Getting a second mortgage and keeping existing home as investment property

O

onthewater

Guest
Your views would be greatly appreciated.

Myself and my wife currently have a home which no-longer meets our needs.
We also have a direct family member who has financial difficulties and would like us to buy his home. His home would meet our needs & in principle it could work for everyone.
However in the case of our existing home we have a tracker mortgage of +.6 on the ECB rate and we have 11 years remaining. It is not in negative equity and we are advised is worth approx + €20,000-25000 over the outstanding mortgage balance.

Current home
· Tracker of +.6
· Outstanding balance €168000
· Joint mortgage. One public servant salary of €70000 pa
One private sector secure employment of €50,000
· Mortgage originally 35 yr when taken out approx 8 years ago but we are paying at increased rate. Currently paying back €1400 pm having reducsed from €1900 pm in recent months
· We are saving a minimum of €1000 pm for a number of months
· We have approx €60,000 in savings
· We are 35 + 36 yrs old and we have one child currently
· We have no other loans

Proposed purchase
Our proposed dwelling will cost approx €400,000.

Question: is there any possibility that we will be able to keep our existing house as an investment property and get a mortgage to acquire a new home.

Your views will be greatly appreciated.
 
You have salaries of €120,000 combined. You own property worth €200k. You are thinking of buying another property for €400k. So your total property will be €600k and your net borrowings will be around €500k.

A better question to ask would be "Should we keep our home when buying another property?". At a stretch, you can afford it, if the bank lends to you. But why stretch? Why not have the flexibility and comfort of a smaller mortgage and become mortgage free sooner rather than later?

If your lender is Ulster Bank, they will allow you to transfer your tracker to the new house.

Assuming your lender is not Ulster Bank, you may still be able to do a deal with them. Maybe not immediately, but they might offer a deal at some stage in the future.

This leaves you with the problems faced by your relative. Could you do a house swap in the meantime, while you are waiting to sell your house or for the lender to do a deal? You pay his mortgage - he pays yours. If he does not want your house, you can rent his house from him and rent out your home. You can do some side contract giving you the right to purchase at a particular price.

All in all, I think that there are better options for you than owning two houses with two big mortgages.

Is he under pressure from his lender?
If so, it's possible that they might lend the money to you to buy his house from him, especially if it clears his mortgage and especially if he has a cheap tracker.
 
Firstly many thanks for the reply Brendan - and the potential options.

to be honest the reason we are considering holding on to our existing property is the tracker mortage. if we did not have one we wouldnt even consider it as an option.
you can probably sense from our overpayments on our mortgage that we woudl prefer to avoid huge debts. we would not be willing landlords either.

We are not with Ulster Bank and if we were we would certainly be looking to switch mortgages.

your suggestion about the house swap is an interesting one adn we had not thought of it.

we will look into it. if our investigations throw up anything that might of interest to others or if the banks take a particular attitude i will update you.

many thanks
 
I am a big fan of trackers. But let's get it in perspective.

You are paying around 3% less than you would be paying on SVR. So that is saving you around €5,000 a year gross. If you rent out the house you would be paying tax on the rental income anyway. So, let's say this year, you will save €4,000 net.

This will reduce as you repay the capital.

So, if the move really suits everyone, maybe it's worth paying €4,000 a year for it? It's 1% of the house value and will be dwarfed by any rise or fall in house prices.

On balance, I don't think I would overborrow and go to the hassle of being a landlord for €4,000 a year, reducing.

I would make every effort to do a deal with the bank and I might delay the trade-up decision to keep the tracker, but I would not let the tracker tail wag the bigger dog.
 
Firstly you'll have no problems getting a mortage for the new house up to 90% of the value of the new property and still be able to keep the old property on the tracker rate. I'm after making the exact same move with my property (Sale agreed on last week on house) and plan on keeping my old house and renting it (got approval in less then 24hours). The bank actually agreed that keeping the old property as a investment was a good idea.

Our income was 95k combine, old property had 14 years left at €1100 p/month again no outstanding debts and excellant repayment record. The house was valued at 180k with 145k outstanding. In the current market I can sell the house in less then 6 weeks (people dying to buy it) or I can rent it straight away for around €1000 to €1100 per month.

I'll make up any difference and see this as having a pension in less then 14 years given me €1200 a month when I'm 50. Where else can I get that return for so little from a pension? Plus if the house increase in value...
 
dont1know thats very interesting. if you dont mind me asking, are you with a bank other than UlsterBank and what was the value of the mortgage for your new home.
we were thinking it through over night and if we could extend the existing tracker mortgage back over the original 35 yr period we might consider holding on to it for a few years whilst waiting for the value to increase.
 
Mexednuts,

Why tell them!!! if they don't know they can't change the rate...once you keep you're payments up its your own business.

Even another bank told me this...

But I'm on a variable rate so not that lucky in the first place.
 
onthewater said:
dont1know thats very interesting. if you dont mind me asking, are you with a bank other than UlsterBank and what was the value of the mortgage for your new home.
we were thinking it through over night and if we could extend the existing tracker mortgage back over the original 35 yr period we might consider holding on to it for a few years whilst waiting for the value to increase.
Click to expand...

To be honest wasn't interested in Ulster Bank so went to EBS first and then BOI (I had no business relationship with them before this). Got approval straight away and was told keeping the old house made good business sense by both banks.

We'll borrow about 300k for the new house and want to keep back some of our savings.

If keeping the old property doesn't work out I can always sell it after 12 months and lession learnt in been a landlord, if it does work out, well in 15 years I'll have 1200 a month pension sort out at 50. Its all about risks I suppose and I'm happy to work hard for the next few years to make this happen.

By the way, waiting for the value to increase and then selling mightn't be the best play, you'll have to pay CGT on it, not all of it but some of it if you make a profit. Best to rent and see it as a future pension when you retire.
 
We are in the middle of waiting on keys on a second property. I am now relieved we made the decision to hold on the the existing one. We still can sell in the future, if we need to. I think its nuts to sell any asset in a depressed market unless you have to.

We did in the end borrow a lot less than we originally thought of, in order not to overexpose on property. Think its important to make that adjustment.

Best of luck, and so you know it was a lot easier getting the mortgage than I thought. Reading the media and indeed posts here would have you think it would be nigh on impossible. This was not our experience. We went with BOI, and they were very helpful.
 
dont1know said:
Mexednuts,

Why tell them!!! if they don't know they can't change the rate...once you keep you're payments up its your own business.

Even another bank told me this...

But I'm on a variable rate so not that lucky in the first place.
Click to expand...

Fair enough but what would my second mortgage be an investor mortgage ?
 
Mixednuts said:
Fair enough but what would my second mortgage be an investor mortgage ?
Click to expand...

Different bank so its a home mortgage or as they called it a movers mortgage.

You won't get a tracker rate on the new house.

As Ash already mention, the banks are open and reading this forum and I thought the same that they weren't and the Media is a joke, even the story today about taxing the Ulster bank comp... do they think the revenue have the time to go after people for €7. And people reading this crap believe it.

The budget in December will be very important for confidence to continue in the housing market. Any new builds price right recently (Maynooth as a example) have sold straight away. People are fed up waiting and want to buy, the biggest problem at the moment is supply, not enough good houses on the market.

And the rental market is also booming and prices are starting to go back up.
 
I now have mortgage approval from two banks.

The original plan was to sell our existing property which is currently on a tracker (.8+ECB) and buy another by getting out a 20yr mortgage and using our savings to make up any difference to keep the mortgage amount and term low.

Our current property is not in neg equity but we will probably walk away with only 10k after fees etc.

After reading this thread it has me thinking that I shouldn't now proceed with the sale of my current house and hold onto it and rent it whilst also holding onto the tracker .

Did the banks decision to grant me a new mortgage based on me selling my current house ?

Can I just go buy another house with the approved mortgage and keep my current one?

Ta
 
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