renting out PPR - is it ever financially worth it??

H

happy bunny

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We are moving to a new area to care for a relative. We had been hoping to rent out our current home, and then rent somewhere in our new area. We had hoped to hang onto our original house with view to moving back in the future. But looking at this forum, it seems with all the charges and tax implications, you either need to have a very low mortgage or be charging an immense unrealistic rent in order to cover the mortgage.

we were under the impression alot of people were doing this, but now i simply can't see how it is affordable? Its so difficult as now we face having to sell our house now at rock bottom markets prices, when we really want to hang onto it (but need rental income to cover the mortgage so it can't just remain empty)

help?? is there any way??
 
How much will you get in rent?
How much are the mortgage repayments?
How much of the repayments comprises mortgage interest?

The answers to those 3 questions will determine, to a large extent, how much you will be paying in tax and/or making up a shortfall in mortgage repayments.

I don't know what the situation is with your existing property but if the bank were to allow you to go interest-only for a set period (say 3 years) then should reduce this burden considerably.

eg - suppose monthly repayments are currently €1,200 per month, €900 of which is interest

You rent for €1,000 per month

Rental Income = €12,000
Allowable Interest = €8,100 (€900 x 12 x 75%)
Other expenses = €1,000 (house insurance, life assurance, repairs etc)
Capital Allowances = €1,000 (estimate)
Rental profit = €1,900
Taxed at 47% = €893

You also have to make up the shortfall of €200 per month so the total cost to you is €3,293 per year, in addition to the renat payable on the new home

If you can get your bank to go interest only, the rental computation stays the same except this time you DON'T have to make up the €200 per month because you are actually making a profit on the rent vs mortgage aspect (ignoring other expenses)


There are other issues to bear in mind though, one of which is if you are on a tracker rate on your existing mortgage, the bank may take the tracker off you as you no longer live there as your PPR.
 
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