Mortgage Finished, looking to move but rent house

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makooy

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Hi folks

we cleared our mortgage last month, house is 5 bed semi in South Dublin, value approx 750,000

we are looking to move on as the house needs work done to it. I had an idea of keeping the house, renting it out and buying somewhere else of the same value taking out a new 20yr about us The rent from the house will cover the new mortgage repayments over 20years.Problem is we don’t have liquidcash as a deposit,we have about 60k in savings that we don’t want to touch.

Do you think the bank would be open to this idea? Mortgage is with AIB.

We are 41 years old, both working full time with 1 dependent salary 50 & 60k have personal loan and car loans total value around 30k of debt.

Thanks in advance
 
Unlikely. You’ll be paying roughly 50% of the rental income in tax/prsi etc. With a joint salary of €110k you’ll struggle to raise north of €400/500k even with exemptions.
Plus market at the moment could be interesting.
Personally at that house price level I think you’d be mad to even consider keeping the house and renting it out. Do you like the area? Would you not just plough a decent amount of money into it and get it exactly the way you’d like it?
 
I'll be gentle. Absolutely not a chance.

The after tax rental income might cover the interest on new mortgage. but theres no way it'd repay it for you over 20 years.

You don't have enough income to borrow 700k+.

You've posted about other issues previously that would impact also.
 
Why do you not want to live in the house? Or is this a humble brag about living mortgage free in socodu at 41?

Also, I'm wondering why you prioritised paying down your mortgage over your other debt?
 
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Probably doesn't make sense to be carrying loans at unsecured rates while having cash savings of double your amount.

Becoming a landlord is a bad idea for reasons others have suggested. Also the fact that a 5-bed house in South Dublin is probably the lowest yielding of any kind of property in Ireland.
 
Steiny said:
Why do you not want to live in the house? Or is this a humble brag about living mortgage free in socodu at 41?

Also, I'm wondering why you prioritised paying down your mortgage over your other debt?
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thanks for all comments, it was an idea, a hypothetical idea and thanks again for Feedback.

to answer this specific comment, no sir it’s not a humblebrag. The house is worth 700k(others in the are are 850+) and it is in need of massive refurbishment. We have been quoted €250-300k minimum from architects to bring it up to a decent standard which won’t add anything to the value. Which is why I was thinking of doing it up for rental and moving elsewhere.
 
makooy said:
,we have about 60k in savings that we don’t want to touch.
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makooy said:
have personal loan and car loans total value around 30k of debt.
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This really makes no sense. You should be paying off your expensive loans with your cash.

Would you go into BoI and borrow €30k at 9% to put it on deposit at 0% ?

I hope you wouldn't.

This has probably cost you thousands of euro over the last few years.
 
If a house in South Dublin needs €250k of work , it's unlikely to be lettable at top rent. And you will probably get tenants who will complain about stuff and demand that you fix it. And the RTB will be right behind them telling you to fix the problems.

Sounds as if you should just sell the house quickly and buy the house you want. Let someone else spend the €250k on doing it up.

You could try to buy another house first so that you could move from your existing house into the new house without having to rent somewhere in the meantime.

Maybe the likes of First Ireland would consider it as it would have security on both houses and your commitment to sell your existing house.

I think it unlikely, but don't pay down your expensive loans until you have ruled that out, in case you need to €60k.

Brendan
 
makooy said:
thanks for all comments, it was an idea, a hypothetical idea and thanks again for Feedback.

to answer this specific comment, no sir it’s not a humblebrag. The house is worth 700k(others in the are are 850+) and it is in need of massive refurbishment. We have been quoted €250-300k minimum from architects to bring it up to a decent standard which won’t add anything to the value. Which is why I was thinking of doing it up for rental and moving elsewhere.
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I apologise. I think the advice that's been given is very good. You're in an enviable position as regards your primary residence. You own it outright at a relatively young age. Why jump back into debt? The obvious solution is, if the house doesn't suit you, sell up, buy a smaller house and budget for works.. Granted covid has thrown everything up in the air but building work probably won't be any more expensive after all this than it is right now. What hold does this house have on you? Better options for investment with the spare cash you'll now have sans mortgage rather than ploughing back into a mortgage at a very uncertain time economically...
 
makooy said:
We have been quoted €250-300k minimum from architects to bring it up to a decent standard which won’t add anything to the value.
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Of course it will add to value, just not to the extent that it would be reflected on the market.

My advice is to sell, pay off other debts and downsize. Five bedrooms for a family of three is beyond your needs.
 
One key factor AGAINST your plan is that you may become subject to CGT if you sold your house prior to your death. The CGT liability would be calculated pro-rata over the period that it was rented. (I know some people that have rented their family homes and moved overseas, but they plan to retain ownership until their death, as there is no CGT payable upon death.)

Jim Stafford
 
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