Question about mortgages and rental income

Giwo

Hopefully this is the correct forum to ask this.

I am 32 and live with my aunt. A few years ago my old childhood home went up for sale and I bought it using my savings, so I have not had a mortgage yet. The house is in Sligo, quite close to the hospital, university, training center. It was a decision made more with my heart than my head as the house contains a lot of memories. The rental potential of the house is quite high because of the location and I can find people looking to rent in less than a day when I need to.

Currently I am renting the house out to apprentices/students. Some come for 10 weeks and sometimes it is 20 weeks depending on which phase of their apprenticeship they are in. I don't want to rent it out to a long-term tenant in case problems arise getting people who are causing trouble/not paying rent to leave the property.

The house is occupied 40 weeks out of the year currently and the rental income before tax/bills is €13,200. I have considered something like AirBNB for the summer months but I would need planning permission. The council up in Sligo seem to be approving similar applications, so if I go down that road it could bump the pre-tax income up to around €17k I estimate.

On top of this income I have my work. I am self-employed and over the past few years I've cut back significantly from 60-70 hours per week to around 25 due to burnout. My income over the past 2 years averages out to around €25,000 gross.

€25k isn't a lot obviously, but I don't have rent and my only outgoings tend to be food and the house bills for both the rental and my aunt's house, which I insist on paying in lieu of rent. Plus, there is the rental money which tends to go into savings.

The question I have is this: Are there any banks who will consider the rental income potential of the property I own if I were to apply for a FTB mortgage? With just my salary I would only be approved for a €100k mortgage, but if the full rental income was included that could jump to over €150k. Even if they would only consider a % of the potential rental income that would help.

I might sound like a **** talking about buying a second house with the current housing situation but that's not my intention. The house I have at the minute is important to me for sentimental reasons, but it's not where I see myself living long-term. I would like something more remote with a bit of land and room for a workshop.

Sorry for the life story but I wanted to clear up as many potential questions as possible in the opening post.

suvigirl

You're not a first time buyer.

If you're going for a mortgage I'm sure the bank will take a certain portion of your income into account, perhaps the part that is guaranteed

zg3409

Beware butting up the first house as a guarantee on the second mortgage/house. If you fail to make repayments they can take both houses.

However if you were to put first house down as a guarantee it would be a no brainer for bank to approve you for a loan as worst case they get 2 houses.

I am not sure if you have a mortgage on first house but if not that may be a way if getting "deposit".

I suggest meet a broker and outline all incoming, outgoing and assets.

Note if renting out a house it's typically good to have a big loan as you can offset the cost of the loan against part of your taxes. You should try minimize your tax bill by possibly remortgaging the first house to pay for second house. Overall tax may be less.

Allinall

https://www.boards.ie/discussion/comment/120904113#Comment_120904113

For mortgage purposes, the OP is more than likely classed as a first time buyer.

Giwo

https://www.boards.ie/discussion/comment/120904113#Comment_120904113

I could have made it clearer in my post: The house I own was bought without a mortgage using savings, so I've never held a mortgage. I believe I would be eligible for a first time buyer mortgage due to this, but not Help to Buy. The central bank says a first time buyer is "a borrower to whom no housing loan has ever before been advanced".

Allinall

https://www.boards.ie/discussion/comment/120904156#Comment_120904156

Be very careful.

If you remortgage an existing house to buy a PPR, then no interest can be put against tax, as the borrowing was not for the purpose of acquiring the rental.

Giwo

https://www.boards.ie/discussion/comment/120904156#Comment_120904156

Thanks for the advice. There's no mortgage on the house I own. I am hesitant to use the house as any sort of guarantee even though I know I'd be fine paying the mortgage. I think it would cause me unneeded stress..I tend to worry about stupid stuff and spend too much time in my head entertaining doomsday scenarios.

The reason I haven't gone to a financial advisor or a bank with this is because I am probably 3-4 years away from even considering buying something permanent for myself and I didn't want to waste their time with it. Rules could change between now and then or any number of things could happen with the economy. A mortgage advisor is definitely the plan when the time comes as I'm self employed and would like to be walked through the process so I don't screw up the application.

I am saving at a rate of around €14k per year currently, so in 3 or 4 years I should have at least a €50k deposit. All I'd really want is for a bank to consider both my salary and the rental income when determining the amount I am approved for as I would struggle to find the type of property I want for €150k (€100k mortgage + €50k deposit). But if it could be bumped up to around €185k - €200k I would be more optimistic when looking for a property.