Tracker mortgage and switching, advice needed on options

Discussion in 'Tracker mortgages - other than redress issues' started by diver, 13 Jan 2019 at 9:53 PM.

  1. diver

    diver Frequent Poster

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    178
    Hi all

    I'm currently reflecting on where I'd like to live in a few years time. I'd like to move house to a better area some time in the next couple of years and I'm not sure how to approach a move without losing a valuable tracker.

    I have 2 tracker mortgages:

    Current residential house: tracker of 0.75% over ECB with the former Bank of Scotland Ireland, now Pepper. No option to move my tracker to another property as they are only now servicing existing mortgages.

    Investment property: smaller property, rented out since I moved to my current house. Interest only investment tracker of 1.15% over ECB with Ulster Bank, 10 years left on mortgage.

    What are my options if I were to sell my current PPR and move but use my UB tracker to switch? Do UB allow switching of an investment tracker?

    Would I have to physically move back in to my investment property, apply to have it converted back to a residential tracker and then consider moving after a couple of years? Would I even get a residential tracker with UB?

    All advice gratefully received, many thanks.
     
  2. Brendan Burgess

    Brendan Burgess Founder

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    36,352
    You should give all the relevant information to get a proper answer

    Value of home
    Amount outstanding on mortgage
    Interest margin
    Remaining term.

    Value of property you would like to buy
    Amount you will need to borrow (so we can calculate LTV)

    Value of RIP
    Amount of mortgage
    Interest margin
    Rent received and rough expenses

    Brendan
     
  3. luckystar

    luckystar Frequent Poster

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    66
    UB tracker. I presume if you took it out as an investment mortgage then there is probably no option to carry the tracker to another property.
    All tracker ports add an additional 1% so the UB one would be 2.15%
    Depending on LTV you could get a rate not much higher than that.
    Shame about ppr tracker but don't let it stop you making plans. Your home is very important
     
    diver likes this.
  4. diver

    diver Frequent Poster

    Posts:
    178
    Thanks Brendan

    I've no specific house in mind, just toying with where I need to be if moving in the future.

    Information below:

    Annual gross income: 90,000 +/- bonuses from time to time

    Value of home approx 360,000
    Amount outstanding on mortgage approx 194,000
    Interest margin 0.7% tracker over ECB
    Remaining term. 16 years left

    Value of property you would like to buy 450,000-500,000
    Amount you will need to borrow (so we can calculate LTV)

    Value of RIP 260,000
    Amount of mortgage 194,000 interest only, 10 years left
    Interest margin 1.15% tracker over ECB
    Rent received and rough expenses: monthly rent of 1,250, annual tax bill of approx 5k
     
  5. Brendan Burgess

    Brendan Burgess Founder

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    36,352
    Last edited: 14 Jan 2019 at 8:27 AM
    First of all, how much is the tracker worth on your family home?

    You have a mortgage of €194k @0.75% with 16 years left.



    If you move in 4 years, your mortgage will be down to €140,000 as most of your monthly repayment goes to capital.

    Let's say that the same rates apply in 4 years time as are available today.

    If you take out a fresh mortgage with Ulster Bank and fix for two years, it will be at 2.3%

    So, in the first year you will pay an extra €2,200 a year in interest. ( €140k @ 2.3% -.07%)

    Over the remaining 12 years, this will work out at a total of about €12k. ( The €2,200 per year will fall as the capital falls.)

    So, it's just not a factor in the overall calculations.

    When you are ready to move, just sell your current home and take out a mortgage wherever it is cheapest.

    And you should ignore the tracker in making the decision to trade up. If you want to trade up now, do so and give up your tracker.

    Brendan
     
    Last edited: 14 Jan 2019 at 8:27 AM
  6. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    36,352
    Last edited: 14 Jan 2019 at 8:32 AM
    Should you sell the Buy to Let so that you borrow less to buy the new house?

    It doesn't look like it now. You would release about €60k in equity which would save you about €1,500 a year in mortgage interest on your home.

    By keeping it, you are making a profit of
    Rental income after expenses: €12,000
    Interest: €2,000
    Tax: €5,000
    Profit after tax: €5,000

    So you are far better off keeping the property than selling it.

    When you are ready to move, you must do these calculations again.

    For example, the loss of a good tenant, a fall in rent combined with increased interest rates and a property price rise may tilt the balance towards selling it. And, of course, if these variables move in the opposite direction, it will be even more correct to keep it.

    If you trade up and retain your buy to let, you should review the decision every couple of years.

    Brendan
     
    Last edited: 14 Jan 2019 at 8:32 AM
  7. elcato

    elcato Moderator

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    2,933
    Can you explain this one as I'm confused ? You are paying interest only ? What is the 10 years left ? Is it that in 10 years you have to pay capital as well ?
     
  8. diver

    diver Frequent Poster

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    178
    Thank you Brendan for your detailed response, much appreciated. I think a couple of years more paying down my current home mortgage before I move would change things in terms of LTV etc. I don't "need" to move so I can wait.

    Agreed re investment property. I have a good longterm RAS tenant insitu and rental income is steady so I've no need to sell.

    Thanks again.
     
  9. diver

    diver Frequent Poster

    Posts:
    178
    I have an interest only mortgage for the lifetime of the loan. The remaining term is 10 years. Once the 10 years is up, I will need to repay the full capital by whatever means......sell most likely.