Buying second home - advice?

D

dr_octagon

Registered User
Messages
18
My wife and I are thinking about trading upwards but would like to hang on to our existing house as a rental concern (I guess that means that we're not actually trading upwards, but I digress). Obviously this means taking out a second mortgage; is this something that's likely to be a problem in the current climate?

As far as I know, we both have good credit reports but I occasionally go overdrawn - never outside my agreed overdraft limit (€250) and never by more than around €100. I'm a little worried that this last point might scupper our chances but i may be blowing that out of proportion. We also save a significant proportion of our wages every month (basically, what we currently save would quite comfortably cover the repayments on the amount that we want to borrow while still leaving room to continuing saving, albeit more modestly).

Anyway, I just thought I'd ask for feedback here - does anyone have any experience of trying to get a mortgage for a second property recently and am I worrying about nothing with regard to my OD?
 
Re: Buying second home - advise?

Limited info. You might want to have a look on daftwatch for the number of rentals available. Overdraft large enough to cover the second mortgage when its empty?
Mind you... selling ain't getting any easier either.

.
 
Re: Buying second home - advise?

It's hard to make a buck renting.
I would consider the location of your proposed rental property and really consider its rental market.

I have a large airy ensuite room to rent in a great house close to the city centre in Dublin. Its been advertised for 6 days now and not a peep.
This has happened before and I got it rented .....but its not easy.
My existing tenant lost her job and had to move home.
 
Re: Buying second home - advise?

I'm pretty confident that we will be able to rent out our existing home (it's very near to a largish business park) and I'm more than confident that the rent will cover our existing mortgage as well. I think it's also probably fair to say that trying to rent out a room in a house that may have strangers (from the PoV of the tenant) living in it is a different proposition to tying to rent out a whole house. I'm not saying it's easier, necessarily, but you can't draw the same conclusion.

Clearly a €250 overdraft wouldn't be enough to cover the kind of mortgage that I'm thinking of (~€350k) but my concern is more to do with having an overdraft in the first place: is this fact, combined with me occasionally making use of it likely to pose any problems when seeking this second mortgage?

It's probably worth pointing out that we don't actually *pay* our mortgage from the account that I refer to; we actually have a joint account that's used to pay bills including our mortgage and this account is always in credit. The account with the overdraft is my own account (we both get paid into separate accounts and transfer 'housekeeping' into one joint account and savings into a second; whatever's left in our personal accounts is our own to do what we will with).
 
Re: Buying second home - advise?

Once your overdraft is authorised ther is no problem. In fact, it can often help your credit rating if you can show a history of borrowing and repaying within terms.
 
Re: Buying second home - advise?

Overdraft is authorised and it's obviously small enough that my monthly salary clears it straight away - this would be the case even if I maxed it out.
 
Re: Buying second home - advise?

dr_octagon said:
I'm pretty confident that we will be able to rent out our existing home (it's very near to a largish business park) and I'm more than confident that the rent will cover our existing mortgage as well.
Click to expand...
This isn't the question you should be asking yourself. You should be asking yourself if putting this property out to rent is the best return you can get for your money. What return will you earn? What would you get if you just sell it and put the money on deposit? How much time will it take you to manage the property, register with the PRTB, look after your tax returns etc.
 
Re: Buying second home - advise?

Our main motivation for keeping the house is as a pension, basically, so unless rental income is less than the mortgage then no, it's probably not worthwhile, the other things you mention not withstanding.
 
Re: Buying second home - advise?

What rent would you expect to get from the house is worth and what would you expect to get if you sold the house?
 
Re: Buying second home - advise?

dr_octagon said:
Our main motivation for keeping the house is as a pension, basically, so unless rental income is less than the mortgage then no, it's probably not worthwhile, the other things you mention not withstanding.
Click to expand...
It really sounds like you are going into this blind. There are lots of ways of providing a pension. Before you go into this investment, do the maths on the return on the investment, or you'll live to regret it.
 
I think your response to my repsonse is a little naive. Hopefull i'm wrong.
But I don't think you'll have a choice as to who rents your property and there are far more single sharing renters than families or groups of renters.

I also think you probably have a reasonable amount of equity in your property at the moment and it will be hard to realise all that equity if you sell now and maybe if you delay selling you will find a better time. that's reasonable.....but that's what I did with my first rental property...waiting to sell until a huge constrution site was completed across the road...turned out to be a big mistake. One that I'm prepared to live through/with.:(

There are lots of pension funds that are protected from tax in a more efficent way than one-off properties....you should look into these.
Certainly they are underperforming right now...but so is property so compare compare compare.

You need to become a landlord with your eyes wide open cos there are many of us in it because we had no choice. That's ok too....hobson's choice. But understand where you are at and understand your exit strategy.
 
You must log in or register to reply here.
Back
Top