Mortgage advise needed

House.Hunter

I have a house worth about €125k, with a tracker mortgage of €29k left on it. I currently pay €550 a month with 4.5 years left. We have €26k in saving, and will have all my other loans\credit card paid off soon in the next month or so. Both myself and my wife have permanent jobs, with 2 kids. My salary is €38k, and my wife is €34k. I'm 36 years old and my wife is 35.

We want to move to a new house and rent out the old house we live in. It's in a very rentable area, and we would get about €600 a month.

We want to move to a nicer town, close to where we are already. In the region of €175k, so we would be looking for a mortgage of around €160k. So the mortgage would be around €850 a month for a 28 year mortgage.

I was thinking of paying off the old mortgage with our savings, and then saving towards a deposit for the new house. We would hopefully be able to live on nothing for a year and save about 18k needed for the deposit in 10 to 12 months. We don't want to be paying two mortgages at once, as we are thinking of having another child and my wife is going to mind the kids, but she can't until we have a new house.

Is there anyway of getting a mortgage for both houses, but just paying into one mortgage, or using the old house as collateral?

Any advice welcome.

WhichCar

What you could do is use the 29k as a deposit on a mortgage for the second house and keep the tracker mortgage on your first house. However, if the ECB rate goes up in the next 4.5 years, you'll end up paying more on your existing tracker mortgage. I think if you use the existing house as collateral for a new mortgage, you're effectively taking out a new mortgage on that house (ie. if you defaulted on your new mortgage couldn't they repossess the house you used as collateral?).

This may be unpractical with a growing family but why not stay where you are until you have saved enough to buy another house (along with the proceeds of selling your current house once you have paid off the mortgage)? That way you could end up mortgage free

okiss

I would agree with the previous post to stay were you are until you have enough money saved and along will selling your present house that you end up mortgage free.

If you go to borrow for a new house the bank will take into consideration that you now have 2 children and will base the borrowings on both your earnings. After you do this you plan to have another child and your wife will give up work so the household income will go down by €34k a year.

Based on your income of €38,000 on tax calc.eu if you wife was to stop working your earnings a month would be €2641.
Your are looking to borrow €160k which you say would cost you about €850 pm.
I have worked out on the aib website that your mortgage payment over 25 years at 91% ltv and over 25 years at a rate of 4.31% cost will be €865 per month.
Based on your income of 2641 -865 = €1776 income to pay the living cost of 2 adults and 3 children. What happens when the interest rate rises?
Also as you children get older there expenses will higher and how will you pay for them when they go to college?

Even at the moment if your wife give up work and after paying you present mortgage of €550 pm you would have an income of €2091 a month.

Also you have told us you will get rent of €600 a month on your present house. A lot of people can't rent out there houses. This income is taxable.
I know one family who let out a previous family home to the renters from hell.
They ended up spending several thousand euro get the house fixed up and replacing all the things the renters broke.

I would advise you to do the following:
Save as much of your wife salary as possible in a high interest regular savings account for the next 2 years. Look up at nca.ie. You may need to open 2 of these accounts as most have a max amount of €1000 per month.
You should earn more on your savings than the rate you are currently paying on your mortgage.
Then pay off what is owed on your existing mortgage.
You will then know the value of home you can buy if you sell your present house and use your savings in order to stay mortgage free.

I know several couples with 3 children and they have told me that having the 3rd children means a bigger car with 3 seat belts (people carrier). Cheap holiday deals are only for 2 adults and 2 children. Having a 3rd child makes holidays expensive.
Why not work towards the goal of moving to a nicer area mortgage free where your wife can give up work without having another child which will be more expense on you.

House.Hunter

Thanks for all the responses so far.

I not too bothered about being mortgage free, if I have the money I'll spend it, on new cars and expensive holidays.
Plus trying to sell the house that I live in now, would mean that I would have to highly discount it, to even get any appointments to view, let alone sell the house. I have put in a fair bit of updating into the house. Plus the house is walking distance from a prosperous town with a big factory and hospital close as well. So I can't see it being empty for long. If damage is done, I can use it against the tax taken for repairs.

I would like to have the house as an investment, for retirement. I have lived it the house for 8 years, and I want to move asap. I think there is value in the market at the moment, just the banks aren't lending, and too many people over spent in the boom (We nearly fell in that trap too).

WhichCar

I would talk to a couple of banks and see what they will offer you if you

1) Use your 26k as a deposit on a new house
2) Finish the mortgage on your current house and have a 18k deposit for the new one.

The last time I approached the bank when I was thinking of doing something similar, they wanted much more than a 10% deposit. Also, they may not want to let you keep your tracker if want to go with option 1). But they will possibly look at it in a case by case basis, so I hope I'm not worrying you unnecessarily.