Buying a 2nd property

SarahMollie

I currently own a property in my name only and have about 45% equity in it and the rest is mortgage.

Due to the nature of my work, once or twice a year I can earn a bonus, which normally goes into savings. Since interest rates on savings are so low to basically be punitive, once my initial fixed period is up, I'm planning on making a lump sum payment against the mortgage, which combined with my repayments should bring my equity to 55-60% in the next two years. This also lowers my monthly repayments and therefore allows me to save more, and possibly repeat the process.

My objective is to reduce the mortgage to a really low rate or possibly even pay it off early.

At a conservative estimate, my place would rent for approx €1800 per month. My mortgage is currently about half this amount. If i were to move out, rental income would comfortably cover my costs.

My question is - does anyone have any experience of how the banks are currently looking at people who own one property and wish to then buy another, perhaps with their partner? If my boyfriend and I want to buy together in the future, would I be advised to sell my place or would it be seen as an advantage to keep it as a rental property? I have no real ambitions to be a landlord, but if its a savy investment I'd like to keep it.

Would love to know what others have experienced in this situation.

handlemaster

SarahMollie wrote: »

I currently own a property in my name only and have about 45% equity in it and the rest is mortgage.

Due to the nature of my work, once or twice a year I can earn a bonus, which normally goes into savings. Since interest rates on savings are so low to basically be punitive, once my initial fixed period is up, I'm planning on making a lump sum payment against the mortgage, which combined with my repayments should bring my equity to 55-60% in the next two years. This also lowers my monthly repayments and therefore allows me to save more, and possibly repeat the process.

My objective is to reduce the mortgage to a really low rate or possibly even pay it off early.

At a conservative estimate, my place would rent for approx €1800 per month. My mortgage is currently about half this amount. If i were to move out, rental income would comfortably cover my costs.

My question is - does anyone have any experience of how the banks are currently looking at people who own one property and wish to then buy another, perhaps with their partner? If my boyfriend and I want to buy together in the future, would I be advised to sell my place or would it be seen as an advantage to keep it as a rental property? I have no real ambitions to be a landlord, but if its a savy investment I'd like to keep it.

Would love to know what others have experienced in this situation.

I would advise not buying with a BF relationship break down ... And you dont want that added pressure which owning à property together would bring.

SarahMollie

handlemaster wrote: »

I would advise not buying with a BF relationship break down ... And you dont want that added pressure which owning à property together would bring.

Point taken totally.

When i say boyfriend, thats just the situation at the moment. We're not engaged but do talk about a future together, so really what my question is really if we were to get married. We're together a bit over 2 years now, I'm late twenties, he's early thirties, so I think our situation might be different in 2/3 years time.

My property is great for our lifestyle right now, but in future if we got married we might want a bigger place with a garden etc, which I don't currently have.

If the relationship doesn't go the distance, the whole thing would be moot anyway

Has anyone approached the bank as a couple when one party is already a home owner and other is a first time buyer?

Schrodingercat

Hi

I have done this and there was no issue (with AIB). From what I could see the bank wanted to see proof we could pay both mortgages without rental income and still have enough left over to live.

We still needed a deposit as normal (equity in your existing property doesn't count as part of deposit), and a savings history. The other mortgage was treated as if it was another loan, so it reduced the amount we could borrow rather than making us a better prospect.

If you are paying a lump sum off your existing mortgage make sure you get your re-payments lowered rather than the term reduced. I tried to go back a year later after making lump sum payments and the bank refused to adjust repayments. You can always keep paying lump sums off each year, but as your circumstances change you may need the extra money in your pocket

Also mortgage interest on the rental property is tax deductible, so you may be better off not paying off the existing mortgage, and having a bigger deposit for your new home.

All the banks have mortgage advisers so it may be worth going in and having a chat with them and they can outline what you can borrow.

Best of luck.

SarahMollie

Schrodingercat wrote: »

Hi

I have done this and there was no issue (with AIB). From what I could see the bank wanted to see proof we could pay both mortgages without rental income and still have enough left over to live.

Wow, having to show the ability to be able to pay both mortgages without rental income is a pretty high standard! Definitely seems like its counted against you, rather than demonstrating that you can handle a mortgage.

That said, its probably not impossible for us, especially if I can reduce my payment amount by contributing lump sums. In reality, I don't doubt that I could rent it out as its well located near the green luas and Sandyford Industrial estate - even though I don't plan to be a landlord any time soon, this was something I thought about for the future when I was househunting.

Ultimately, I suppose I'd like to have the option of keeping this place if the market conditions arent right to sell whenever we reach the point of wanting a proper family home.

I Am The Law

SarahMollie wrote: »

I currently own a property in my name only and have about 45% equity in it and the rest is mortgage.

Due to the nature of my work, once or twice a year I can earn a bonus, which normally goes into savings. Since interest rates on savings are so low to basically be punitive, once my initial fixed period is up, I'm planning on making a lump sum payment against the mortgage, which combined with my repayments should bring my equity to 55-60% in the next two years. This also lowers my monthly repayments and therefore allows me to save more, and possibly repeat the process.

My objective is to reduce the mortgage to a really low rate or possibly even pay it off early.

At a conservative estimate, my place would rent for approx €1800 per month. My mortgage is currently about half this amount. If i were to move out, rental income would comfortably cover my costs.

My question is - does anyone have any experience of how the banks are currently looking at people who own one property and wish to then buy another, perhaps with their partner? If my boyfriend and I want to buy together in the future, would I be advised to sell my place or would it be seen as an advantage to keep it as a rental property? I have no real ambitions to be a landlord, but if its a savy investment I'd like to keep it.

Would love to know what others have experienced in this situation.

From experience, the first point above is very wise and would highly recommend it.

The second point, also from experience, think very carefully about what you are doing. Make sure the first property remains in your name and cannot be dragged into a dispute about the jointly owned property should there be a split in years to come.

Wabbit Ears

I Am The Law wrote:

The second point, also from experience, think very carefully about what you are doing. Make sure the first property remains in your name and cannot be dragged into a dispute about the jointly owned property should there be a split in years to come.

I second that. If you plan on purchasing another property talk first with the lawyers from the purchase of your current property with a view to minimising your risk.

These types of conversation between partners always end badly so save yourself some grief and have this chat with the lawyers on the quiet.

gaius c

SarahMollie wrote: »

I currently own a property in my name only and have about 45% equity in it and the rest is mortgage.

Due to the nature of my work, once or twice a year I can earn a bonus, which normally goes into savings. Since interest rates on savings are so low to basically be punitive, once my initial fixed period is up, I'm planning on making a lump sum payment against the mortgage, which combined with my repayments should bring my equity to 55-60% in the next two years. This also lowers my monthly repayments and therefore allows me to save more, and possibly repeat the process.

My objective is to reduce the mortgage to a really low rate or possibly even pay it off early.

At a conservative estimate, my place would rent for approx €1800 per month. My mortgage is currently about half this amount. If i were to move out, rental income would comfortably cover my costs.

My question is - does anyone have any experience of how the banks are currently looking at people who own one property and wish to then buy another, perhaps with their partner? If my boyfriend and I want to buy together in the future, would I be advised to sell my place or would it be seen as an advantage to keep it as a rental property? I have no real ambitions to be a landlord, but if its a savy investment I'd like to keep it.

Would love to know what others have experienced in this situation.

Before you do become a landlord, have a read of these threads:
http://www.boards.ie/vbulletin/showthread.php?t=2057522766

http://www.boards.ie/vbulletin/showthread.php?t=2057521382

http://www.boards.ie/vbulletin/showthread.php?t=2057532242

Jen44

I just did this,moved into our new home in Sep. My first property I bought on my own its with Bank of Scotland who are no longer in Ireland anymore so there wasnt the option of getting another mortgage with them. The mortgage myself and my husband got is with a different bank. We managed to get exempt from the 20% deposit for second time buyers rules as we were looking to borrow less then the 3.5 times our combined salary and our first house is in an area with a great rental market. Now I would have sold the first house if i could have but it was in 20K negative equity. As it turns out we would break even now. Renting is a bit of a pain. There are a lot of costs involved regarding tax and that. My husband is an accountant so he is looking after all that end of things. Also you loose any TRS you had in relation to the first property as you are not residing there anymore so I would think carefully about if you really want to go down that road. I will sell that house as soon as I can its not worth the stress or money in my opinion

SarahMollie

Jen44 wrote: »

I just did this,moved into our new home in Sep. My first property I bought on my own its with Bank of Scotland who are no longer in Ireland anymore so there wasnt the option of getting another mortgage with them. The mortgage myself and my husband got is with a different bank. We managed to get exempt from the 20% deposit for second time buyers rules as we were looking to borrow less then the 3.5 times our combined salary and our first house is in an area with a great rental market. Now I would have sold the first house if i could have but it was in 20K negative equity. As it turns out we would break even now. Renting is a bit of a pain. There are a lot of costs involved regarding tax and that. My husband is an accountant so he is looking after all that end of things. Also you loose any TRS you had in relation to the first property as you are not residing there anymore so I would think carefully about if you really want to go down that road. I will sell that house as soon as I can its not worth the stress or money in my opinion

Thanks, this is actually a really helpful perspective! I've no major desire to become a landlord, and am aware it would be a lot of extra work, and having looked into the tax implications for PAYE works who are also landlords, renting your property out isnt that attractive.
I guess the reason I have an eye towards keeping it is that its my first property on my own and I've done a lot of decoration and renovation, so I'd be sorry to sell it again in only a few years, but I'll have to make a rational decision when the time comes!

witchgirl26

Quick question OP - if you love the house so much and if it suits, would it make more sense for yourself & your other half to use it as your home together? It's not straight-forward to do but you can get someone's name put on the mortgage etc.

If you live together for 5 years (without children, 2 if you have kids), then whoever doesn't officially own the house does gain some rights to it so if you do live together in it, be aware of that.

SarahMollie

witchgirl26 wrote: »

Quick question OP - if you love the house so much and if it suits, would it make more sense for yourself & your other half to use it as your home together? It's not straight-forward to do but you can get someone's name put on the mortgage etc.

If you live together for 5 years (without children, 2 if you have kids), then whoever doesn't officially own the house does gain some rights to it so if you do live together in it, be aware of that.

Hi Witchgirl - yes I'm aware that if we live together long enough, he'll have some rights but I'm not too worried about that. I've given it a lot of thought and I think the relationship is worth the risk (plus there another 4 years to go as we are happily child free!)

I love the place now but it is a duplex above a ground floor apartment so we've no garden etc, and we're part of a managed development so we've little autonomy on anything external and no scope to extend etc. At our age/life stage it really suits us as its low maintenance and in a great location, and because I'd good savings, my mortgage is low and I'm able to just charge him a nominal rent, and its really affordable.

Moving would be in the long term really. the current place was bought based on my savings/earnings only, however if in 2/3 years our relationship is still going strong, we might want to buy a proper family home with our combined incomes, which would be a bigger budget.

skallywag

handlemaster wrote: »

I would advise not buying with a BF relationship break down ... And you dont want that added pressure which owning à property together would bring.

That depends heavily on the individual circumstances.

Fair enough if you have been together for a few wet weekends, but there are plenty of long term couples who buy and who have no immediate plans for marriage.

witchgirl26

SarahMollie wrote: »

Hi Witchgirl - yes I'm aware that if we live together long enough, he'll have some rights but I'm not too worried about that. I've given it a lot of thought and I think the relationship is worth the risk (plus there another 4 years to go as we are happily child free!)

I love the place now but it is a duplex above a ground floor apartment so we've no garden etc, and we're part of a managed development so we've little autonomy on anything external and no scope to extend etc. At our age/life stage it really suits us as its low maintenance and in a great location, and because I'd good savings, my mortgage is low and I'm able to just charge him a nominal rent, and its really affordable.

Moving would be in the long term really. the current place was bought based on my savings/earnings only, however if in 2/3 years our relationship is still going strong, we might want to buy a proper family home with our combined incomes, which would be a bigger budget.

Ah right. Yeah I can understand that alright. I know from a few friends of mine that a lot of the banks decisions are on an individual basis. 1 was told that because of where their first property was, and the fact that it was in negative equity, they could rent it & buy a family home. Another friend was advised she'd have to sell (despite being in negative equity albeit a small bit) before she'd be considered because the rental market wasn't strong enough in the area.

I wouldn't really see 2/3 years as the long term - it'll possibly take that long to get the deposit together. Maybe worth having a conversation with the bank now to understand how they'd feel about your proposal.

The_Conductor

A little point guys- don't allow your loss of TRS to be a factor in the equation- its being phased out completely anyway- you've only another 3 years one way or the other..........

If you are renting out property- the only tax efficient way to do so- is to have as much debt as possible loaded up against the property- as the primary allowable cost (at 75% of interest) that most landlords can use to shelter their rental income- is costs (interest) associated with servicing debt.

Personally- I'd seriously suggest you read the various threads here, on landlord.ie and elsewhere- and if you are still interested in letting your property- do so with your eyes wide open.

Suggesting that you have spent time and effort in decorating the property and have an emotional attachment to the property- and citing this as a good reason for letting the property instead of selling it- is unfortunately in my eyes- a predicator of trouble and stress for you as a landlord. It will no longer be your prized possession that you spent all those nights putting up wallpaper, painting, choosing the floor tiles, doing all the things that made it into a home for you. It will be someone else's home- and this is a disconnect that you have not grasped. Being a landlord- is running a business. It is not walking daisy the cow from a nice field of green grass, home to the parlour in the evening to be milked, and then out to graze again in the morning. No matter how lovely your tenants are- it will be their home- and they will experience the normal wear and tear that anyone does in a house- only- as they don't own it- they are unlikely to care for it in the manner in which you do.

Personally- all things being equal- if you are out of Negative Equity- I'd sell- clear the debt- and try to have as stress free an existence as possible.

Coming into all of this with an emotional attachment to the property- is a complete recipe for disaster- for your own sake- sell it, you really don't need the stress of being a landlord.........

padjo5

Having experience of similar I would suggest you do ALL the maths before jumping in. If you PM me I'd be happy to send you an Excel Calculator I put together to help do the sums, and determine likely profit/loss on a rental.

Aside from the financials it's important to consider what your objective is in all of this; financial gain, status, 'my pension'!? Without an objective it may quickly become a nuisance to you.

Paddy

SarahMollie

The_Conductor wrote: »

If you are renting out property- the only tax efficient way to do so- is to have as much debt as possible loaded up against the property- as the primary allowable cost (at 75% of interest) that most landlords can use to shelter their rental income- is costs (interest) associated with servicing debt.

OK this is genuinely something to consider - I suppose I'd assumed that if I have high equity in the property that Low Mortgage + High Rental income would equal profit for me whilst getting to hold on to an asset, however if this is all going to go to the Tax man, then theres not much point.

Regarding being emotionally involved, I'm probably overly sensitive to it now as the hard work is fresh in my mind, I'd imagine that in a few years I'd be a lot less precious about it!

gaius c

You've ignored most of the posts in this thread, haven't you?
The links here spell out why becoming a landlord should be approached with caution, extreme caution.