Advice needed re rental property

Hi all
I was living in my PPR in Dublin and took out a small re-mortgage 3 years ago €45.000 over 10 years @ 2.25% (8%LTV).

This money was to renovate the house but shortly after work had been completed I lost my job so with very little prospects for future work myself and my family decided to emigrate.

We have been living here in Australia for a while now and although we have the house rented out we are really struggling to make ends meet here and it is only a matter of time before we will have to default on the mortgage in Ireland.

I want to contact my bank and try to re structure my mortgage but before I do this I was hoping to get some advice as to what my options might be.

I am happy to relinquish the tracker as the property is now a rental and my intention is to stay here in OZ for the next few years.

Does anyone have any idea if the bank would consider switching the mortgage to a buy to let whereby I could go interest only for the lifetime of the mortgage and pay off the principle if I sold the house? or are they likely to give me interest only for a few months also what is the likely rate I would be switched to under an investment mortgage?

The reason I am asking in advance is I am concerned that I may lose the tracker and the bank may not be willing to help in any way.


Thanks in advance and I hope this is posted in the right catagory, any clarifications feel free to ask,
cheers.

They will allow interest only for a fixed short term. There are over 300,000 homeowners in arrears of their morgage in Ireland. You'd be doing excetionally well if you get interest only on the full term. There is no harm in asking though!

Why keep the Irish property if you are really struggling at the moment? Even with the recent price crash and even at a low quick-sale price surely your property is worth more than the mortgage.

Nobody believes Irish property prices are likely to increase for some years. So get rid of it and use the much needed cash surplus.

What are you doing with the rent? Does it not cover the mortgage? In any case as previous poster stated why don't you sell the property?

Thanks for your advice, The rent covers the mortgage and the balance helps towards rent here in OZ but there is a shortfall, We are also trying to service a credit card loan 3k, selling would certainly solve our problem but we are reluctant to make that decision as we don't know if we will stay here in OZ and need the security of having our home back in Ireland as a bolthole, We will contact both the credit card company and mortgage provider to see if we can get some relief my hoping a six month interest only break would allow us to pay ofF the credit card, thanks again.

Hi Pokemon

Sorry you are finding yourself in this situation.
It sounds like the house is paying for itself and your problems are really your own financial situation.

One concern I have is in relation to the tax liability for the rental income.
This could really bite you in the butt if you don't keep on top of it and it really affects your cash flow. Please keep this in mind.

I would rather default on the 3k credit card debt than sell the house.
I have emgirated 3 times in my life and it IS good to have a house here in Ireland. having said that you need a credit card to travel in the event of a family crisis etc.

Australia is a long way and things happen with family and parents etc, that force many people to return here. You could also consider down sizing the house perhaps. But this sort of manoeuvre would require you to come home which costs €€€

The obvious answer is to increase your australian income.I don't know what business you are in but you can get extra income in Aus if you are willing to do short contract in the outback.

One of my friends does 3/4 week contracts back to back....way out in the boonies. She has no choice as she blew all her pension when she had bad breast cancer and subsequently found her self cured and broke. So things could be worse!

Disagree with previou poster that" it is good to have a house in ireland". Why is it ?
You're in OZ -what on earth is the great benefit of having property in Ireland?

Irish house prices won't increase ,may fall further. Interest rates are going up. There'll be increasing penalties for owing property (property tax,water rates etc).
And ,sooner or later, you'll need to renovate -or at least "refresh" your property.
And ,as for the furniture/carpets etc in a few years time...

There is now a big change in Irish thinking about owning property - a realisation that property is as much a noose around one's neck as anything else.
If one does own property ,especially for rental purposes, then it's not something easily done from 12.000miles away.

If you do come back to Ireland (why would you in the next few years?) you'll find alot alot of places to rent- cheaply.

Sell- get rid of your debts -and use money to enjoy life in Oz.

Oldnick, I have noticed that you always advise people to sell It's understandable as you are selling yourself and presumably for you that's the best option but other people's circumstances are different, what suits you won't necessarily suit everybody.

OP has a small mortgage which he took to renovate his house, and shortly after the renovation he emigrated, so his house isn't likely to need expensive renovation for some time. His house is paying for itself and even provides him with some income in Australia.

I think it is ridiculously drastic to sell the house because of the mortgage of only 8% of the value and a credit card debt of only 3K!!!

OP's problems seem to be not the house but insufficient income/excessive expenses in Australia and he'll be better off making efforts to increase his income rather than rushing to sell his house.

I also notice that his mortgage only has 7 more years left, so one obvious solution would be to extend the mortgage term.

I agree with Mommah, it's good to have a house, where you can come back to, rather than going through the hassle of trying to rent. Renting isn't that easy if you have just come back from abroad - not many decent landlords would rent without work references etc. If you can't get a job - then what? You live in a hostel, trying desperately to find any job, just so you can rent?
Even when you do find a job and a place to rent, if your job isn't permanent, you may be unable to get a mortgage and buy anything for a very long time.

While housing market in Ireland is very depressed now, nobody can be sure what it will be like when OP comes back.

Carelessly selling your house and having no permanent place anywhere in the world may result in never getting one again. Imagine that - and all just over a mortgage of 8% LTV and 3K credit card debt!

oldnick said:

Disagree with previou poster that" it is good to have a house in ireland". Why is it ?.

Click to expand...

Have you ever emigrated Nick?
Sometimes people have to come back at short notice because of some family crisis. Dying parent, dying or ill partner, child or self. Divorce...etc etc etc

oldnick said:

You're in OZ -what on earth is the great benefit of having property in Ireland??.

Click to expand...

See above

oldnick said:

If you do come back to Ireland (why would you in the next few years?) you'll find alot alot of places to rent- cheaply.??.

Click to expand...

Usually when I returned from abroad I had to wait to get a job, therefore difficult to rent somewhere, especially if you have a family in tow.

I usually returned during an upswing in the economy and rents were rising. Rentals for family homes near good schools were extortionate.
So if the OP returns it will likely be when the picture is better and rents etc are rising.

oldnick said:

Sell- get rid of your debts -and use money to enjoy life in Oz.

Click to expand...

Think carefully before you take this advice.
This house is your insurance policy to come home.
Hold onto it for at least 2 years, at that point you may decide to commit to OZ long term.

I understand both of the previous posters comments but am unsure about a few points...
- OP rents out his Irish home - so if he has to "return at short notice" he can't stay there until he evicts the tenants.

- If he decides to return permanently in the next few years then every forecast indicates that property prices will be as low if not lower than today. There is little short-term investment potential in todays Irish property market. May do better to sell and buy similar property in a year or so.

(p.s. If interest rates increase by a couple of percent the OP could soon make 5% on a safe cash investment which I doubt he'll make on his property)

- If OP sells the house he will have a lot of money.
Money to 1)help start his new life in Oz where, he claims ,he is presently struggling.
2) Invest in a safe interest-bearing security/savings to use when he finds his feet.

- I repeat what I said before about potential hassle of renting from 12k miles away, regardless of problems about condition of house/furniture.

- Having lived half my life abroad I saw how some countries just don't have this obsession to own rather than rent. In Germany,regardless of class, renting is as acceptable as owing.
So,the statement in a previous post "having no permanent place -imagine that! " would be puzzling to many Europeans.

I've been letting properties for decades - am presently selling two out of dozen because I see it as changing one asset for another, combined with a belief that it will become even tougher for landlords in the foreseeable future.

I've only recently shed this "must-hold-on-to-property" belief and I admit that like many converts am probably more fanatic in my belief than reason dictates.
So, whilst i strongly urge OP to sell asap, I understand contrary views.

I hope by now OP has decided what to do. Any thoughts OP?

Mommah said:

This house is your insurance policy to come home.
Hold onto it for at least 2 years, at that point you may decide to commit to OZ long term.

Click to expand...

Mommah, I generally agree with all your points. On this one I can add that I think it's wise to have a home somewhere that you know you can live in. So it would be a good idea for OP to hold on to the Irish property at least until he gets the right to permanent residency in Australia. Then he can consider what's better - to keep it or to sell and buy something there.

At the moment Irish property market is depressed, the Australian one is still overheated (if I am not mistaken) and Australian dollar very expensive, so it is probably not a good time for that, even if OP was sure that he is staying there for good, which he is not.


Oldnick, your situation is very different, you are just diversifying, based on the belief that other asset classes that you are going to invest in will perform better than property. But you are not leaving yourself with no home to live in.

Germany, France etc are very different to Ireland, higher pensions, laws much more favourable to tenants, good social housing, security of tenure, rent controls etc. In Ireland that's not the case, even with the PRTB and recent laws, it's still possible to get tenants out with only a few months' notice. And pensions are such that without own home people are not going to enjoy a prosperous retirement, with very few exceptions.

As to enjoying life on the proceeds of house sale, I know some people who did that. When they got through the proceeds, life wasn't so enjoyable any more...

oldnick said:

- I repeat what I said before about potential hassle of renting from 12k miles away, regardless of problems about condition of house/furniture.?

Click to expand...

I rented from 5k miles away.
Paid a trusted neighbour to be the "go to" person for the properties.
I managed 99% of tenant interactions through email, on-line banking and daft...it's actually not that hard to do.

oldnick said:

- Having lived half my life abroad I saw how some countries just don't have this obsession to own rather than rent. In Germany,regardless of class, renting is as acceptable as owing. .?

Click to expand...

Yes but the rental market is more stable and there are alot more protections in place for the tenant than here and its easier to rent family accommodation.

If I took your advice the last time I emigrated, I would definitely be financially better off and I could buy a new house in a slightly better area with low stamp study.....BUT that is with hindsight.
Personally it was great for my kids to return to a familiar house with familiar friends, neighbours and schools.
So I'm glad I didn't sell despite the apparent financial loss.

You only have to give tenants a months notice if the owner is returning to the property, family will usually put up up for a few weeks if you have something in the pipeline.

This property is currently subsidizing the OP's lifestyle in Australia.
Another thing about emigrating is that it is very expensive in the first year, unless you are REALLY disciplined about not touring around your new country.

So if its the OPs first year, its not that surprising that s/he is spending more than earning and that will settle down.

Mommah said:

You only have to give tenants a months notice if the owner is returning to the property

Click to expand...

If the tenants have a standard fixed term lease, then they are entitled to see it out, regardless of the owner wanting to move back.
If there is a specific break clause in the lease, or it is a part 4 tenancy, then the appropriate notice period kicks in, which will range from 28 to 112 days.

dangerous statement this ...
..but I wonder if any difference of opinion on this is a man/woman thing ?

For example, wife and I contemplating travelling around -maybe living abroad in the sun. I lightly suggested we'll sell our Dublin home and..... immediately cut off by screaming wife who acted as if I said we'll sell the child.

I've also noticed over many years with female staff , many of whom bought homes in the last decade, that it was the ladies who took the decision in most aspects of the house purchase -almost as if the man was dragged around with an invisible leash.A bit like shopping.

It's just a light-hearted observation:- I accept after forty years of working-life that women are more capable and intelligent than men, but as regards property is there an emotional bond twixt woman and house that sometimes defies logic ?

I shall now hide.

oldnick said:

i shall now hide.

Click to expand...

:d

oldnick said:

as regards property is there an emotional bond twixt woman and house that sometimes defies logic ?
.

Click to expand...

Interesting question and we risk going off topic.!
When buying not all my criteria are "rational"
There is an intuitive element.

However I (and I can only speak for myself) wouldn't shed a tear selling this house in and for itself. I am naturally fairly nomadic.

However I know how hard it is to find that house which ticks all one's boxes both rational and intuitive and therefore I am reluctant to cast it aside on purely economic grounds on the assumption that, I could find similar easily should I need to return.

oldnick said:

dangerous statement this ...
..but I wonder if any difference of opinion on this is a man/woman thing ?

Click to expand...

Nick, my husband and I are probably about equally attached to our Dublin house (we don't live there now, but rent it out, since we emigrated to the UK), and it was as much his decision as mine to keep it rather than sell.

When we were buying it, he was definitely a lot harder to please about the houses we viewed, I was beginning to despair if we'd ever buy anything...

Though the decision to buy then and not delay was mine, but it was as much for economic reasons - house prices were rising fast at the time and we were paying rent, which is dead money, - as because I wanted safety of our own home, without any landlords.

I generally think that it's unwise to gamble with your home, i.e. your main home, as opposed to your investments, as it's important to have a roof over your head. For this reason I think it's not a good idea to buy or sell your home purely in the expectation of house prices rising/falling. What if you are wrong? - you risk having no roof over your head.

In the boom years many were buying unsuitable properties just to get on the property ladder, or multiple properties hoping to sell one later and pay the mortgage on the other one, releasing equity and buying another property with it etc. It was a gamble. For some of them it worked out, others are regretting it bitterly now.

Similarly, selling your only home now, in the hope of buying a similar/better one cheaper later is a gamble. If it doesn't work out, those, who sell now to gamble in this way will be left with no home of their own.

you are absolutely right that " it is not a good idea to buy or sell your home purely in expectation of house pirces rising/falling "

I'd advised OP to sell for several reasons.

Let's review shall we:
Option 1 - have a house in your name in your home country that is paying for itself with a 3k credit card bill.

Option 2 - Have no house in your name and no 3k credit card bill.

Which one makes you feel better and is goal orientated?

Without giving it you know my opinion

- OP started thread with "we're really struggling here to make ends meet here ..its only a matter of time before we default ...."

So:-
Option 2 (continued) - have a few hundred thousand euros cash, some of which to help OP's family stop struggling and some of which to safely invest in interest-bearing account.
Not only no debts to bank, credit-card but also...
no worry about about forthcoming increased interest rates (actually a good thing if OP puts aside a secure saving amount) and no concerns/stress about how Irish house with tenants are doing.


O.K -as a compromise to my views I 'd reluctantly tell OP....
If the house means a lot to OP and/or its in a location is important (near to family etc) and OP feels that he just can't sell at this stage, then immediately ask the bank for interest-only and see how it goes for a couple of years.