Looking to purchase new house and hold onto existing property..

[bobbles]

Just a quick question.. We are looking to keep existing property and purchase a new property. We have mortgage on existing property and are looking to get another mortagage to purchase new property. Is it hard to keep one mortgage and get approved for another? Will there be stamp duty implications etc??

 

[ClubMan]

You need to clarify what the two properties are used for - e.g. existing one is your PPR and new on will be investment etc.? Whether or not you can get another mortgage will depend on your ability to service both. Basically - more detailed info needed.

 

[bobbles]

Ok, House 1 (H1) is my PPR, we are living there 2 years, property is worth around €420k and existing mortgage is €300k. We are looking to upgrade now to House 2 (H2) which is worth €550k.

I have €100k in savings to go towards H2 and we have already been mortgage approved for H2 as long as we sell H1.
H1 has been on market for 4 months and no offers so we thought we would hold onto H1 and rent it out and still purchase H2 for our PPR.

Would we have to pay Stamp Duty on H1 now that we are planning to let it out and will there be tax implications on H1?.. Thats if we can still get mortgage approved if we want to hold onto H1 and purchase H2..

 

[ClubMan]

Would we have to pay Stamp Duty on H1 now that we are planning to let it out

Yes - renting out a property originally bought as an owner occupied PPR within 5 years of purchase triggers a stamp duty clawback liability (i.e. investor SD on the original purchase minus any SD that you paid).

and will there be tax implications on H1?

If you rent it out for more than 12 months before selling on then some portion of any eventual resale gain will be assessable for CGT. For example - if you live there for 2 years and then rent it out for a further 4 years before selling it then (4-1)/(4+2) = 50% of any resale gain would be assessable for CGT.

I have €100k in savings to go towards H2 and we have already been mortgage approved for H2 as long as we sell H1.

On the other hand if you just sell H1 then there is no SD clawback or CGT liability. If you want to keep it (and can manage this financially) then you need to crunch the numbers and make sure that this is a viable proposition and that the potential rental income and/or capital appreciation makes this a good investment. Obviously concentrating most or all of your means into one asset class, risk/reward profile and geographic region such as Irish residential property involves certain risks that may not be attributable to a more widely diversified portfolio.

You should also read the Property Investment FAQ to get an idea of your responsibilities/liabilities as a landlord.

Property Investment FAQ