Would we get mortgage approval if we keep rental property ?

J

Jean84

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Hi there

Myself, fiancée and 2yo child are from Dublin but are currently living in a house we own outside Dublin. We all commute to Dublin city Centre 5 days per week which is starting to have a huge effect on our health mentally and physically so we have decided we need to make a change. It is also costing us a small fortune commuting in with diesel/tolls and regular car maintenance.
Ideally we would love to sell the house outside Dublin and buy a house where we both grew up close to family friends and cut a huge chunk off our commute.

The issue is that we have a second property (apt) currently let out which is in negative equity but is in a great location so rental income is good and it is on a tracker mortgage so I feel this is a good long term investment .

Looking at the current mortgage rules I feel that we haven't a hope in getting mortgage approval for a house if we sell the house we are living in and keep the rental property as we don't have any savings and we are on averages salaries however I wonder if any institutions are willing to take into account rental income when calculating the amount they will lend? Secondly I wonder regarding the 20% deposit now required for second time buyers....is this negotiable at all?

If we can't get mortgage approval we will probably sell the house anyway and rent until we can figure out what to do but given the rental market at the moment I am nervous about putting my family in this situation.

Figures below, hopefully I've included everything...

We have 2 mortgages (well 3 technically) all with AIB

First mortgage taken out in 2006 for house we currently live in...
Type of Property. 4 bedroom house.
Value of Property: approx 200k
Amount of Mortgage 183k
joint variable rate mortgage
Term of Mortgage: 25 years left

Second (& third) mortgage taken out in 2008 which is currently let out...
Type of Property. 2 bed apt
Value of Property: approx 190k
Amount of Mortgage total €250k
1- 230k
2- 20k (this was a 'top up' from equity in house when buying apt, used as deposit for apt)
joint tracker mortgage for both amounts
Term of Mortgage: 27 years left
Rental income in this property is €1300 per month and we have never had issues with letting it out
Our details:
Age 31 & 32

Employment situation. Private sector.
Salary: €40,000 & €36,500
How long are you in current position and are you permanent. Both permanent. I'm 10 years there, have very good defined benefit pension and other good benefits. Fiancée is in his company 2 years, has standard pension.

Have you any children. 1 child age 2 in childcare 4 days per week costing €800 pm

Have you any other loans. Credit card with balance of €7,500- paying minimum amount back monthly

Any previous negative Cr. history by either applicant. No

We have no current savings due to renovations we did last year of house we are currently living in

I would appreciate any advice or opinions if we should contact AIB or if any other institutions look positively on investment property? Or should we just sell everything and try start again?
 
I would move into the two bed apartment and either let or sell the house you are currently in. I'm assuming by great location you mean in Dublin ? Your Credit card bill is a serious issue which you need to deal with first. Paying the minimum amount is just giving the banks money for old rope.
 
Where are you getting the valuations from. I'm amazed the investment property is in NE seeing as it was bought in 2008? Where is it? How much are the two mortgages on it costing. Is there much rental income tax on that property?

Before you even think of moving you need to have some savings, what happens if the tenant leaves and you have to pay back the deposit? Are you keeping the rental accounts separate to your own current account.

Who owns the properties, is it the both of you?

If you sell your home you will have about 10K. How much do you want to purchase for. With 60K of NE in the investment I cannot see a bank funding a new purchase.
 
Thanks so much for the responses.

The location of apartment is Dublin 15... close to hospital, BIT, shopping Centre and industrial estate.

The mortgage repayments monthly are €119 and €777 per month - 896 total.

When we bought the apartment we rented out the house and lived in the apt from 2008 until early last year when our daughter was born. We decided to move back to the house for more space as I thought I would get part time in work and wouldn't have the commute every day...this has not materialized hence us having to relook at our situation.

We bought the apt for €280,000 in 2008...havnt had it valued lately so the value I mentioned in my post is just a guess based on other property sales in the area. There is also a new phase of apartments recently built in the estate so I reckon people would go for them before buying a second hand property which could be driving down the price?

The apartment is very close to the area we would like to be so it is definitely an option to move back there, would take a huge amount of stress off with commute. It's just not ideal in terms of space inside and outside area etc...

We have an accountant who does our end of year accounts and for 2014 we have had no income tax bill due to me being on maternity leave for most of 2014 and my other half out of work for 3 months of the year. We actually got a refund taking into account medical costs etc... However I know it will be a different story this year with us both having worked full time for the full year and also full years rental income versus only 8 months last year (due to moving, renovations)

Yes I agree the credit card is a big issue that we need to work on.

We do keep the tenants deposit, should have specified that earlier but would not consider this as savings as it is not our money.

In terms of maintenance costs you are right, we have no back up and when something breaks or needs servicing we have just used extra cash at end of month to pay however this does leave us short.

we are just very miserable at the min in our situation and was hoping there is some easy solution I am not seeing....wishful thinking I know!

Edited to add... All mortgages are in both our names.
 
Then it's a no brainer not to move into apartment and either sell or rent out the house as soon as. You could rethink the issue in a years time by renting it and then decide though. By doing this you can put all the savings on the petrol commute towards clearing the CC bill.
 
You've admitted that the commute to Dublin & the cost of travel are making life miserable for you. Where the apartment is situated close to where you want to be.
So it seems to me that space is the compromise you would have to make if you moved back to the apartment.
Move back & get a skip & declutter!
Decide whether to rent the house or sell it. Plan a serious savings regime for the next couple of years to move to a bigger place in your desired area.
 
Thanks so much for all the responses...it's good to have an outsiders view on things

Thanks again
 
I agree with you moving into the apartment.

You then pay off the CC.

You then have about 5K in savings to which you add:

1. Difference of current mortgage € ??? versus apartment mortgage €900 =
2. Saved petrol costs ???

Will childcare come down if you live in Dublin. If yes you add this. ???

All these you use to get a deposit together, meanwhile your NE is being whittled away. You are effectively living in a suitable house that none of you ever sees. I imagine the weekends are spent catching up on sleep.
 
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