Be aware that you may lose your tracker rate if the property ceases to be your principal private residence - check your mortgage documents, it would change your numbers significantly if you were moved onto an investment property rate.
Sybil
Rather than looking at the situation as "crystallising a loss", you should also look at the savings you will crystallise in "trading up".
For example, I would assume that if your place has depreciated by say 40%, then it would be reasonable to expect your new house to have depreciated by 30%-40% from peak also (likely more). In which case, if you had tried to move a couple of years ago, you would be looking at trying to find another 300k+ to make the move. Add in that the stamp duty would have been higher and it looks to me that you will be doing actually quite well in real terms for this trade-up than if you had done it before the market tanked. The overall cost of trading up has decreased.
You have just lost 60K per annum on property and you want to buy even more?
Combined salary 200K. Combined mortages would be 1040K. In the current environment banks aren't taking rental income into account in these scenarios. A bank may not lend you those multiples.
Assuming they do it boils down to where you think property prices are going in the short to medium term.
If you feel they're going to continue falling then you aren't crytalising a loss, you're placing a limit on the loss.
If you feel they're going to rise within a short period of time then you should hold on.
If you feel they're going to continue falling for the short term but start rising in the medium term, then I'd consider selling now and buying a proper investment property when you feel the market has bottomed out.
Take into account that there is a limited market for family homes as rental properties. There is more or less an upper bound on rents so a 600K home is highly unlikely to achieve the same rent as 2 300K houses. Tenants do not respect the property they live in, your fancy floor/worktops may depreciate quite considerably whilst you wait for the market to recover.
If you paid 600K for the property and it's worth 400K today you'll need a 50% increase in the market to break even. How long are you prepared to wait for that to happen? If it drops in value to 300K you'll need a 100% increase. You could be waiting a long time and have very little flexability during that period with a million euro mortgage hanging over you.
I think it's easy to get philosophical at this point over the question your asking - if your initial 600k property was now worth 700k instead of 350k - would you have made as much effort to get the mortgage to 440k ?
It could be argued that the overpayments (I'm only assuming you made these) to your mortgage to get to 440k was 'a loss' as this expendible income could have been used to invest elsewhere (or buy a 4 week round the world holiday and a porsche, give to charity or whatever floats your boat - you get my point).
As someone said earlier - there is generally no right and wrong once you have the basic necessities covered and you should use money as a facilitator to attaining your goals rather than vice-versa.
Exactly Tripley, I kind of feel I've already 'wasted' a huge amount of real money on the property and if I have to pay off even more to sell it, leaving me short for my new property, that money is well and truly gone. Whereas if I keep it and hang on until the loan is paid off (by me and various tenants) then at least there's something at the end of it.
It certainly sounds like you've already made up your mind. The problem with debating a point with anyone of reasonable intelligence is that once they've made up their mind they can make a case to justify anything.My intention isn't to wait for prices to rise, more to let the mortgage run down and pay it off slowly rather than take a huge hit upfront. I suppose I'm justifying it because of the low interest rates whereas like another poster says if I use my cash towards my new mortgage I'll pay less interest overall.
If I can get the new mortgage down reasonably quickly (already demonstrated this is possible with the current one) then I'll turn my attentions to the old one and either sell and take the hit then (when I don't 'need' the money for something else) or else keep and at least there will be bricks and mortar at the end of it?
Ok, so how do the numbers stack up?The overall risk to property is large yes, but I'm not looking to make money at this point, more to avoid losing it.
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