Re: Financing apartment in side garden

[lotus]

I own an end of terrace house which is an investment property. I believe I may be able to get planning for a small apartment onto the side. Initial checking tells me I could build it for circa €60K and get €550 rent per month. It is located in a in area close to the town centre where there is a good rental demand. The yield seems ok. Even if you take some void periods into account, it is still over 7%. Is it worth doing?

More importantly, there is a mortgage on the existing house. It is a very good tracker rate with AIB. I dont want to be knocked off this tracker.

I have the cash to build the apartment but would prefer to get a mortgage as you can offset the interest against the rental income. I think this wold make more financial sence.

Also, I assume if I go to AIB, they will try to push me off the tracker....Is there any way to get over this? I assume I wont be able to get a mortage from a dfferent bank either as the entire site is under the existing mortgage.

Ideas and thoughts apppreciated.

 

[mathepac]

If the new build is to be attached to the side of the old house, then you will have no option but to consult with AIB, if you wish to change the property they have an interest in.

 

[DonKing]

I have 4 separate mortgages with First Active on the one property. The first 3 are trackers (ECB +.75%) and the last one was ECB +.9%. When I took out the last one trackers were being phased out, hence the less favourable rate.

I would expect AIB to be able to provide a separate top up mortgage with separate terms but in the present climate maybe they will try to get you off the loss making tracker.

I presume you know that you now can only claim 75% of interest against rental profit? No doubt that the government may look at this again. Certainly labour will if they get into power.

 

[lotus]

Thanks for the replies

I would expect AIB to be able to provide a separate top up mortgage with separate terms but in the present climate maybe they will try to get you off the loss making tracker.

I will check with AIB about this. Obviously I would hope to keep the current tracker and then get the best interest rate for the top up - I would be inclined to go for a fixed rate (maybe 10 yrs?)for this top up. Is there a way of avoiding bein pushed off the tracker for the original mortgage or am I completely at their mercy?

I presume you know that you now can only claim 75% of interest against rental profit? No doubt that the government may look at this again. Certainly labour will if they get into power.

I am aware of the fact that I can only claim 75% of interest against tax and that this may reduce further. Overall, do you think the figures stack up for going ahead with the project?