Currently own 2-bed apartment in negative equity - looking to move and rent

crazyderk

Hi All,

Hoping you can give some advice, My wife and I bought a 2 bed apartment in south county Dublin in December 2006, 7 Years later and 1 child later, were finding the place a bit cramped and I would love a house.

Obviously getting another mortgage or selling ours is impossible due to negative equity and all the current who ha with the banks so the next most reasonable suggestion would be to rent our apartment out and use whatever we get in rent to rent a house.

Whenever I've suggested it to my wife she has advised that we would lose our tracker mortgage and tax relief.

So I guess my question would be, where can I find information about what I need to do to make this happens so I can work out a budget.

Has anyone here been in a similar situation? Any advice or info would be greatly appreciated!

Thanks
Crazyderk

D3PO

There's no one stop shop that I know of that will give you all the information you need.

Your wife is correct or at lease thinking in the right way. You will lose your TRS which I am assuming is €75 a month. Regarding your tracker rate it would depend on whats written in your mortgage contract.

You need to calculate in the costs of renting however, Non PPR €200 fee, EA fee (if not managing yourself) PRTB fee €70 per tenancy (i think its 70) PRSI due on rental income, income tax due on the rental income minus allowable expenses.

Its not as easy an option as many think. Your looking at minimum an average €100 a month in the costs / loss of income outlined above, before you consider your tax implications and assuming you have uninterrupted tenancies and your mortgage rate isn't impacted.

That also assumes that your rent will cover all your mortgage which it may not and thats without considering that renting somewhere bigger is likely to cost you more monthly aswell.

ABajaninCork

I would agree. Might be cheaper to work out a payment plan with the bank. Is there any way you could buy a house, transferring whatever negative equity you have on to the new property? I'm not sure how it'll work, or even if that would be possible, but the first step would be to talk to the bank. Renting when you already have a mortgage will probably work out much more expensive.

crazyderk

D3PO wrote: »

There's no one stop shop that I know of that will give you all the information you need.

Your wife is correct or at lease thinking in the right way. You will lose your TRS which I am assuming is €75 a month. Regarding your tracker rate it would depend on whats written in your mortgage contract.

You need to calculate in the costs of renting however, Non PPR €200 fee, EA fee (if not managing yourself) PRTB fee €70 per tenancy (i think its 70) PRSI due on rental income, income tax due on the rental income minus allowable expenses.

Its not as easy an option as many think. Your looking at minimum an average €100 a month in the costs / loss of income outlined above, before you consider your tax implications and assuming you have uninterrupted tenancies and your mortgage rate isn't impacted.

That also assumes that your rent will cover all your mortgage which it may not and thats without considering that renting somewhere bigger is likely to cost you more monthly aswell.

Ouch!

I knew the rent wouldn't cover our mortgage but I was more thinking if we can get 900 pm for our place and then rent somewhere for 900 that would be ideal.

With all the extra expenses and the possibility of not getting tenants say for a month or two, I don't think it would be doable!

crazyderk

ABajaninCork wrote: »

I would agree. Might be cheaper to work out a payment plan with the bank. Is there any way you could buy a house, transferring whatever negative equity you have on to the new property? I'm not sure how it'll work, or even if that would be possible, but the first step would be to talk to the bank. Renting when you already have a mortgage will probably work out much more expensive.

We can afford our mortgage right now, its just we don't have enough space with a growing family!

I don't believe the bank will allow our negative equity to be transferred over. even if they did ours is so much I don't think we could afford it!

the_syco

crazyderk wrote: »

I don't believe the bank will allow our negative equity to be transferred over. even if they did ours is so much I don't think we could afford it!

Could you afford a more expensive mortgage? Although banks will say no to a house that costs less than what you currently owe, it seems they'll say yes to places that cost more (from reading other threads about this matter here on boards.ie), as there's something to "take" should you not be able to pay your mortgage in the years to come.

So pick a house that's big enough for three kids and hope for the best :P

D3PO

crazyderk wrote: »

We can afford our mortgage right now, its just we don't have enough space with a growing family!

I don't believe the bank will allow our negative equity to be transferred over. even if they did ours is so much I don't think we could afford it!

You could do a lot worse than PMing Killers1 for a chat. Hes a well respected broker on here and might well be the best person to chat to about a potential Neg equity mortgage.

Kristopherus

OP, whatever arrangement you come to, DO NOT surrender your Tracker Mortgage. The bank would be delighted for you to do that, and would screw you for the next 30 yrs with a variable one.

Zulu

Whos your mortgage with? Don't be so sure you'd loose your tracker. I had the same problem, and was renting out my apartment without notifying the bank. After a while, I decided to ring the bank and tell them (accepting that I may loose my tracker). It transpires that they were ok with me renting, and I've been allowed to keep my tracker.

Have a look over in askaboutmoney - there are some banks that allow it, and others that don't.

TL;DR: don't assume you'll loose your tracker & can't rent out your apartment. Ring and ask.

crazyderk

Kristopherus wrote: »

OP, whatever arrangement you come to, DO NOT surrender your Tracker Mortgage. The bank would be delighted for you to do that, and would screw you for the next 30 yrs with a variable one.

My wife is in that boat, she wont dare surrender it!

Bigus

Here's an option to take the pressure off you at weekends which I suggested to a 3 child family squashed into a 2 bed house and it worked well for them so far.

If you and your wife have weekends off , consider renting a holiday home/mobile park home near a beach to spend a lot of weekends in and help rare the family outdoors, it may make apartment more sustainable in the long run and cost less.

Rentals are about 2 k per year plus the capital cost of a unit which are good value second hand now, and use is generally restricted march to November.

With the money saved on moving house,if you could contribute towards even slightly accelerated capital repayments however small on your current borrowing, this might get you moving forward and STAND to you in the near future.

crazyderk

Bigus wrote: »

Here's an option to take the pressure off you at weekends which I suggested to a 3 child family squashed into a 2 bed house and it worked well for them so far.

If you and your wife have weekends off , consider renting a holiday home/mobile park home near a beach to spend a lot of weekends in and help rare the family outdoors, it may make apartment more sustainable in the long run and cost less.

Rentals are about 2 k per year plus the capital cost of a unit which are good value second hand now, and use is generally restricted march to November.

With the money saved on moving house,if you could contribute towards even slightly accelerated capital repayments however small on your current borrowing, this might get you moving forward and STAND to you in the near future.

Not a bad idea, certainly something to look into, my uncle has a holiday home in Wexford and loves it

Edit: spoke to the wife over lunch and she LOVES this idea!

strandroad

Bigus wrote: »

If you and your wife have weekends off , consider renting a holiday home/mobile park home near a beach to spend a lot of weekends in and help rare the family outdoors, it may make apartment more sustainable in the long run and cost less.

What an excellent and creative idea. Kudos to you.

RATM

That's a good suggestion by Bigus and could defintely work for some people who are stuck in apartments and have space problems. There are loads of holiday homes all the way down the Wicklow and Wexford coasts. Bringing up kids in the great outdoors every weekend sounds to me to be a lot more desirable than being cluttered in a 2 bed apartment every weekend.

OP I'm aware of someone in your exact position. Losing their tracker is a big no-no. So they rented a 3 bed house and then rented their apartment off market to a family member. The family member is paying €200 under market value rent. The couple have to subsidise their mortgage by €100 a month, or €25 a week.

It's not a bad solution for the short term but when the family member wants to move on they've got another headache. But the apartment is gorgeous and they have a big network of friends, cousins, nieces, nephews, etc most of whom would bite their arm off to rent a high spec apartment in a good location for €200 below market rents. Heck when they told me about it even I told them to put me on the waiting list ! The important thing is that the renter is someone they know and trust to look after the place. And that you can still pop by once a week to collect post, etc.

Of course all of the above is 'off the books' with the PRTB, Revenue and the banks. They're comfortable with that but not every one would be. But from their perspective they paid €450k for an apartment that is now worth less than half that, they paid some €40k stamp duty to the government and are now being asked for property taxes and water charges. So I guess their attitude is that they can't afford to pay any more but need to bring up their kids in an environment where everyone isn't biting each others heads off due to lack of space like they were before. The banks still get their mortgage and they get a decent sized space to live in. They make a loss on the rent and have to subsidise the mortgage so they're fecked if they're paying income tax to Revenue. In the words one of them 'sometime extraordinary circumstances demand extraordinary actions'.

I don't blame them, they're just doing what is right for their family in a difficult situation. They still have a gigantic 2006 mortgage hanging over their heads. Having some extra space makes that burden a little more bearable. The other option for them was to emigrate and throw the keys back at the bank, something that wouldn't have benefited them or the taxpayer in the long run.

Chris_5339762

Thats an excellent idea.

Bigus

mhge wrote: »

What an excellent and creative idea. Kudos to you.

Shucks thanks I'm embarassed now, and I was nearly afraid to push the submit button for fear of ridicule. But it genuinely has worked for that other family too.

The bottom line is families under pressure have to do whatever is necessary and think outside the box because the authorities sure aren't goin to do anything to help,.

Crazyderk you owe me a pint in Wexford if it works out