Should I sell secondary property to pay mortgage of primary residence?

B

bishop1

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Is it a wise idea to sell my secondary property ,to pay off my primary residence mortgage?

My secondary property has a mortgage of around 100,000 yet to pay and is worth 300,000. This has a rental income of 700 Euro/month.

My primary residence has a mortage of around 250,000 and is worth ~650,000 at current market prices.

If I sold the secondary residence and used the money after tax to pay off the primary mortgage, I would be left with a much smaller mortgage and more financial freedom. I have no financial pressure paying both mortgages at the moment, but I would like to make the wisest decision given current house prices? Any advice is appreciated!
 
Your decision really is based on your view of the market. Are you willing to risk your current market gains for possible future gains ?
 
I am going off the premise that the market will slow down soon - not to be a doom monger! I also was looking at this from the point of view of financial sensibility or if in the long term it's better to hold on to both properties, bearing in mind capital gains tax, potential rental income etc. Any views from people with more insight into this than me is appreciated!
 
Some frown on crystal ball gazing but:

- there is still a phenomenal shortage of houses;
- even with UK interest rate rises, property has still continued to rise;
- rental returns are poor so its all capital gain is what you would depend on;
- who knows what will happen here;

As 2Pack has pointed out, you could take a certain profit.

You could ask yourself what would your regret be if:
- there was a fall or a levelling in prices;
- or prices rose again by 10% for a number of years.
 
you have made a good deal of money out of the property market. taking a profit now would free up capital for you to consider alternatives uses of your cash. but then again, you could end up loosing a lot of this cash if you are unlucky/unwise.

it is difficult to give you an answer without reference to your financial situation.

i would take the cash and clear as much of the mortgage on my PPR - but then again, I would probably not have bought an investment property in the first place! reducing your debts in an environment of rising interest rates is generally a prudent thing to do.

if the property market slows you can probably expect an increase in the number of rental properties on the market as formerly vacant investment properties are put to work - this could put further downward pressure on rents.

how often in your life will you get €200k before tax?
 
You may also consider that remortageing the prime property while the loan is €250k or higher will get you a very very cheap tracker rate like 0.8% over base with NIB

Then maybe sell the gaff, pay off a large sum of that remortgage in one fell swoop and you still pay 0.8% over base on a small mortgage for the remainder of its term which adds up too.

Pople with money have always known when to sell and bank it . If you have had the investment property for a number of years you have made yourself a tidy sum, but ONLY if you sell it :D Your CGT will reduce somewhat according to the number of years you held it too .

Run the figures through this calculator and see

http://www.askaboutmoney.com/clubman/cgtcalc.htm
 
I'd hang onto the investment property. Even if Values dont go up, every year the house is rented your mortgage will be going down.
 
892896 said:
I'd hang onto the investment property.
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Nobody can really tell you what you should or shouldn't do. It all comes down to your own opinions on the current property market (and your belief on its future direction), your attitude to risk, have you got investments outside of property, do you wish to diversify some of your money away from property investments etc etc.

You may also wish to free up some funds (lower mortgage repayments / clear mortgage on PPR so no mortgage repayments in the future) to improve your quality of life.
 
The original poster asked for 'all advice' and thats what I gave.
 
892896 said:
The original poster asked for 'all advice' and thats what I gave.
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I know. It's also what I did. As much as I love checking out AAM for opinions etc, people should be clear that it is far from detailed financial planning that's being provided.
(Maybe I should have put an emphasis on the I'd to help clarify I wasn't disregarding the suggestion, just wondering if it is also the right way forward for the OP)

Your advice was that YOU would hold the property in his shoes (and that's perfectly fine advice, many property investors are holding their properties or expanding their investments), my advice was simply that no matter what ANYBODY may suggest to him, he must consider his personal circumstances before making a call either way.
 
Hi I am in a similar situation to the guy who posted this thread. I was thinking of doing the following in order to pay off my mortgage on my primary residence and make the most of the interest relief on rented properties:

Step 1:
Use the equity in the rented property to buy another rented property that has a similar value to the currently rented one .
Step 2:
Get interest only mortgages split evenly between the two investment properties
Step 3:
After 1 or 2 yrs renting both properties, sell one of the properties . Sell the one that requires more maintenance or the one with less potential as regards renting ,capital appreciation etc.
Step 4.
After paying capital gains etc you use the proceeds to pay all or most of your primary residence mortgage off.
So you end up where you started except all or most of your mortgages are on your investment property and little or none on your primary residence.
Obviously you'd have to work out transacational/tax costs and weigh this up against what you'd gain by shifting the mortgage over to the rented property and see whether it was worth all the effort.
I'm not sure what revenue would think of this. Anyone any ideas??
 
As long as you pay your taxes I don't think Revenue would have any thoughts on it. Good idea if it goes according to plan. You are only allowed to claim relief against monies borrowed to buy/repair investment properties.
 
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