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Second mortgage, 1st in negative equity

  • 06-08-2011 7:43pm
    #1
    DrPhilG
    Registered Users, Registered Users 2 Posts: 12,615 ✭✭✭✭


    Similar issue as this thread, but I didn't want to hijack it so I'll ask separately.

    Bought 5 years ago, mortgage is €125k, still owe €110k. House now only worth probably €80k max. Not a bad place but would love to upgrade.

    Current situation is that after a change in circumstances, I have €140k in the bank. I have considered starting a build or buying a house, but have settled on a place we like.

    I know the first reaction from everyone will be... WAIT, DON'T BUY YET! :D But we really like the place and although I know the prices are still going down, I honestly don't think we'll find a better option than this place. Price is about €130k.

    The question is this...

    Option A - Pay €50k off the current house to clear off negative equity, buy the second house with €75k deposit and a small mortgage, then sell the current place. Means taking a hit on the equity.

    Option B - Buy the new place outright (hopefully), and rent out the current place for now. Might be 10 years before it's back in equity but I can wait.

    If I go option A, what's the chances of getting a mortgage? Is getting a second mortgage likely while having negative equity in the first?

    If I take option B, could I then take a mortgage on the new house to clear off the old place? Sort of transferring the equity?


Comments

  • #2
    ShadowHearth
    Registered Users, Registered Users 2 Posts: 22,929 ✭✭✭✭ShadowHearth


    Buying for cash and renting out sounds better and less hassle. Repayments shouldn't be too big on 125k Morgage so rent should cover it self.

    I am no expert, but first options will involve alot alot of anal action.


  • #3
    mari2222
    Registered Users, Registered Users 2 Posts: 568 ✭✭✭mari2222


    To have one mortgage is unfortunate; to have two looks like carelessness
    ( with thanks to Oscar Wilde)


  • #4
    ShadowHearth
    Registered Users, Registered Users 2 Posts: 22,929 ✭✭✭✭ShadowHearth


    Agree again. 2xmortgage is not a good idea


  • #5
    the groutch
    Closed Accounts Posts: 16,096 ✭✭✭✭the groutch


    definitely option B, trying to apply for a new mortgage (even if you've paid off the old one) is alot of hassle you don't need.
    buy the new one for "cash", and rent out tother


  • #6
    Akrasia
    Registered Users, Registered Users 2 Posts: 22,799 ✭✭✭✭Akrasia


    DrPhilG wrote: »
    Similar issue as this thread, but I didn't want to hijack it so I'll ask separately.

    Bought 5 years ago, mortgage is €125k, still owe €110k. House now only worth probably €80k max. Not a bad place but would love to upgrade.

    Current situation is that after a change in circumstances, I have €140k in the bank. I have considered starting a build or buying a house, but have settled on a place we like.

    I know the first reaction from everyone will be... WAIT, DON'T BUY YET! :D But we really like the place and although I know the prices are still going down, I honestly don't think we'll find a better option than this place. Price is about €130k.

    The question is this...

    Option A - Pay €50k off the current house to clear off negative equity, buy the second house with €75k deposit and a small mortgage, then sell the current place. Means taking a hit on the equity.

    Option B - Buy the new place outright (hopefully), and rent out the current place for now. Might be 10 years before it's back in equity but I can wait.

    If I go option A, what's the chances of getting a mortgage? Is getting a second mortgage likely while having negative equity in the first?

    If I take option B, could I then take a mortgage on the new house to clear off the old place? Sort of transferring the equity?
    Offer 100k for the new place. pay in cash. Sell the other place and just take the hit


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  • #7
    beeno67
    Registered Users, Registered Users 2 Posts: 1,218 ✭✭✭beeno67


    DrPhilG wrote: »
    Similar issue as this thread, but I didn't want to hijack it so I'll ask separately.

    Bought 5 years ago, mortgage is €125k, still owe €110k. House now only worth probably €80k max. Not a bad place but would love to upgrade.

    Current situation is that after a change in circumstances, I have €140k in the bank. I have considered starting a build or buying a house, but have settled on a place we like.

    I know the first reaction from everyone will be... WAIT, DON'T BUY YET! :D But we really like the place and although I know the prices are still going down, I honestly don't think we'll find a better option than this place. Price is about €130k.

    The question is this...

    Option A - Pay €50k off the current house to clear off negative equity, buy the second house with €75k deposit and a small mortgage, then sell the current place. Means taking a hit on the equity.

    Option B - Buy the new place outright (hopefully), and rent out the current place for now. Might be 10 years before it's back in equity but I can wait.

    If I go option A, what's the chances of getting a mortgage? Is getting a second mortgage likely while having negative equity in the first?

    If I take option B, could I then take a mortgage on the new house to clear off the old place? Sort of transferring the equity?

    When you think about it your question is really Is property a good investment over the next 10 years? No one knows for certain but at a guess the answer would have to be no. You would probably earn more putting money on deposit in the bank. If you agree with this analysis then selling your house is the obvious answer. Don't get confused by looking at what your house originally cost. That is irrelevant at this stage.


  • #8
    Balmed Out
    Registered Users, Registered Users 2 Posts: 4,730 ✭✭✭Balmed Out


    what kind of mortgage do you have at the moment? tracker?


  • #9
    DrPhilG
    Registered Users, Registered Users 2 Posts: 12,615 ✭✭✭✭DrPhilG


    Balmed Out wrote: »
    what kind of mortgage do you have at the moment? tracker?

    Yup


  • #10
    Dades
    Moderators, Society & Culture Moderators Posts: 25,558 Mod ✭✭✭✭Dades


    Surely a big factor would be not losing your tracker? Any new mortgage is going to be on much bigger rates.


  • #11
    DrPhilG
    Registered Users, Registered Users 2 Posts: 12,615 ✭✭✭✭DrPhilG


    Dades wrote: »
    Surely a big factor would be not losing your tracker? Any new mortgage is going to be on much bigger rates.

    That means definitely keeping the first house then? If I buy the new place cash, I have no savings left so if I sell the current house I wouldn't have any dosh to pay the equity shortfall. So I have to rent it out until I save enough to sell it.


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  • #12
    Dades
    Moderators, Society & Culture Moderators Posts: 25,558 Mod ✭✭✭✭Dades


    It would suggest to me to not dump the current mortgage for a new pricer one ...
    Though to be honest I'm not sure I'd buy a second place at all for another year.

    Would you rent out your current place and rent yourself a bigger place for a while?


  • #13
    JoeyJJ
    Registered Users, Registered Users 2 Posts: 3,663 ✭✭✭JoeyJJ


    Check the terms of your current mortgage if you change from dweller to investor on it are you mortgage payments likely to change?

    Plus you prob lose TRS and have to pay other fees related to renting out first house.


  • #14
    BostonB
    Closed Accounts Posts: 18,056 ✭✭✭✭BostonB


    beeno67 wrote: »
    When you think about it your question is really Is property a good investment over the next 10 years? No one knows for certain but at a guess the answer would have to be no. ...

    I'd agree. The only exception is if you found your dream house in the dream location and you have the funds to buy it.


  • #15
    namurt
    Registered Users, Registered Users 2 Posts: 277 ✭✭namurt


    DrPhilG wrote: »
    That means definitely keeping the first house then? If I buy the new place cash, I have no savings left so if I sell the current house I wouldn't have any dosh to pay the equity shortfall. So I have to rent it out until I save enough to sell it.

    You could always consider taking out a personal loan to pay off the negative equity. If you've bought the new house outright and are selling the current one then you won't have any rent/mortgage outgoings so should be able to pay off a loan fairly quickly and easily....depending on income of course.


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