60k deposit) a month and still in negative equity. I see my apartment as a great pension and I would prefer to pay 1500 a month for 3-4 years then been reduced to 1200 a month after CU is cleared.
 
Well, it seems that you have already decided how you want to proceed but I would make a few points:

1. A negative equity mortgage is not subject to the new Central Bank restrictions so you would not require a 20% deposit.

2. You will be in negative equity on an aggregate basis in any event. Splitting you loans in two won't change this reality.

3. You really need to understand the taxation of rental profits before you decide that your apartment is a great investment. It's actually extremely inefficient from a tax perspective, in addition to being a highly concentrated, illiquid, high-risk investment.

Professionally I know of at least a dozen couples that have made exactly the same decision as you are contemplating. Without exception, they all subsequently realised that it was the worst financial decision they ever made. Maybe it will work out for you but, in my opinion, you are taking on an unnecessary degree of risk in your circumstances.
 
Cheers Sarenco. Will take on board your pointers. Just the more knowledge i have then i can decide the right direction i feel is right for me. Thanks again
 
sidb said:
As for the tax on apartment i know nothing about.Im gonna look in to this.
Click to expand...

That's a very odd statement. How long have you been renting out the apartment.

Also worrying is the fact that you 'think' the tracker could go up by 1% only when the bank finds out it's now an investment, presuming that you've not told them.
 
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