should we sell to build or ????

D

designchick

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Age: 36
Spouse’s/Partner's age: 37
Annual gross income from employment or profession: 44,000
Annual gross income of spouse: 49,000

Type of employment: Me: PAYE, Spouse: PAYE. Both secure in jobs

In general are you:
(b) saving

Rough estimate of value of home: hard to say as it’s a small house on a site 450,000? depending on market
Amount outstanding on your mortgage: 173,000
what interest rate are you paying? ECB + 0.85% tracker, paying interest only at moment.
Repayments 580 monthly repayments

Other borrowings – 2nd house mortgage 267,000
Currently paying interest only on that ECB+0.85% tracker
Repayments 607 monthly

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? N/A

Savings and investments: Approx €80,000 in savings accounts, saving minimum €800 per month

Do you have a pension scheme?
Self: PRSA, contribute €300 per month
Spouse: PRSA, contributions per monthly e350
Did put money into AVC’s for both of us but stopped this.thought I could use the money else where..


Do you own any investment or other property? yes

Ages of children: none

Current situation is that we own 2 houses, living in one.

We would like to knock current home and rebuild a new house, cost 300,000.
quotes from builders that are coming in.

1st house in now in negative equity got it valued and it is being valued at 265,000.
Have had it rented out earning and am saving all the rent money.

Need to check what would be a wise thing to do

We both in safe jobs with no chance of losing them.

We want to start building in the next year but are unsure as to whether it would be a wise move to leave ourselves open to such a large debt.
We’d have a mortgage on home of 400,000(that would be 300,000 minus savings of 80,000 plus current mortgage of 173,000 and the rental house of 267,000 would be paying for itself. Spouse very worried about such a big loan and specically interest rates moving upwards.

[FONT=&quot]Could use a little clear thinking please[/FONT]
 
Hi design chick,

Just one comment the price you are being quoted for your new build sounds in this day and age excessive. Not sure what part of the country you are in but I know 2 people building massive 3000sq ft houses and their houses are being built for E180,000 approx 60 sq foot - one is by direct labour the other is not. If you can get down the price of your new build it will help greatly and be very practical when finishing off. It is a good time to build right now if you have the money and finishing it off will be a lot cheaper than has been in the past if you can get your hands on the money. It might not last that way for too long though.

Angela59
 
designchick said:
Current situation is that we own 2 houses, living in one.
Click to expand...

The bank owns your house not you.


designchick said:
We want to start building in the next year but are unsure as to whether it would be a wise move to leave ourselves open to such a large debt.
We’d have a mortgage on home of 400,000(that would be 300,000 minus savings of 80,000 plus current mortgage of 173,000 and the rental house of 267,000 would be paying for itself. Spouse very worried about such a big loan and specically interest rates moving upwards.

[FONT=&quot]Could use a little clear thinking please[/FONT]
Click to expand...


I would say your plans may fall at the first hurdle. You would be looking to borrowing over 7 times yr joint income. I don't think banks do that any more (Thank God!!)

The rental property is paying for its self but how are you planing on paying off the capital?

I my opinion your plans would leave you heavily exposed. I would wait and save, start to pay off the 2nd property and go from there. Would you consider selling the 2nd property and use saving to fund the negatively equity?
 
Technically MrsDT designchick and spouse own the house but have surrendered the deeds to the banks until such time as the mortgages are paid off. The bank is not the property owner though. The bank owns the debt as an asset, designchick +1 own the property as an asset and owe the money they have borrowed on the strength of having the property.

It wouldn't be terribly unusual on a rented property to only repay the capital at the point of sale.

Designchick, I am going to guess that ye were looking originally to selling the investment property (referred to as 2nd House mortgage 267k and 1st house valued at 265k??) and have found you will not realise and value from it? First point is the rental income covering the cost of the investment property? You are right to have that mortgage on interest only, is that indefinite or a fixed term measure? Does the bank know that it is an investment property now?

How come you are interest only on your main mortgage at the moment? That does seem odd since there doesn't appear to be any distress in your current expenditure.

Would it not be worth holding out 6 or 12 months and then looking to see can you offload the rental property? It would allay your partner's concern about borrowing so much if it was only the one property you were concerned with.
 
not really sure why I'm only paying back interest on home ,think it was to try and save as much as possible .you're right in saying that we're under no stress in paying it.think we thought just to save ,save save.

as for is the rental income covering the investment property yes it is, just.it is only on interest free for another year and then we will have to rethink plans again.
 
I assume you meant interest only not interest free ;) we'd all love to have the latter!

Well if the interest-only period on your investment property is up in a year I think that gives you a timeline in which to decide what is the most sensible approach. Given that it is currently breaking even any increase in the base rate or change of circumstances in the mortgage (if you decide to hang onto it in a years time you will either have to start repaying capital or come to a new arrangement with your bank) will mean that it will be costing you to retain it. It may be wisest to have a plan to sell within the next year, even if it is at a small loss - that will leave you unencumbered for looking at your main aim which is rebuilding your home. (I am reading between the lines that your investment property is not something you necessarily want to hang onto).

In terms of the savings, it may be worthwhile looking at whether you are costing yourself money saving at the expense of repaying the capital. I think it might be better in the long run to repay the capital on your home mortgage, it will reduce the amount you can put into savings but it won't eat up the entirety of your €800pm. You already have a reasonably large deposit in the 80k if you are aiming for a 400k mortgage.
 
ok got that,
the thing is i am the one in the relationship that wants to keep the investment prop and believe it is in a really good area to rent out for a long time.
I've been thinking reduce its mortgage using the 60,000 and that will free it up to keep it. we also have another 60,000 of the mortgate that we haven'tdrawn down or used yet. (when we went to the bank at the begining we had 60,000 saved as well and we didn't draw it down so that agreement is still there). would this help us do you think....
 
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