Advice badly needed re Mortgage

Headwrecked34

Hi All

Im looking for some advice but don’t know if I am posting in the right place. I bought a house in 2004 with my partner for €235,000, outstanding mortgage of €197,000 approx. Myself and my partner broke up in 2007 and I used the PTSB equity release of €40,000 to buy him out of our property of the time, balance outstanding on this is approx €35,000.00 total balance outstanding is approx €232,000.00. When I took out this loan I got the term to be the same as my original term so both mortgages will be paid in 18 years and I am 34. My mortgage is currently with PTSB and my total repayments are €1,708 per mth at a rate of 5.25% fixed rate til Jan 13. I am not in arrears on my mortgage and have successfully been paying this on my own since 2006 on a salary of €47K even tho last year I was earning €38K (reduced for a period of 1 year).


I have been in a long distance relationship for the last 4 years and obviously we want to get to a point where we live together. My partner has a job with the civil service so his job is very secure unlike mine. We have decided that will be Dec 2012 allowing me to pay off as much as I can off my loan, best estimates from the bank is that my balance at that point will be abt €218K. Property in my area at this time will probably only be selling for €190 resulting in a shortfall. Wud the bank allow me to get a personal loan to cover the shortfall or is this a stupid idea? My other option would be to rent out two rooms in my house from Jan 12 to allow me to save up approx €6000 to cover any costs covered from my mortgage in the first year that I am away.

Ive been looking into renting out my house but obviously I would not be able to continue to make up a huge shortfall of €708 if I was to rent my house out for €1000 a mth. So I contacted PTSB and they gave me estimate figs to allow me to increase my mortgage term by 7 years and this would bring my repayments down to €1384 a mth. I could make up the difference of this no problem. Is this something that they would allow me to do? Ive been looking into additional costs associated with renting out my house and I know that I would need to pay house insurance and mortgage protection in my absence also.

Mortage shortfall €384 * 12 mts = €4608
House Insurance €50*12 mts = €600
Mort Protection €13*12 mts = €156
Property Tax & Mngt Fees €356
Total Outlay €5720

Obviously I want to try and keep my outgoings to a minimum and don’t have a problem in paying tax to Revenue but Im a bit confused about the understanding of it.

I have based my figs on the following:-

Rental Income per mth €1384 * 12 mts = 16,608

Interest 75% deductable – say €1000 – 9000
Deprection of Furniture 1000
Total €10,000.00

Taxable Income of 6,608 at 40% equals €2643.20

So my house would cost me €8,363.20 per annum based on interest rates not going up. Probably highly unlikely with having a mortgage with PTSB.

Is this my only option? I have based this on me renting out the house myself and not relying on agents as I cannot afford that at all and also what are the implications of me being a non resident landlord?…Any ideas would be greatly appreciated.

I want to do the right thing and get my head straight but obviously cant let my heart rule my head even tho I want to run.

Many Thanks

Debbie

unclebill98

Renting out your house is tricky enough when your in the country. Most estate agents will manage this for you but IMHO its not worth the money. All they'll save you is a direct call from the tenant.

As a landlord you'll have to draw up lease agreement etc and register. Plenty of landlords are not registered.

The easiest way is to have someone you can trust look after things for you. They will only be needed to drop out and get things fixed if need be. Actually interaction from you could be kept to a minimum. From experience you can be called upon weekly, monthly by a tennant. It just depends who you get.

As for the mortgage, extending you term is a last resort but from your figures it gives you a chance to at least move on. Normally an extension is only given to those in financial distress so how you present your case to the bank will be key. I'm sure on paper it's a runner but a full application would be sought after by your lender. Th negative equity issue would be a worry for a bank too. Is selling the house a non runner?

A long as you adhere to the rules being a non res landlord should not be an issue.

Headwrecked34

Thanks so much for taking the time to reply. Based on best figures I am figuring that it will cost me approx €8500 a year to rent out my house taking all the costs into account.

Houses in the estate at present are selling for €190 so unless something were to change selling would not be a runner. I have been thinking abt speaking to my credit union abt getting a personal loan to make up the shortfall of €28K if I was to sell - I have a good record with them and have borrowed big from them in the past and even paid the loan back early. Seems unbelieveable that I may have to get a loan to sell a house ive lived in for 7 years but mite work best for me if I could get a loan.

What are the rules around being a non-resident landlord - one of the accountants said that coz Id be moving to the UK are working there that I may be able to be a resident here for tax purposes for 3 years???

Thanks again for the advice, much appreciated.

unclebill98

Refer to a tax advisor about level end of things.

As for a loan to sell, I'd only do that if the rental does not work out or becomes to much hassle. In that, contact your bank and try negotiate this end figure with the bank. You never know by the time that comes the bank may write of the negative part.

mari2222

Headwrecked34 wrote: »

Thanks so much for taking the time to reply. Based on best figures I am figuring that it will cost me approx €8500 a year to rent out my house taking all the costs into account.

Houses in the estate at present are selling for €190 so unless something were to change selling would not be a runner. I have been thinking abt speaking to my credit union abt getting a personal loan to make up the shortfall of €28K if I was to sell - I have a good record with them and have borrowed big from them in the past and even paid the loan back early. Seems unbelieveable that I may have to get a loan to sell a house ive lived in for 7 years but mite work best for me if I could get a loan.

What are the rules around being a non-resident landlord - one of the accountants said that coz Id be moving to the UK are working there that I may be able to be a resident here for tax purposes for 3 years???

Thanks again for the advice, much appreciated.

In your shoes, I would sell - the loss of 28K over 7 years means it "cost" you 4K a year extra to your morgage to live in the house - not nice to know, but not as bad as many people. At least you can start again clear of the "old" house.

Tim Robbins

As soon as you don't live int he place and rent it out you are liable for 200 euro tax per year because it is your non principle private residence. You also pay tax on your rental income. You can only write so much off as an expense.

If you choose not to declare for tax you lose the moral high ground when giving out about FFers. More importantly, you can't register with the PTRB so if any of your tennants act up, you're on your own.

Tim Robbins

Headwrecked34 wrote: »

What are the rules around being a non-resident landlord - one of the accountants said that coz Id be moving to the UK are working there that I may be able to be a resident here for tax purposes for 3 years???

Thanks again for the advice, much appreciated.

For non resident landlord your tennants pay less rent to you and are supposed to pay the rest to the tax man themselves.

unclebill98

Tim Robbins wrote: »

As soon as you don't live int he place and rent it out you are liable for 200 euro tax per year because it is your non principle private residence. You also pay tax on your rental income. You can only write so much off as an expense.

If you choose not to declare for tax you lose the moral high ground when giving out about FFers. More importantly, you can't register with the PTRB so if any of your tennants act up, you're on your own.

IMHO, is a waste of time. Mainly used by students.

Tim Robbins wrote: »

For non resident landlord your tennants pay less rent to you and are supposed to pay the rest to the tax man themselves.

Really? Never heard of that. Why would a tenant be responsible for paying your tax and how exactly can they do that?

snubbleste

You are obligated by law to register with the PRTB with some exceptions.

The tenant is expected to withold 20% of their rent and hand it to Revenue each year if the landlord is non-resident, an exception is if there is an agent handling the rent on behalf of the landlord.

Also you need to think of insurance, the mortgage bank would need to be told about the fact you are renting the property, you lose any TRS as well.

unclebill98

Like I said, it's still a waste of time.

I'd say tenants are highly unlikey to comply with that.

Good point about the tsr. Also be careful your lender does not try change your interest rate to an investment one.

Tim Robbins

snubbleste wrote: »

You are obligated by law to register with the PRTB with some exceptions.

The tenant is expected to withold 20% of their rent and hand it to Revenue each year if the landlord is non-resident, an exception is if there is an agent handling the rent on behalf of the landlord.

Also you need to think of insurance, the mortgage bank would need to be told about the fact you are renting the property, you lose any TRS as well.

That's true forgot about TRS. That's gone too.

It's very hard to make any money as a landlord. I get about 1.3 times my mortgage on rent but I am making a loss after expenses and tax.

I'd love to sell the place but can't.

Dam you Bertie Ahern.

Tim Robbins

unclebill98 wrote: »

Like I said, it's still a waste of time.

I'd say tenants are highly unlikey to comply with that.

Good point about the tsr. Also be careful your lender does not try change your interest rate to an investment one.

Lender can't change your mortgage rate afaik. Also, PTRB is not a waste of time.

If I am tennant I'd like to know my landlord is legit, tax and law compliant. It can help get better tennants when you explain you do everything by the book.

Nothing worse than bad tennants.

unclebill98

Well they can try.

I hear what your saying but my experiences have proved otherwise. Most tenants I've had could not care less, I've had doctors to students to my favourite non nationals.

If they deal directly with a letting agency they tend never to ask. Out of the amount I've dealt with directly only 1 asked and they where a student..... Which did not end well.