First Time vs Buy to Let Mortgage

Durninnn

Hi there,

I was wondering if anyone would have any advice on how to approach a mortgage application. I am 30 and currently renting in Dublin with my partner (we're lucky we're in an apartment a number of years and rent is not crazy high) and we are thinking of buying a house back in my hometown down the country (200k) with a view to relocating there in a few years time.

The aim would be to rent the house for a few years before we move home. My question is could we apply for a first time buyers mortgage or would it have to be a buy to let mortgage even though the letting would be for a short term of the overall mortgage? The difference of deposits is huge, we have enough to cover 10% but not a chance of 30%.

I'm confident that in a worst case scenario we could manage to pay both the monthly rent in Dublin and the mortgage if we could not rent out the house - we just wouldn't be able to save very much. If things did get unsustainable we would move home sooner than planned and commute to Dublin. But looking at the current rental market, the potential rental income from the house would cover the monthly mortgage repayments.

From some googling I know there are tax implications with renting out properties, I'd definitely need to look into that more but for now it would be great to get some advice on the mortgage application approach.

Any advice would be greatly appreciated.

Thanks

Unless it's within commutable distance to work for at least one of ye it's unlikely a bank will offer an owner occupier mortgage to you.

BTL are also shorter term typically.

Also the gross rent might cover your mortgage payment but you'll likely be paying income tax on almost half of it

GarIT

Durninnn wrote: »

From some googling I know there are tax implications with renting out properties, I'd definitely need to look into that more but for now it would be great to get some advice on the mortgage application approach.

It works out at somewhere between 40% - 60% tax. Renting probably won't cover your mortgage, especially after other expenses. The tenant would need to be paying 3x your mortgage in rent for you to break even.

3k/month rent & 1k/month mortgage.
Let's say 50% of the mortgage is interest (deductible expense ) & there's also 2k/annum additional expenses (I rented out properties myself and that's realistic expenses even with a letting agent if nothing goes wrong)

So income of 36k...expenses of 8k means approx 14k in tax to be paid. The other 14k minus the 6k capital payments leaves 8k after tax profit.

Sooo imo & using my own experience you don't need treble the mortgage in rent to break even. The tax is nowhere close to 60% as the mortgage interest is an expense. Even if it wasn't I can't imagine how unearned income could be taxed more then earned income.

In the figures above where the rent is treble the mortgage the tax is still under 40% gross income.

wonski

3k a rent figure for a house bought for 200k down a country?

Not a chance.

wonski

wonski wrote: »

3k a rent figure for a house bought for 200k down a country?

Not a chance.

No doubt but that illustration was in response to .... "The tenant would need to be paying 3x your mortgage in rent for you to break even"

Which should be obvious.

wonski

Augeo wrote: »

No doubt but that illustration was in response to .... "The tenant would need to be paying 3x your mortgage in rent for you to break even"

Which should be obvious.

My apologies.

I agree the 3x figure is not always good guidance tbh.

mystic86

I don't see why it should be expected to cover your mortgage completely, and then some, sure you're gaining capital...

Anyway, regarding tax, on average less than 70% of your rental income will be taxed, due to various deductables allowed. After that the income will be taxed at your marginal rate.