Buying second house

cr-07

Hi All,

Looking for some advice and opinions.

So me and my wife currently own a house in Galway city. We bought the house 4 years ago, and there is about €100,000 left on the mortgage. House value is around €300,000. It is a 3 bed semi-detached built in the 1980's, so is relatively old.

We have it at a 'living' standard, and are reluctant in pumping money into it for extensions etc. It is around 70 SQM.

We are both currently 31 and would like to buy elsewhere in the next couple of years. My salary is around 67k, with hers being 47k.

Our dilema is trying to figure out what is the best option:
1. Pay off existing mortgage as quick as possible (~8 years away). We can then decide to either a) rent out this property, or b) sell it for more equity towards a nicer home.

2. Look to sell current house now, use the proceeds to pay off the mortgage, with remaining going towards deposit for new house.

3. Keep current house + mortgage, put current house for rent, take out second mortgage for new property.

Current mortgage repayments are very manageable at 800 per month, which will have us paid off in 15 years.

Does anyone have any other thoughts or opinions?

Oscar_Madison

Given your age and salaries sounds like the only way is up in terms of future income. Your principle private residence is currently free from tax if ever selling- and mortgage rates overall are still relatively low compared to say 30 years ago.

I don’t think you’re stretching yourselves enough on what you can afford - I’d be buying the biggest house in the best area I could afford coz over 25 or 30 years you’ll have paid it off nearly without noticing with the sort of income you’re likely to be on in the next 5-10 years.
A mortgage is also the cheapest loan you’ll ever have
Sure you can buy to let - are you happy with bad tenants or no rent payments or difficulty evicting if required etc etc- yes it could all go smoothly too- but what sort of house will you live in while the rent is helping pay that mortgage?

My point being- big house, posh area - 25-30 years time, maybe downsizing to release some capital (hopefully still tax free) - I can’t see you making more money by owning two average houses over that time and certainly a lot less hassle - if money allowed, maybe look into apartment buying abroad or a small holiday home in a place you reckon may become popular in years to come in Ireland - you’ve tons of choice over that side of the island.

Anyway my tuppence - best of luck whatever you decide

cr-07

https://www.boards.ie/discussion/comment/122601713#Comment_122601713

Hi Oscar. Thanks for the inputs!

Yes, definitely not putting all that we can into the mortgage, but we are currently enjoying life while we are young - nice car, 2-3 holidays per year etc. We are also maxing out our pensions, putting some money into a rainy-day fund, along with some small investments. So although we plan to put more into paying back the mortgage, we don't think we want to focus solely on that.

Yes, that is the plan - nice house in a nice area. Are you saying that option 1 from above is best in your point of view? i.e. Pay off current mortgage & sell current house?

Something in the back of the head is telling me to pay off mortgage & keep current house for rent / sell for retirement.

Good point on PPR / CGT!

Oscar_Madison

https://www.boards.ie/discussion/comment/122602029#Comment_122602029

”Pension” was going to be my second piece of advice so Jaypers, you’re way ahead of your peers so you are - keep that going and maximise as much as you can- it costs you so so so less now to save for your pension than it will in years to come - essentially the amount required to save per month to get the same income on retirement doubles every 7 years - so never let the pension contributions lapse - eat your mother in laws cooking if you have to 🤪- but always pay those premiums .

I mean after that it’s your life - whether you guys have kids is entirely your business - you could work all your life and die the day after retirement - (it happens more than you think) - you both appear to have the right approach - “everything in moderation” is not bad advice - have a ball and enjoy every darn minute - dead jealous - some days I wish I was back there again 😀

halkar

If you rent your current house and buy another you will pay almost half of the rent to tax and it may not cover the mortgage on that house.

o1s1n

https://www.boards.ie/discussion/comment/122602119#Comment_122602119

Only 100k left on the mortgage. The rent would be at least twice their monthly repayments I'd imagine.

Geuze

https://www.boards.ie/discussion/2058368427/buying-second-house

If you look for a mortgage on house B, the bank may not allow you to choose 1 or 2 or 3.

By this I mean depending on the variables involved, the bank may only lend for house B if you sell house A.

Rows Grower

Go for option 1 and you can't go wrong.

mulbot

Option 1 from my understanding is a minimum of 8 years away?. That's quite a long time if you're already thinking of making a move.

Option 3, Bank might not allow this scenario.

Option 2 is the more realistic solution.

DubCount

Option 3 …. are you really considering becoming a landlord, in Ireland? Do you have any knowledge of RTB, rental legislation, taxation etc.? IMHO this should not even be an option.

Sit down and decide what you want, and where you want to live. Then decide how much it would cost, and are you prepared to sacrifice lifestyle to live there. After that, its down to your personal choice whether to buy now or later.

SupaCat95

I would go with the advice of a smarter man than me, Warren Buffett "One spouse, one house".

cr-07

Hi All. Thanks for the contributions.

In a nutshell, we would like to move to a bigger/better house. We are unsure if it is best to clear the current mortgage first (whilst still living a comfortable life). As the current re-payment contributions are relatively low, we are wondering if it might be a good idea to rent out the current property.

If we decide to wait & pay off the current mortgage, the housing scene might shift and we can get more bang for our buck (of course it can go the other way also). In this scenario, I imagine our current property would also reduce in value, hence would consider renting out until house prices rise again.

I'm well aware of the issues with becoming a landlord in Ireland, that is what is causing the dilemma of rent vs sell. I feel it would be a decent asset to hold onto whilst approaching retirement. I think it can provide us options in 20 years time.

We are mainly just looking to get an idea of the best approach to take, as we don't want to be left blindsided in the near to mid future.

halkar

Life is too short to think too much. Do your sums and go with option 2.