Are we stuck or do we have options?

rightoldpickle

we bought our home years ago, got a good deal then but still in neg equity now. Never much of an issue as we planned on staying put for 10+ years however life has changed and we are looking to move closer to DHs family.
From what I can see these are our options - none of them great but I'm wondering if anyone is in a similar position and perhaps have some advice?

1) Put house up for sale, sell at neg equity. Hope that bank give us remainder mortgage as personal debt and pay off monthly. Rent in new location until debt paid then buy/build.

2) Rent out current house, rent wont cover mortgage but we could make the difference at a push and rent in new location. rent in the new location is considerably less then what we would pay here so hopefully between the contribution from a tenant we wouldnt have too much on top.

Is it all as clear as this or am I completely missing main issues. We would really like to move asap so option 2 seems best for us as who knows how long it would take to sell?

any advice on tax implications etc would be great. or again if I am missing some big detail.

thanks

Coriolanus

rightoldpickle wrote: »

1) Put house up for sale, sell at neg equity. Hope that bank give us remainder mortgage as personal debt and pay off monthly. Rent in new location until debt paid then buy/build.

This afaik isn't going to swing with the banks. Any similar stories I've heard have involved the banks refusing to allow a sale without a substantial cash sum being lodged to cover any shortfall. ie: If you think you're going to be down 50k on the mortgage, the bank is gonna want 75-100 sitting in their vault before they'll release permission to sell.

Treehouse72

You can only ask the bank, but anecdotally the story seems to be that it's very unlikely they'd trade a secured debt for an unsecured one.

On the renting idea, I'd just say that any amateur landlords I know say that they vastly overestimated income and vastly underestimated stress when renting their property. I would be very conservative indeed in making these calculations to be honest - very easy for your rental property to become a money pit and a perma-headache.

rightoldpickle

thanks for your replies,
if we were to rent out our own home I think we would go with an agency. From having rented before Ive seen first hand how quickly a property can become demanding.

I guess what your both saying tho is that really we have no choice and have to stay put?

smelltheglove

I would say if it is a necessity to move then rent your home out and rent elsewhere. Obviously the first option would be best but from the theme on boards it doesnt seem to settle well with the banks, of course try it but if all comes to all you will be looking at renting.

If it was me I would be opening a seperate bank account, where the tenants would pay their rent into and your mortgage can come out of, I would set up this account with a couple of thousand euro if at all possible to cover prtb, tax, and any maintenance or repairs possible. Going with an agent does not mean necessarily there will be less hassle for you though, but there will be more cost so I would recommend trying to do it yourself if at all possible.

Be aware that your house may be vacant for 1-2 months of the year if tenants move on or you could be lucky like a friend of mine who has had a house rented out to the same couple for 8 years on the trot. It can be a head ache I am sure but you have to think about what is the worst headache, being too far from where you need to be or having to arrange a plumber / repair man every once in a while...... it really depends on how necessary this move is!

rightoldpickle

thanks smelltheglove, our move is not urgent but we are trying to stay one step ahead. Both my and my husbands job are at risk - and as the months pass its really only a matter of time. As it is I am on short time, between commuting costs and childcare we are at a loss already, if either of us were to lose our jobs we would sink fairly fast.

Has anyone had any experience approaching their lender to see if a NE sale is a possibility.

Also interested to hear from anyone who has had any experience with "Residential Letting Opportunities with Local Authorities"
http://www.housing.ie/_fileupload/Social%20Leasing%20Final%20Documents_16th%20Sept%202010/Residential%20Letting%20Opportunities%20with%20Local%20Authorities_one%20page.pdf

athtrasna

When thinking about renting it's always important to note that tax is payable on income not profit. This means that it's not economically workable for many in negative equity as you pay tax on the income even if it doesn't cover the mortgage.

rightoldpickle

thanks athtrasna, i thought it was on profit! That does change this slightly, although are there things that you can put against the tax? ie insurance, bins etc?

djmcr

athtrasna wrote: »

When thinking about renting it's always important to note that tax is payable on income not profit. This means that it's not economically workable for many in negative equity as you pay tax on the income even if it doesn't cover the mortgage.

Not correct. you can offset capital allowances on furniture etc, most costs associated with letting and 75% of interest charged on property to name a few

http://www.revenue.ie/en/tax/it/leaflets/it70.html

athtrasna

djmcr wrote: »

Not correct. you can offset capital allowances on furniture etc, most costs associated with letting and 75% of interest charged on property to name a few

http://www.revenue.ie/en/tax/it/leaflets/it70.html

Yes...I should have set income less certain deductions...but there have been many threads on here where people have figured that if rent was €800 and mortgage was €900 (random examples) that they wouldn't have to pay tax.

We have a property that is rented and the tax bill last year was significantly more than expected. In our case that was because the first few years we had college fees to reduce the bill, we just hadn't realised what a difference they made!