To sell or not to sell

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finny

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I'm currently considering my options in relation to an apartment I own.

Any input/advice/comments most welcome.

Purchase price of property in 2008: €450,000
Current Value: €400,000
Outstanding Mortgage: €364,000 with 15 years remaining
Current Mortgage Rate: 0.75%, First Active, now UB tracker
Current Mortgage Repayments: €2,021/month of which interest €237 (paying capital back over 20 years- first 5 were interest-free, but it is classified as a residential and I have a first active letter stating this)
Current Rent income: €1,820 (can increase it later in the year- this is below market rate which is more like 2k in the development)

A few other factors:

- I lived in it for the first 5 years and it is currently let. The apartment is no longer suitable as we've outgrown it as a family.
- We're both 36. We have separate life cover and mortgage protection in place.
-We recently moved back from overseas, have two toddlers and currently one income (35k after tax). We hope to have a second part time income later in the year.
- After tax, management fees etc, we're funding a shortfall of 500e per month on the apartment and we're paying 1,500 in rent ourselves. So, we're basically living off savings
- There are potential building defects in the development with a court case likely to become public later in the year/next year. The issues are currently being disclosed on requisitions on title.
- If we can hang on to it, I would see it as our pension. This would leave us with a mortgage-free property in a good location (assuming all the building defects issues are sorted) in 15 years time. I'm also aware this is the cheapest money we'll ever borrow so afraid I'd regret selling. But, then, when interest rates go up and our own (low) rent gets reviewed we'll struggle.


Options:

a) keep the property and keep renting it out. try to get another mortgage for a dwelling in a few years once our incomes are sufficient and kids older so less childcare costs.
b) sell and put (all of) the 30k or so (after costs) equity into a deposit account and ringfence it for a deposit for a family home in a few years; this would leave us with 500euro extra cash per month
c) sell and avail of the UB tracker mover. On this- does anyone know whether UB would treat this as a whole new mortgage application? If so, we obviously wouldn't qualify on our incomes so this might not be an option at all.

Would really appreciate some input here as I can see the argument each way and I'd like to make a decision soon.

Thanks in advance for your input.
 
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The news is not too positive here,

I cant see how you can afford to keep the Apt and fund a new Mortgage on a salary of 35k,
Also, if you wanted to sell, the building defects will only allow a cash buyer sale, reducing the value again.

I would at this moment, consider moving back into the Apartment, and revisit this situation in a few years time.
Maybe some other posters will see it differently than I do.
 
Thanks so much LS400. Moving back in really isn't an option as we're a family of 4 now and the development/location isn't suitable.

To clarify. The building defects have only just come to light and the entire development is currently being surveyed but my apartment doesn't appear to be affected at all (I'm waiting on a quantity surveyor report to confirm this). At present, the only potential effect for us/a buyer would be an increase in the service charge (to fund any action). I believe if I want to sell I should do it now or else I'm in for the long haul while it all gets sorted.

We will have more income by the end of this year as I return to work and I can command a reasonable salary so this will increase.
 
Brendan. Thanks.

10-15k savings. Another home where we live now would cost approx 370-390.

I'm unclear about whether UB would entertain us moving the tracker as, if they did, thinking more about it this may be our best option. We would be paying out around the same in mortgage repayments as we are now in rent and mortgage, plus we'd be better equipped to deal with the increase in repayments once variable kicks in as we'd have kids in school, full time jobs. I'd have to book in a consultation with UB (couldn't get anyone on the phone) and that can take awhile so was hoping for an idea whether it would fly or not now.
 
You'd need a mortgage of in excess of 300k on a salary of ~50k. Unfortunately I don't see how that's possible in any scenario.
 
PGF2016. Thanks. I'm clear we wouldn't qualify for another mortgage as is. With both of us working full time in 2/3 years we should be able to bring in approx 100k. We're happy to stay renting for the medium term and either sell the apartment or keep it just trying to decide that part now.
 
UB's tracker mover product excludes investment properties so it would seem that you would have to move back into your apartment at some point to avail of this product.

If you can hang onto the apartment for the time being then that probably makes sense (as it hedges your exposure to house price inflation). However, your cash flow position looks very tight and I'm not sure how sustainable this is going to be unless your income increases fairly quickly.
 
Thanks for your input Sarenco. Agreed- cashflow has suddenly become tight with small children and illness. If we decide to keep it, I'm thinking my return to full time work will have to be sooner than we had hoped. Astronomical childcare costs and wanting one parent at home while the kids were small had made us decide against that but we're constantly reviewing it and I think will need to decide soon.
 
I would put the case as follows to Ulster Bank

upload_2017-5-22_16-10-28.png

I have not allowed for the cost of selling and buying, but a lot of the figures are estimates anyway. But you can sell and buy another property and reduce the amount of your mortgage.

Ask for the tracker mover product. Although it's not available on investment properties, you can argue that this was your family home and will be again when the current lease is up.

Ulster Bank should welcome this as they will be charging you 2% instead of 1.75%. (I say "should" - but they probably won't.)

At the moment, I estimate that your outgoings are €2,100 per month:

upload_2017-5-22_16-14-14.png


€309k@ 2% over 15 years = €1,988

So, your outgoings would be lower.
 
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Now here is the complicated bit.

If you do nothing, you will run out of cash soon and will go into mortgage arrears.

So you should talk to Ulster Bank about going into the Mortgage Arrears Resolution Process.

You tell them that you would like a trade down mortgage.

They should consider a trade down mortgage under the MARP. "Considering" doesn't mean that they will grant you it. They may well suggest that the best solution is for you to sell your investment property and pay off your mortgage.

But if you could convince them to give you a trade-down mortgage, then they might give it to you at the current rate.

Your case would be a lot stronger if you were living in the apartment.

I would certainly ask for this. They will probably refuse.

Then ask for the tracker mover and at the same time ask them to extend the term from 15 years to 25 years. This would bring the repayments on the tracker mover down from €1,988 to €1,309 per month.

Brendan
 
Brendan. Thanks for this. Great suggestions and food for thought.

Thanks to everyone. Really appreciate the input.

I will consider and update here how I proceed and the outcome.
 
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