It'd depend on the overall financial circumstances. No point telling someone on the breadline to keep it, if they're borrowing the shortfall on their credit card.Would you ever advocate keeping a property if it had a negative cashflow yearly but when considering equity it is positive. For example the property costs you 2k per year but you are building 10k of equity per year.
Thanks, I agree. I will be in a similar position as the Op in a few years. I do not love the idea of being a LL but even to hold the property for an additional 5 years and build 10k in equity per year, seems like a no brainer. Even when considering potential loss of rent / problem tennants.It'd depend on the overall financial circumstances. No point telling someone on the breadline to keep it, if they're borrowing the shortfall on their credit card.
The OP couple earn 180k. After pension their net should be 8k per month, and their PPR mortgage is under 2k. They could easily wear a shortfall - it's just another way of putting money into savings.
Thanks again for the responses. I think it just might be worth it alright.We were given the interest rate and the outstanding principal amount.
In very round numbers, the OP could earn around €7k pa, after tax, by keeping the property as a rental. Alternatively, he could cash out the equity and apply it against the mortgage on his new PPR, saving around €2k pa.
So, I guess the question is whether €5k pa is sufficient reward for all the risk and hassle that goes with being a LL?
Thanks, when deaing with your bank, have they treated this as two separate mortgages or bundled them into one? Did they need you have a minimum LTV in the property that you are going to let? Or did they simply do, (Income * 3.5) - Existing Mortgage = Borrowing capability and then check you had a 20% deposit for new property?Thanks again for the responses. I think it just might be worth it alright.
If it turns in to a nightmare I can always get out after initial lease is up. I am favouring availing of a letting agent initially and will see how that goes.
I know the banks are not really policing the Tracker vs BTL rates at the moment, but that can change at any time I suppose.
Now we're going to switch sides on the risk debate!seems like a no brainer. Even when considering
The mortgages are with two separate banks. I have a mortgage on my own with UB and we have secured a joint mortgage with another lender.Thanks, when deaing with your bank, have they treated this as two separate mortgages or bundled them into one? Did they need you have a minimum LTV in the property that you are going to let? Or did they simply do, (Income * 3.5) - Existing Mortgage = Borrowing capability and then check you had a 20% deposit for new property?
I am going to be in a similar situation in a few years and plan to keep my apartment but would likely only have 20% Equity in it and would probably need an exception up to 4.5 on amount I can borrow.
Yes might be, but as Grasshopper has got his answer, I will post here and then an admin can move if needed.Now we're going to switch sides on the risk debate!
Don't underestimate the risks involved.
if you were planning this, you'll have 2 separate mortgages. 1 attached to each property. You can use your existing bank for new mortgage, or a different one.
The LTI / LTV criteria relates to your new mortgage, not the combined position. You will need a 20% deposit for the new mortgage; you won't be able to use existing equity for that.
Might be worth getting split out to a separate post if you want to get into more detail.
|Borrowing Amounts||Mortgages||Apartment Rental|
|Salary||Apartment Mortgage||401,576||Rental Income||30,000.00|
|Income (Total incl Spouse||228,000||New House (20% Dep)||600,000||Expenses||5,000.00|
|Monthly Cost||Taxable Income||14,559.02|
|Tax @ 52%||7,570.69|
|Borrow at 3.5||798,000||Shortfall at 3.5||- 203,576|
|Borrow at 4.5||1,026,000||Shortfall at 4.5||24,424||Mortgage Payments||19,308.00|
|Deposit + Fees||160,000.00||Cashflow||- 1,878.69|
Yes, I can see how that'd be a factor.one of my thoughts is as a future place for the kids to live if they go to college
Yes of course, but that would be a risk for my main home as well, which I would stress against. One benefit would be as interest increased the tax liability should marginally reduce due to being able to offset.Yes, I can see how that'd be a factor.
Other risks - you didn't mention interest rate increase. Over the long term it's bound to happen. If you're not a first time LL you have your eyes open.