Applying for a mortgage - save or top-up mortgage repayments.

TowerCross

Hi - long time lurker, first time poster.

Myself and husband are renting a house in the south of the country.

We have two houses in the midlands - one he had built before we met & then we lived in it once we married until last year. One that I had bought as an "investment".

Both houses are rented & we are fully tax compliant, PRTB registered etc.

We are in a position to buy a small site at a nominal price from my parents and then apply for planning permission. We are getting all our ducks-in-a-row with regards to clearing credit card & credit union loan etc & also saving at the same time.

My question is the following:

We are topping up the rent on the house which we lived in previously in order to meet the mortgage. We will be selling this but the question is when.

I think we should sell it this year, thereby freeing up approx €600 pm which we can then immediately divert into our savings.

My husband thinks we should wait for another 12/18 months to sell as the mortgage repayments are both capital & interest & the selling price should increase so we should realise some sort of profit.

If we sold told we would probably break even, after costs etc, maybe even make €5/6K

So, from a banks perspective, is it better to show 12 months of saving the €600 or sell in 12/18 months & probably realise a lump sum of between €10k & €20k? Which would they prefer to see? Regular savings or a small lump sum from a sale?

We are already saving about €500-600 p.m. already.

Thanks.

Trish56

The bank will be looking for proof of repayment capacity and will take into consideration that you have been paying €600 per month towards the mortgage on the property that you will have sold. Make sure once you sell the property that you then save €1200 per month rather than €600. Would be a good idea to keep your bank accounts strong as in do not use an overdraft, no referral fees or unpaid and clear you credit card balance monthly.

Villa05

I would sell now, reduce your exposure to property. If your can breakeven, great, your cashflow has improved and it is highly questionable that property prices in the midlands will be higher in 12/18 months time.