Sell now and buy a year later or rent out apt for year

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Sideview

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I'm hoping for some advice. It is about the often posted 'Should I sell or become an accidental landlord?'

I am in the process of getting a job transfer to Galway from Dublin.
I bought an apartment in 2008 under the AHI and paid 270K for it.
I have 210K left to pay on the mortgage. I could sell currently for 255-260K.
I could rent it for considerably more than the curent mortgage repayment ~1K per month when I take out owner interest relief. I could rent it for 1500-1600 a month.

I am relucatant though to become a landlord, with all the other costs to renting it out and hassle of dealing with tenants etc.

Once I get settled out west and find an area I want to live in I would like to buy a place again in approximately 1 year.

Is there any advantage to transfering a mortgage ( I would have to rent out current apt for the year before doing so) over just taking out a new mortgage in a years's time? Granted if prices continue to rise then I would lose out on the extra my apt would sell for whilst having to pay whatever increases a new place in Galway would cost but I'm thinking it might be worth it so I can purchase when I'm ready rather than trying to coincide selling apt whilest buying new place.

Any advice or thought would be appreciated. Thanks
 
There are a number of separate issues here.

The simple one is about transferring the mortgage. If you have a tracker and you can keep it that would be a big advantage and you should make any efforts necessary to keep it.

If you sell now and buy in a years time what risks are you running. With a current sale of €260k less €210k mortgage that gives you a deposit of €50k, that gives you a 20% deposit toward a new house with a budget, depending on income of €250k.

If property increases 10% in the next year that €250k house will cost €275k by then. Not good for you. If on the other hand prices fall 10% you will only pay €225k for the same house. We dont speculate on property prices here, but in my opinion all the risk is on the downside.
 
Looking at the mortgage piece only, is your current mortgage a tracker, and if so with which bank?
 
Thanks for the replies.
I should have said my mortgage is SVR with EBS. I know I should move from them anyway but only recently realised how much out of negative equaity I am.

Cremeegg, when you lay it out as you have it seems I'd be very foolish to sell now and be trying to buy elsewhere a year later.
I guess I could try renting to tenants with a full agreement that the apt will be sold in a year's time.
 
If it was me I would sell and not go through the hassle of becoming a landlord for a year if it is your intension to buy in Galway at that point.

If you were on a tracker it would of been a slightly tougher decision but as it stands I would be happy to see that back of it as you near the breakeven sale point.
 
Thanks Easel.
This is going to sound like a really stupid question but i'll ask anyway.
When I took out my mortgage first I was paying an enourmous amount of the interest in the first few years. The banks front load interest payments.
The last couple of years (I'm 9 years into my mortgage) I've finally started to clear some larger chunks off the capital.
If I was to sell and start again with a new mortgage would I end up front loading interest again?

For simplicity say prices remained static and I bought a simlarly priced place in Galway. Would I end up paying more in a new mortgage than if i transferred my current mortgage?
 
Sideview said:
For simplicity say prices remained static and I bought a simlarly priced place in Galway. Would I end up paying more in a new mortgage than if i transferred my current mortgage?
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No. You would end up paying the same amount of interest irrespective of whether it's a new Mortgage or existing.

It's not correct to think interest is 'front loaded' - it's charged on the remaining balance, but because your balance is bigger at the start the interest charged is higher (plus in your case rates were higher).

The speed at which you pay capital is mainly determined by the mortgage term.
 
Sideview said:
Thanks Easel.
This is going to sound like a really stupid question but i'll ask anyway.
When I took out my mortgage first I was paying an enourmous amount of the interest in the first few years. The banks front load interest payments.
The last couple of years (I'm 9 years into my mortgage) I've finally started to clear some larger chunks off the capital.
If I was to sell and start again with a new mortgage would I end up front loading interest again?

For simplicity say prices remained static and I bought a simlarly priced place in Galway. Would I end up paying more in a new mortgage than if i transferred my current mortgage?
Click to expand...

Your mortgage interest is calculated based on the capital outstanding. The reason why a large amount of interest is payable at the start of a mortgage term is because it is at this point when the outstanding balance is at it's largest.

The below example is for demonstration purposes and does not include exact figures.

Say you borrowed €100,000 at 3% and your mortgage payments were €500 per month.

After 1 year (12 months of payments) you will have repaid €6,000. Of this €3,000 is interest (€100,000 * 3%) and €3,000 is paid off the capital.

At the start of the second year the amount outstanding is €97,000 and of the €6,000 of repayments €2,910 is interest (€97,000*3%) and €3,090 is off the balance.

Over time the interest paid decreases as the rate is charged on the balance outstanding.
 
RedOnion said:
No. You would end up paying the same amount of interest irrespective of whether it's a new Mortgage or existing.

It's not correct to think interest is 'front loaded' - it's charged on the remaining balance, but because your balance is bigger at the start the interest charged is higher (plus in your case rates were higher).

The speed at which you pay capital is mainly determined by the mortgage term.
Click to expand...

Ah Ok, thanks. That makes sense now.
As you can see I'm very naive on this whole process. But the concise, accurate replies on here have made things clear.
It seems my main issue so would be if house prices inflated I could be at a loss versus the hassle of being a landlord.
 
Easel said:
If it was me I would sell and not go through the hassle of becoming a landlord for a year if it is your intension to buy in Galway at that point.
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I can't see this. The risk of a significant increase in property prices between buying and selling is too great. And by risk I mean the damage to your position that would be caused by a big increase, rather than how likely that is.

If prices went up you too much might be unable to buy again. For that reason I wouldn't sell until I was ready to buy.

If you really don't want to be a landlord you don't have to rent out the Dublin property. If it were me I would sleep on a sofa in Galway for a year rather than be out of property for year.

It its not about which way you will be better off, its about which way gives you less risk.
 
cremeegg said:
I can't see this. The risk of a significant increase in property prices between buying and selling is too great. And by risk I mean the damage to your position that would be caused by a big increase, rather than how likely that is.

If prices went up you too much might be unable to buy again. For that reason I wouldn't sell until I was ready to buy.

If you really don't want to be a landlord you don't have to rent out the Dublin property. If it were me I would sleep on a sofa in Galway for a year rather than be out of property for year.

It its not about which way you will be better off, its about which way gives you less risk.
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I think this would be mad. To pay €12k in mortgage repayments and a possible service charge for up to 12 months while sleeping on a couch just to stay exposed to property. Starting a job in a new location is hard enough without not having your own space. You would need property prices to increase by over 5% in the next year for this to be profitable.

Having €50,000 cash now to help fund a potential purchase in 12 months seems like a good position to be in.
 
I would sell. Accidental landlord hassle gone. Mortgage payments gone. Deposit in pocket for next buy. Clean slate ... and all that!
 
Easel said:
I think this would be mad. To pay €12k in mortgage repayments and a possible service charge for up to 12 months while sleeping on a couch just to stay exposed to property. Starting a job in a new location is hard enough without not having your own space. You would need property prices to increase by over 5% in the next year for this to be profitable..
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I agree with what you say, though while it is of course a matter of personal preference, for me the risk of prices rising significantly would outweigh this.
 
As an accidental landlord myself I would personally sell up take the money and continue saving you will be in a better situation to buy when you see the right property and you will have no chain to worry about.

The only reason I became an accidental landlord was because my house was in negative equity. Thankfully it is out of that and putting it up for sale.

Am I not correct in thinking that you will be liable for capital gains tax if house value goes over price you bought it for?
 
Have you thought about keeping your Dublin property with the rental income covering the present mortgage repayments. Then purchasing a second property in Galway and using the additional rental income from your first property to partly fund your repayments on your new second property?
 
CatherineK said:
As an accidental landlord myself I would personally sell up take the money and continue saving you will be in a better situation to buy when you see the right property and you will have no chain to worry about.

The only reason I became an accidental landlord was because my house was in negative equity. Thankfully it is out of that and putting it up for sale.

Am I not correct in thinking that you will be liable for capital gains tax if house value goes over price you bought it for?
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Thanks for the input Catherine. I find it very interesting the amount of accidental landlords who all seem to say I'd be better off selling up.
It'll be a couple of months before I have to make a final decision on what to do. I guess ideally I'd be ready to move on a property straight away in galway but I don't want to rush that decision either.
 
Laramie said:
Have you thought about keeping your Dublin property with the rental income covering the present mortgage repayments. Then purchasing a second property in Galway and using the additional rental income from your first property to partly fund your repayments on your new second property?
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Thanks for the suggestion Laramie but I'm not overly interested in becoming a landlord longterm anyway. Plus I'd need the deposit from the sale to purchase a new property.
 
Have you thought about the interest relief you would get on you mortgage if you rented it out? It seems crazy to sell property in this market and rents are lower in Galway than Dublin. Is the move to Galway permanent or temporary? Take the income from Dublin, enjoy the tax relief on the mortgage interest and rent in Galway until you have a clearer plan. If you save a few more quid you might be able to buy in Galway in a year and keep Dublin. Buy to Let is a decent place to be in the long term if your entry point is decent. Best of luck with the decision.
 
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