charlie_45
Registered User
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Projected after-tax net rental income of €1.2kpm, versus an increased mortgage payment of €1.8kpm on your PPR?Rental of the property would be ~€2.5k pm, and as we'd be paying ~50% tax and have no mortgage interest to write off, we're estimating net rental income of ~€1.2k pm. Borrowing the additional €450k increases the mortgage by ~€1,800 pm. From this simple calculation, we think it's financially better to sell rather than take a higher mortgage and rent.
Projected after-tax net rental income of €1.2kpm, versus an increased mortgage payment of €1.8kpm on your PPR?
No brainer, sell.
Only at LTVs up to 60% (UB's five-year fixed rate). Based on the OP's figures, it looks like he is projecting an initial mortgage rate of ~2.7%.One can borrow at 2.2%.
No matter what the OP's broader financial position, there is:
Highly unlikely to be worth it, given the risk.
- Tax payable at marginal rate on all rental income
- No mortgage interest relief available
Only at LTVs up to 60% (UB's five-year fixed rate). Based on the OP's figures, it looks like he is projecting an initial mortgage rate of ~2.7%.
Also, the OP hasn't factored any expenses into the projected net rental profit. What about insurance, maintenance, LPT?
There isn't anything like a sufficient margin to cover voids, over-holding periods, negative cash flow, hassle, falling property prices/rents, etc.
Sorry, but to me this is a no brainer - it's a clear sell.
Again, it is simply wrong to say that “it’s highly unlikely to be worth it” without undertaking meaningful analysis.
Sorry, you're right - I forgot about their recently introduced high value rate.Incorrect; that rate is available for LTVs up to 80%.
The phrase "highly unlikely" was about the probability of there being a scenario where it would be worth it give the two constraints.
Meaningful analysis could of course prove me wrong, but it would be an unusual congruence of circumstances.
The framework in this post may help -
Sorry, you're right - I forgot about their recently introduced high value rate.
But it doesn't really move the dial materially.
If you assume (say) €4kpa in deductible expenses and €855 in LPT, you are looking at a marginal net return over the savings that the OP would make by simply having lower mortgage on the PPR. And that assumes that all goes well (no tenant default, no falls in rent, etc.).
On a risk return basis, it's simply not worth it - a clear sell for me. No brainer.
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