Can I hold onto my current house while trading up? 10% deposit.

C

Chaman

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Current home, value 450k, mortgage remaining 98k
Monthly payment @ 700pm

Very keen on a new house @ 515k
Have a deposit of 55k

Household income @ 160k
Car Loan o/s at 18k
No other outgoings

I want to hold on to current property and rent it out.
Achievable rental income @ 2,000

Would there be any providers that would look at such a scenario.

Thanks
 
If you hold current house, you need 20% deposit for second house, that's €103k. At the moment you have €55k so you need another €48k. Plus you need stamp duty of €5k plus solicitor fees 2-3k.

Also that car loan will be a drain on yr ability to repay. You are looking at aggregate debt of €538k if buying at €525k. Three and a half times your income is €560k so you are borderline getting a loan.

My advice, why the hell would you want to get into the buy to let game with everything that's going on at the moment. Huge numbers of current landlords are leaving the markets en masse, what do you know that others don't?! Sell yr property (free of CGT) and find investments elsewhere. Just my tuppence.
 
If a lender were to give you a mortgage, this would be your position:

Property value: €960k
Mortgages : €558k
Car loan: €18k
Net assets: €400k

If you sell your existing home, you will have
Property value: €515k
Mortgage €100k
Car loan €18k
Net assets: €400k

You would have an interest in the property market, without being overexposed to it.

You could buy a house for more than €515k if you wanted to.

You would be mortgage-free in a few years.

You would be hassle-free as you would not be a landlord.

You would be able to max your pension contributions.

It's very clear. Sell your current home if you want to trade up.

Brendan
 
Having said all that, if you want to hold onto your current home, go to a mortgage broker.

You could switch your current mortgage to ICS who would give you more money for the deposit on the other property.

Brendan
 
Yes, it's possible, but I'm not sure that it makes sense.

Either ICS or Finance Ireland might look at this. Find a good broker that deals with both.
But you would be remortgaging your current home, at buy to let rates to release equity for your deposit. So if you have a tracker you'd lose that. You'd also be limited in the amount of interest you can claim as a tax deduction - the equity release is for your personal home so wouldn't be tax deductible.
 
Understand above advise and agree with it to a certain extent.
We were in the same position a couple of years ago but did not pull the trigger at the time.
I understand the forementioned reasoning however do posters not attribute a value to an asset for which a tenant will pay a significant portion of the costs over time and the OP is left with an asset when mortgage paid?
(assume that property is in an area with good rentals etc,, original poster didn't say)
 
RedOnion said:
.... You'd also be limited in the amount of interest you can claim as a tax deduction - the equity release is for your personal home so wouldn't be tax deductible.
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This is the key, in my opinion. I think being a landlord still makes sense, particularly if one has a favourable tracker in place. If that's the case, then there's a strong case for keeping an existing property as a rental. You're getting the benefit of gearing your investment and putting the bank's money to work for you.

But in this case, the OP has a mortgage of approx 100k on a 450k property. That generates an interest charge of only one to three thousand per year to attract tax relief. Result: over 50% of your rent goes on taxes, PRSI, USC and LPT.

Furthermore, €2k pm is not a great return on a property worth €450k.

I'd suggest a slightly different approach. Sell your PPR, taking (probably) a nice tax free gain, exempt from CGT. Get a mortgage somewhat larger than your needs for your new property, leaving you with about 100k in cash. Use that to:
A) pay off the car loan.
B) put a deposit on a new BTL property

You should be able to get, for example, a property costing about 300k with a mortgage of 240k. You will easily get a property yielding 2k per month for that price and ALL your interest on the BTL mortgage is tax deductible.
 
Baby boomer said:
This is the key, in my opinion. I think being a landlord still makes sense, particularly if one has a favourable tracker in place. If that's the case, then there's a strong case for keeping an existing property as a rental. You're getting the benefit of gearing your investment and putting the bank's money to work for you.

But in this case, the OP has a mortgage of approx 100k on a 450k property. That generates an interest charge of only one to three thousand per year to attract tax relief. Result: over 50% of your rent goes on taxes, PRSI, USC and LPT.

Furthermore, €2k pm is not a great return on a property worth €450k.

I'd suggest a slightly different approach. Sell your PPR, taking (probably) a nice tax free gain, exempt from CGT. Get a mortgage somewhat larger than your needs for your new property, leaving you with about 100k in cash. Use that to:
A) pay off the car loan.
B) put a deposit on a new BTL property

You should be able to get, for example, a property costing about 300k with a mortgage of 240k. You will easily get a property yielding 2k per month for that price and ALL your interest on the BTL mortgage is tax deductible.
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How far would the housing market have to drop before you find yourself in serious trouble with this highly leveraged investment scenario?
 
RetirementPlan said:
How far would the housing market have to drop before you find yourself in serious trouble with this highly leveraged investment scenario?
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Is it risk free? No. Then again, neither is getting out of bed in the morning. There's an appropriate level of risk which depends on both the individual's circumstances and the individual's appetite for risk and comfort level with it. In this case, the OP has a household income of 160k AND does not seem unduly afraid of risk.

Anyway, the real risk is not negative equity on the BTL. The BTL is best viewed as a BTK-BTL (buy-to-keep BTL) which will throw off an annual income sufficient to pay the interest and make inroads into the capital. At least in the short term, property prices are almost irrelevant - you're not going to be selling. Your sole concern is the level of rent and the interest rate. In the long term, you can view capital appreciation as a bonus, if you get it.

The real risk is the security of your future rental income. Will rents fall when (if?) cost rental comes on stream? Will Government regulation make the rental game impossible? Will you get the proverbial tenant from hell? All these things are possible and should be considered. But I keep coming back to that €160k pa household income. I am suggesting that the OP carry a total mortgage debt of about 200k on the PPR and 240k on the BTL. The OP can service that debt fairly comfortably. It's a prudent investment in a wealth generating strategy. Guaranteed winner? No. There's no such thing. But over time, it should deliver. Historically, it always has.
 
Baby boomer said:
Is it risk free? No. Then again, neither is getting out of bed in the morning. There's an appropriate level of risk which depends on both the individual's circumstances and the individual's appetite for risk and comfort level with it. In this case, the OP has a household income of 160k AND does not seem unduly afraid of risk.

Anyway, the real risk is not negative equity on the BTL. The BTL is best viewed as a BTK-BTL (buy-to-keep BTL) which will throw off an annual income sufficient to pay the interest and make inroads into the capital. At least in the short term, property prices are almost irrelevant - you're not going to be selling. Your sole concern is the level of rent and the interest rate. In the long term, you can view capital appreciation as a bonus, if you get it.

The real risk is the security of your future rental income. Will rents fall when (if?) cost rental comes on stream? Will Government regulation make the rental game impossible? Will you get the proverbial tenant from hell? All these things are possible and should be considered. But I keep coming back to that €160k pa household income. I am suggesting that the OP carry a total mortgage debt of about 200k on the PPR and 240k on the BTL. The OP can service that debt fairly comfortably. It's a prudent investment in a wealth generating strategy. Guaranteed winner? No. There's no such thing. But over time, it should deliver. Historically, it always has.
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Just think it's important to point out the difference in risk between a highly leveraged investment and a partially leveraged investment. It isn't a pain free option to choose the highly leveraged option to maximise tax relief.

Indeed, the OP might want to think about whether leveraging investments is a good idea at all. And maybe clear his debts before he starts investing.
 
Some are saying the housing market is at a peak. There could be 40,000+ new homes built next year as developers are building as quickly as possible to take advantage of current market. In Naas, Newbridge & Kildare town there are almost 5,000 completions due in the next 12-18 months based on construction starts.

Even if the poster has a tracker, it's 98k and reducing, so over 5 years, selling now and moving to best fixed rate of 2% for new house will only cost circa €2,500 extra over the 5 years.

And the potential issues with tenants, regulations, tax, maintenance and loss of 100% ppr relief, the figures just don't add up especially if you have the ability to increase pension payments.
 
RetirementPlan said:
Just think it's important to point out the difference in risk between a highly leveraged investment and a partially leveraged investment.
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I wouldn't disagree. There's always risk in leverage. But in this case, I'd suggest the risk is low and manageable.


RetirementPlan said:
It isn't a pain free option to choose the highly leveraged option to maximise tax relief.
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No, but any investment plan MUST take tax into account.


RetirementPlan said:
Indeed, the OP might want to think about whether leveraging investments is a good idea at all. And maybe clear his debts before he starts investing.
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Yes, my suggestion incorporates paying off the non-mortgage debt.
 
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