Having paid 7 years of mortgage payments it would hurt a little to sell it at a loss.
We have a house (home) in negative equity – owe €357k, worth €300k SVR 3.9%
If it's a close call, I would be inclined to sell the rental - there's no point taking on the unnecessary risk of holding a rental unless there is a clear benefit to doing so.
Would transferring the NE to your new house impact the rate on your new loan? I assume it would no longer be a 60% LTV mortgage so that may be a relevant consideration.
Thanks Brendan. My existing mortgage is with BOI.
There is a further variable to add, and I know there was a recent thread on this but I guess the bank could try to change my 3.9% to investment rate if I rent it out.
Thanks Brendan, yes definitely 3.9%. It's not a former IN mortgage, I took it out directly with the bank in 2007. I even have it quoted in a recent email from the bank. I am a former bank staff member if that makes a difference. Having said that, when I left the bank all my accounts etc. were switched to "non-staff".Are you sure you are on 3.9% SVR?
Is this one of the Irish Nationwide mortgages taken over by BoI?
People talk about paying a higher rate for renting out a former home, but I have never actually seen a case of it.
Brendan
Thanks Sarenco, yes I will be informing revenue to cancel TRS and will also switch insurance to rental. We will probably decide towards the end of this year what to do about renting or selling so we still have time to crunch the numbers.That's certainly possible but I think it's unlikely - I don't believe BoI has made any attempt to move people to investment rates in these circumstances.
I would suggest that you sit down and work out what your rental accounts would look like in Year 1 and figure out your after-tax position. That will give you a concrete basis for your decision. Don't forget that you cannot continue to claim MIR (if relevant) on your property if you rent it out.
I suspect selling the property will make sense but you really need to crunch the numbers to make an informed decision.
Hello Brendan , im wondering what you think of those mortgages taken over by mars capital from ibrc? My mortgage was sold late last year , a fully performing mortgage, no missed or late payments, but in negative equity ; it has been suggested to me that this may not be necessarily a bad thing as they may be open to cutting a deal , ive been holding off injecting cash into the mortgage for this reason , your opinion is of interest to me thanks brendan.Are you sure you are on 3.9% SVR?
Is this one of the Irish Nationwide mortgages taken over by BoI?
People talk about paying a higher rate for renting out a former home, but I have never actually seen a case of it.
Brendan
I would suggest that you sit down and work out what your rental accounts would look like in Year 1 and figure out your after-tax position. That will give you a concrete basis for your decision.
Thanks Bronte, I have roughly calculated numbers and am amateur at this so quite open to correction.This is very good advice. Poster mentioned 8K needed annually. But no numbers to back it up.
Thanks Bronte, I have roughly calculated numbers and am amateur at this so quite open to correction.
It seems worse than originally thought and I’ll actually need to add approx. €12k per year.
Rental Income: €16800
Mortgage interest 2016: €13072
75% Interest allowable: €9804
Expenses Estimate:
(Insurance, Assurance,
Accountant, repairs, PTRB) €3100
Taxable Income: €3896
Tax c.50%: €1948
Net Rental Income: €11,752
Annual Mortgage: €23,784
Shortfall: €12,032
Should the OP be thinking about effective rate here?Conversely, your effective tax rate looks very high. Unless you have very substantial income from other sources, your effective tax rate (including PRSI and USC) is likely to be a lot lower than 50%. Don't forget that rental profits are the same as any other form of income - not all of which is taxed at the marginal rate.
Should the OP be thinking about effective rate here?
If the question were "Should I quit my job and become a fulltime landlord?", we would need to make an apples-to-apples comparison between two different income streams, and effective rate would definitely be correct.
But in the scenario where a single portion of OP's income is on the chopping block, isn't 50% the defacto effect on OP's bottom line? (Assuming the OP's taxable income post-sale would still be reaching the marginal rate)
On the effective tax rate - I always feel that if you are already in the higher tax bracket by salary alone, then the tax you pay on the rental income is effectively taxed at 50%.
A lot of people think like this but it's not technically correct. An individual employee would actually have to earn well over €250,000 per annum before they would come anywhere near having an effective tax rate of 50% (including USC and PRSI). This report by TASC is interesting in terms of the effective tax rate at different income levels.
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