Letting out an apartment with a Tracker

LowKeyReturn

Hi folks,

apologies if this has been done to death I did have a quick search but couldn't find an exact match.

I have a First Active/Ulsterbank Tracker on an apartment we bought at the height of the boom. We paid almost 300K and its now worth less than 100K - I'm not crying over spilt milk as we're paying less to buy the thing (albeit with an uncertain future re interest rates and over 40 years!) than to rent one. Thinking of bringing a sprog into the world so we need to move out of the 1 bed place.

The good news is we might be able to buy a place for cash with help from the in-laws but we're looking at a place that literally needs gutting, we don't mind this but really want to move into a place without taking on any more of a mortgage or sell the old place.

This is a very long winded way of asking whether or not we stand to lose the tracker if we rent out the place that has the mortgage on it? To be fair the mortgage clearly states we must not rent the place out.

As an aside has anyone heard of decent deals (20%ish) being offered to buy-out a tracker? If so is this always a write-down or is cash an option.

Many Thanks and sorry for the spiel.

handlemaster

LowKeyReturn wrote: »

Hi folks,

apologies if this has been done to death I did have a quick search but couldn't find an exact match.

I have a First Active/Ulsterbank Tracker on an apartment we bought at the height of the boom. We paid almost 300K and its now worth less than 100K - I'm not crying over spilt milk as we're paying less to buy the thing (albeit with an uncertain future re interest rates and over 40 years!) than to rent one. Thinking of bringing a sprog into the world so we need to move out of the 1 bed place.

The good news is we might be able to buy a place for cash with help from the in-laws but we're looking at a place that literally needs gutting, we don't mind this but really want to move into a place without taking on any more of a mortgage or sell the old place.

This is a very long winded way of asking whether or not we stand to lose the tracker if we rent out the place that has the mortgage on it? To be fair the mortgage clearly states we must not rent the place out.

As an aside has anyone heard of decent deals (20%ish) being offered to buy-out a tracker? If so is this always a write-down or is cash an option.

Many Thanks and sorry for the spiel.

In the news today ulster bank will allow trackers to be transfered for 5 years to new property. other than that you could say nothing.

murphaph

If you don't mind the odd rate change letter and end of year account balance letter going to a rented property I'd just keep my mouth shut and rent it out. I have read elsewhere that UB are turning a blind eye to these cases so long as they are getting repaid. You couldn't rely on that anecdote of course so you either get written confirmation before you do it or keep schtum and see how long you get away with it.

Btw, does the agreement state that you may not let or you may not let without the written prior permission of the bank? What is the actual clause there?

LowKeyReturn

5. Covenants Concerning the Mortgaged Property

..

(e) Not to exercise the powers of leasing or agreeing to lease and of accepting surrenders of leases conferred on a mortgagor in possession by the Conveyancing Acts 1881 to 1911 and not to create any lease or tenancy or part with or share the occupation or possession of the Mortgaged Property.

So that seems to even preclude the rent a rooms scheme, not that we could avail of that anyway with it being a one bedroom.

We'd like to do everything properly in regards to tax - won't the revenue let the bank know were paying NPRT / income tax on a rent?

Many Thanks for the replies!

P. Breathnach

Can the apartment generate enough net rental income to cover the mortgage payments?

LowKeyReturn

P. Breathnach wrote: »

Can the apartment generate enough net rental income to cover the mortgage payments?

With the location, 40 year mortgage and tracker yes. It would actually more than cover mortgage (as it stands), management fee and insurance. If we lose the tracker not a hope!

Where we are is considered a bit of gem of complex as it's very well maintained. Some of the Landlords here have several apartments and they are never empty. The only empty apartments are the odd repossessed one. Plan B is to acquire another apartment in the complex, mortgage free and use the rental income from that to offset out mortgage.

P. Breathnach

I don't believe in telling lies to financial institutions when you are negotiating with them, but neither do I think that you should show all your cards. The ace in the hole is that your in-laws are in a position to help you with acquiring a property. What you don't need is for the bank to see that as additional security on the mortgage.

You could make a case to the bank as follows:
1. Remind them that the security they hold on the mortgage is far below the amount outstanding;
2. Tell them that you can move to other accommodation which your in-laws can make available rent-free (not quite a lie, but not full disclosure);
3. That would make it possible to generate rental income from the property to cover the mortgage, which would otherwise be unmanageable;
4. You need their consent to rent out the property, and the arrangement won't work unless you can keep the tracker rate.
[5. there is an implied threat that if they don't agree, the house of cards falls down and they will be chasing you for a serious amount of negative equity.]

murphaph

LowKeyReturn wrote: »

Plan B is to acquire another apartment in the complex, mortgage free and use the rental income from that to offset out mortgage.

This has a significant downside. You have no mortgage interest to deduct from your rental income when calculating your income tax liability. Mortgage interest is usually the biggest expense you can deduct.

DieselPowered

handlemaster wrote: »

In the news today ulster bank will allow trackers to be transfered for 5 years to new property.

Where was Ulster Bank mentioned today?

Quote: "Now the Irish Independent has learned that Bank of Ireland is to let movers keep their trackers for five years if they move house. And Permanent TSB is close to signing off on a new deal that will see families moving keep their tracker rate for the rest of the loan period."

davidm20

DieselPowered wrote: »

Where was Ulster Bank mentioned today?

Ulster Bank already allows its customers who are moving home to keep their tracker rate on the existing balance owned on their home and transfer this to the mortgage on the new home.

The rest of the purchase price will be on a variable or fixed rate. This means that someone who owes €100,000 and has a tracker at 1.5pc will transfer that loan on to the new property.

http://www.independent.ie/business/personal-finance/property-mortgages/homeowners-can-move-and-keep-their-tracker-mortgages-29279412.html

bee06

Check out http://www.askaboutmoney.com. They have a thread dedicated to this subject with feedback from people who have done the same and what they were told by their banks when they asked.

Here is the link to the thread http://www.askaboutmoney.com/showthread.php?t=170764