Negative Equity - Looking to Move in 3 Years Time

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laura28

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Personal and income details
Net (i.e. after tax) Income self: 1600 montly (currently Part time, intend to return full time in 3 years, income will increase to 2,600 then)
Income history: Public Servant, permanent
Net income partner/spouse:permanent Private Sector, 2,400 monthly.
number of children: 1 (age 2 and a second due in December)
Home loan
Lender: AIB (borrowed 225,00 in 2007)
Amount outstanding: 185K
Value of home: 90K
Interest rate: Tracker (not sure of exact rate)
Monthly Payment: 650 (not including approx 50 TRS which i think will end soon, mortgage started in 2007
Amount in arrears: 0

Summary of discussions and agreements with the bank: None

Other loans and creditors - delete those which don't apply to you
None

Other savings and investments - Approx 5k

How important is retaining the family home to you?
I don't care about keeping the family home.


Any other relevant information

What is your preferred realistic outcome?
We are living in a 2 bed apartment and currently expecting baby No. 2. We would like to move to a small house in the suburbs with access to schools etc. We are happy enough to stay where we are for the next maybe 3 years and are looking to get ourselves in the bext possible financial position before we look to move.
We are currently over paying our mortgage by 300 euros each month, the term has been reduced to 17 years based on maintaining the re-payment. However would we be better to throw this money at savings and look to build a savings pile of 20k in the next 3 years to use as a deposit on a bigger house. We are looking at home that cost approx 190k so a mortgage of 170k, would we get a second mortgage for this based on our earnings?
The goal would be to rent our apartment, it is in a very good rental area and should achieve 850 p/m rental - which would cover mortgage and management fees with a little left over.

I am currently working part time but have the option to return to work full time, which i will do when the kids are older and we are no longer paying huge amounts for child care.

We are looking to get ourselves in order and out of the hole of negative equity we are in. All advice appreciated.
 
Based on my brothers experience, they want you to be able to cover both mortgages without relying on rental income. And even with him being able to do so, he was still turned down as he has 2 kids and they allowed more expenditure for the kids than my brother did.
 
And if you do a search here on becoming a landlord you will realise that it is not as simple as saying all the rental income you receive will cover your mortgage and management fees.

You have to declare your rental income as taxable income once you have allowed for deductions and expenses.
 
Thank you both for the replies.

Have you any idea how much extra the bank would require us to have "allowed" each month for the children?

I realise that becoming a landlord is not very straightforward - would we need to factor in more money to cover possible tax/empty periods in the apartment?

I am really looking for a way to make this work, do you really think it's a no hope situation and we have no way (other than renting) to get out of where we are?
 
Tried to apply recently to AIB to either rent and take on second mortgage or trade up, and it was a complete no-go as before even paying a mortgage the bank expects you to have 1000 per adult and 250 per child as disposable income. So in your case 2500 before paying a mortgage.
 
Who knows how things will be in 3 years time. I think if it were me, Id be looking to save the extra you are putting towards the mortgage at present. It at least means you will have a lump sum of about €11k (if not on deposit) in 3 years time. Maybe things will have changed and you could use as a deposit, maybe not and you use it towards rent, emigrating whatever. If you were happy where you were, then Id leave alone but it isn't suitable for your expanding family. Plus banks will not engage with someone in difficulty if they are not just paying mortgage in full but also topping it up. Who knows what your circumstances will be in 3 yrs time. Good luck whatever you do.
 
I would think you are better off saving the money each month to build up a lump sum. It will give you more flexibility when you want to move.

When the time comes you could rent a new place for a year and rent out your existing apartment for a year. To see if being a landlord suits you. You should know then if you want to buy on the basis of renting the existing apartment or if you want to sell
 
Thanks s much everyone for all the advice to date. It would seem the general consensus is that we are better saving and accumulating a lump sum rather than over paying on our mortgage.

Having thought about this again last night another option came to me. If we were to over pay and reduce the amount of negative equity from 90k to 50/60k and sell would we be in a better position? We could add the negative equity on to a new mortgage and have one mortgage of c. 250k rather than 2 mortgages. Would the banks look more favourably on this? At the moment no apartments in our complex have been sold but am presuming on this situation improving.

All thoughts welcome.
 
While in principle it is a good idea, the income limits I mentioned still apply.
Accumulating a lump sum, in expectation of a time when your income will fit the guidelines could be the best idea.
 
Thanks for the reply. Looking at our income and the income limits i think we could make that workable. Looks like it's heads down and save, save, save for a couple of years!

Am so annoyed that we are in this situation, as so many are. Both of us with reasonable incomes and thanks to a foolish mistake in 2007 stuck in a rut now. Grrr.
 
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