Should I sell tracker rental or take out mortgage top up?

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coletteR

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Hi
We have a family home that needs major refurbishment (>100K) and we need to get it done this year. We are in good permanent jobs taking home over 120k per year. We had to re mortgage our home house two years ago (to pay back a family member that had lent us the money) and it costs 1800k per month. We are both 52yrs old so it is a 17 year mortgage. We also own a house that we rent out on which 150k tracker mortgage remains but would sell for 275k which is the price we paid for it in hte boom so no tax bill.
We also have 3 kids 14, 10 and 9 ( and would like some disposable cash to go on hols etc with them...)

So we feel we have two choices:
1 - Sell our old house that now is in positive equity and get the 100K, however this is on a tracker mortgage and is in a good rental area - but by doing this we don't saddle ourselves with huge debt and no disposable income but we are losing an income stream.
2- Take out another 100K top up on our mortgage and end up with a 2,500 mortgage each month? -no disposable income but we keep the rental house and an income stream??

Not sure which makes the best financial sense?? Any advice would be greatly appreciated
 
you don't say how much your mortgage is on your current home? 1800 euro a month for 17 years is 367,200 euros in repayment so maybe the loan is around 300 k? Also, you don't say how much your rental income is or how much your mortgage repayment on the rental property is.
 
Also what is your take home? After bills what have you left? That will help you decide if you can get a top up loan towards repairs.
Will the repairs require you to move out for a number of months? You may need the rental to move into for yourself. If you want to hold onto the btl what about refurbishing the house in sections?
Btl. Tenants are getting more rights..Keep an eye out on the Residential Tenancies Act. There was a change last November where tenants have a right to stay longer than 6 years and you may in the future end up selling with tenant in situ. A lot to think about.
 
How much is your home worth?
What is the interest rate on your home loan?
Who is the lender?

If you borrow €100k, it will cost you about 2.5% or €2,500 a year in interest. The monthly additional repayment over 17 years will be about €600.

If you have a house worth €275k, you are probably getting around €15k a year rent. The interest is only €1,000, so you are probably making a profit after tax of around €6k a year. The cash flow is less than this because you are making capital repayments.

So you are making about €6k a year for a net investment of €125k ( rental property equity). If you pay this off your home loan, you will save about 2.5% interest or €3k a year.

So it makes financial sense to hold onto it - if cash flow were not an issue.

But if you would find the repayments on the extra €100k tough, then sell it.

Brendan
 
PebbleBeach2020 said:
you don't say how much your mortgage is on your current home? 1800 euro a month for 17 years is 367,200 euros in repayment so maybe the loan is around 300 k? Also, you don't say how much your rental income is or how much your mortgage repayment on the rental property is.
Click to expand...
Hi Mortgage on current home 270K; The mort on the rental is 700per month and hte rent is quite cheap at 960. But we are going to refurbish it if we don't sell it and hopefully get a better return.
 
Sconeandjam said:
Also what is your take home? After bills what have you left? That will help you decide if you can get a top up loan towards repairs.
Will the repairs require you to move out for a number of months? You may need the rental to move into for yourself. If you want to hold onto the btl what about refurbishing the house in sections?
Btl. Tenants are getting more rights..Keep an eye out on the Residential Tenancies Act. There was a change last November where tenants have a right to stay longer than 6 years and you may in the future end up selling with tenant in situ. A lot to think about.
Click to expand...
Thank you yes good points, looks like we will keep the rental and see if the bank will give us the loan.. Thanks
 
Brendan Burgess said:
How much is your home worth?
What is the interest rate on your home loan?
Who is the lender?

If you borrow €100k, it will cost you about 2.5% or €2,500 a year in interest. The monthly additional repayment over 17 years will be about €600.

If you have a house worth €275k, you are probably getting around €15k a year rent. The interest is only €1,000, so you are probably making a profit after tax of around €6k a year. The cash flow is less than this because you are making capital repayments.

So you are making about €6k a year for a net investment of €125k ( rental property equity). If you pay this off your home loan, you will save about 2.5% interest or €3k a year.

So it makes financial sense to hold onto it - if cash flow were not an issue.

But if you would find the repayments on the extra €100k tough, then sell it.

Brendan
Click to expand...
Hi Brendan, I have never increased the rent we are accidental landlords and I have left it quite cheap so less than 15k per year.. But If we are keeping it we need to do it up and then get a better return on it. We are going to apply to the bank for a loan and if they give it to us then we can keep the rental. Thanks for the advice very much appreciated.
 
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