Buy 2nd house while in negative equity and keep current house.

hulkmccracken

We currently have a house in negative equity on a tracker but would like to move house AND keep the existing house to rent it out.

Our mortgage is well under what the rental value would be even at a low value (landlords market eh).

Anything I have seen is that we have to sell this current house before any bank will help us to buy a new house.

Is this the only scenario open to us? We can afford both mortgages if the worst case happens as we are debt free otherwise and can also save a deposit for the new house and are part hat there.

Any and all advice would be appreciated.

4ensic15

The only sensible thing to do is pay down the loan on the existing house until there is positive equity. A rise in interest rates tends to be accompanied by a fall in rents. You would be far too vulnerable to this type of swing in the cycle. Factor in the risk of bad tenants and it looks insane. The danger is, even if you could borrow the money, you would lose both houses and have residual debt hanging over you.
The banks want 40% equity in an investment property and 20% in the main residence before they are remotely comfortable. You could also lose the tracker if the property is let.

Dee01

I'd check with a broker as they may be able to get an exception. We had to sell ours before they'd consider us. The only advantage of this was we were allowed port our tracker mortgage (plus 1%) to the new property and take a top up loan for the additional.

faceman

Watch out for how much tax is payable on the rental income. Rent is generally considered pure profit from the Revenue's perspective with only the interest portion of the mortgage being eligible for a tax deduction. Worth having someone work it out.

c montgomery

I recently bought a new place while having negavite equity of about 120k on previous place.
Got mortgage with a different bank on the second place, didn't tell first bank that negative equity house was rented out as this could be basis for removing tracker.
Banks are much more willing to lend now than a few years ago.

Dr_Kolossus

I did what you are intending to do two years ago. Basically we were in about 100k neg equity.

Mortgage on existing house was 290k, was worth 190k.

Bank looked at our earnings and said if we would be approved for 590k if we did not have existing house. So they approved us for the difference, 300k.

Our new house cost 410k. We had a deposit saved of 110k, so 300k was just enough.

This was BOI. They quite happy as we were saving about 30 k a year for 3 years. Key was this saving history.

Hope that helps.

zl1whqvjs75cdy

c montgomery wrote: »

I recently bought a new place while having negavite equity of about 120k on previous place.
Got mortgage with a different bank on the second place, didn't tell first bank that negative equity house was rented out as this could be basis for removing tracker.
Banks are much more willing to lend now than a few years ago.

Don't think this qualifies as more willing to lend since you flat out lied to them.

Graham

donkeyoaty0099 wrote: »

Don't think this qualifies as more willing to lend since you flat out lied to them.

I don't see anything in the post you quoted that suggests there was any dishonesty in obtaining the mortgage on the second property.