Clawback on Affordable Housing

jolhm87

Hoping someone can offer some advice on this.

My now husband and I bought an affordable house back in May of 2008, he was 26, I was 20. The house was valued at €180,000 and we bought it for €130,000 with a clawback percentage of 27.78%

Fast forward to September 2018, we were looking to trade up and buy another property for ourselves, keeping the AH and renting it out. We were informed by the bank that in order to get the second concurrent mortgage, we would need to get a letter from the council saying that the renting of the AH is allowed by them. Donegal County Council have refused this as it goes against the terms that we bought the AH under back in 2008, understandably.

This leaves us with the option of either selling up, or staying in the property for another 10 years until the 20 year clause runs out.

Due to lack of houses for sale in our area at the minute we were given a valuation of €150,000 (€20,000 more that what we paid for it/€30,000 less that the original market value) and are under the impression that the house would sell reasonably quickly as there is a lot of development happening in the coming years and the demand is high.

I've looked into other threads on this and there seems to be two conflicting views on what the clawback would be in our case.

1. If we sold the house for €150,000, we would be liable to pay the council back the 27.78% clawback, less 10% as we are in the 11th year (150,000 x 27.78% = 41,670 - 10% = €37,503 clawback)

2. If we sold the house for €150,000 i.e. the MV has dropped but still worth more that we paid for it, the council would only look for the difference of what we sell for, less what we paid for the house originally (€150,000 - €130,000 = €20,000)

Another thing to note is that we currently have a tracker mortgage with BoI on the AH at a rate of 1.1%. Balance owing on that is €92,200 remaining term 20 years, repayments at €434pm.

The seller of the potential new house has accepted our offer of €172,000 (we hadn't anticipated at the time that the renting of the AH would be a problem) Minimum deposit of €34,400 (which we have in savings), balance of €137,600.

BoI are currently offering the tracker-mover mortgage rate of the 1.1% + 1% on the balance owing on current mortgage for the remaining term of 20 years, variable rate taking over once the 20 years is up. This isn't taking account of any extra deposit money we would have from the sale of the AH (clawback depending), either €150,000 - 92,200 - 37,503 = €20,297 or
€150,000 - 92,200 - 20,000 = €37,800

1. €172,000 SP - €34,400 - €20,297 = €117,303 mortgage (€92,200 @ 2.1%, €25,103 @ 3%)
2. €172,000 SP - €34,400 - €37,800 = €99,800 mortgage (€92,200 @ 2.1%, €7,600 @ 3%)

Affordability wise we could pay that off over 20 years, negating the variable rate coming into it at all.

Any advice on what to do next would be greatly appreciated.

Should we go ahead with the sale now, eat the clawback, and still end up with decent repayments on the new house, or
wait til the clawback runs out in another 10 years, and proceed with the original plan of trading up, keeping the AH and renting it out. Obviously we have no idea what the market will be like in 10 years, so there's no way of telling if we will be in a position to do that at all when the time comes.

P.S. Sorry about the incredibly long winded post but wanted to provide as much information as possible!

zl1whqvjs75cdy

Not going to offer advice on the financials but 10 years is a long time to be in a house that doesnt suit your needs. Why are you looking to move?

Xterminator

It all depends on how unhappy you are in the current house.

If you waited until the clawback completes you would maximise return on investment, but quality of life would trump the cash, if your current situation is not okay.

I guess you need to assess your priorities & reasons for moving. I dont think anyone who doesn't know you can do that.