Rent out and trade up, or pay down negative equity

Izzy1994

Hi folks, looking for opinions on what to do - with all the property market troubles and this eurozone meltdown, you'd need a crystal ball!

Here is our situation:

Own home, remaining mortgage about €200k, house value maybe €125k.
Mortgage: overpaying at €950 / month
Combined income €5,000 / month
Savings: €25k
Debts: only the mortgage and a Visa bill of €2k - can spare around €1k / month though, so that should be gone by October or so, then will have €1k to save.

There are some houses out there for about €250 (asking €300 but def negotiate) that would suit us fine because we need more space (moved in together and lots of belongings in storage). Saw ideal home and reckon we could get it for €280k, but would be a stretch getting €260k mortgage.

With that level of negative equity, it would take us years just to get back to zero, so we want to move. We could be 6-7 years sitting around, and we kinda need the space asap.

Should we just sit it out, or go for it and buy a bigger house? Our own place should rent for €500 / month, but we don't want to be landlords. Don't mind paying tax, prtb, etc, because we just want to be able to cover maybe half the mortgage, but we just don't want the hassle of tenants - we never wanted to be landlords ever.

Grateful for any advice guys...

Zamboni

Is a second mortgage even an option on €75k NE?

Dades

I think if €25k is all the capital you have, there's every chance that if you buy that place you could have two properties in negative equity in a couple of years. That's if a bank would even go near you with an existing mortgage of €75k.

If you have to have a bigger place - I suggest you rent a bigger place. Don't potentially make the same mistake twice.

Get Cracking

House prices are still falling and will be for a few years.:)

Get Cracking

Most of the house moves I do are people who are now renting out their own house/apartment and moving in to rented houses for more room etc..:)

Snakeblood

I'd put the house on the market and see what offers I got before I decided on what it was worth, to be honest. You might get lucky. I'd rent somewhere after that. The market is in a death spiral (I think) and people who are still earning money in 2 years will be able to dictate terms to people who are sitting on a 3 bed they can't sell for 1/3rd of what they paid.

Treehouse72

I would be very pessimistic about even being granted a second mortgage with that amount of NE and rental income that would not cover the full repayment. Very pessimistic.

D1stant

Take the 25k and extend your house

mari2222

Why not pay the savings off the mortgage and then you will be paying less interest ...will be debt-free quicker.....? Can you de-clutter to "need" less space?

the_syco

D1stant wrote: »

Take the 25k and extend your house

I'd agree with this also. How small is your house, and could it be extended in any way? Or is your current home a small apartment?

Izzy1994

Thanks for all the replies guys. House is a mid-terrace townhouse, so there's only limited room to put a conservatory at the back, but not much possibility for extension otherwise.
Also, we've been in touch with a broker, and the outline quotes from the banks do take into account the existing property and the outstanding loan on it, so on that basis, yes we should be able to get a mortgage. That quote was about two months ago, unless something has changed drastically in the meantime.