Am I crazy?! Mortgage advice needed!

Superman54321

Ok sorry if this is a bit drawn out but here is my situation.
Apartment for sale in my area for 80k. Would have 40k paid off (savings) and 40k of a mortgage. My issue is I'm getting married next year n hope to start a family soon after so apartment wouldn't be ideal long term.

What I need to know is if I decide to get tenants in the apartment after living there myself for few years (rent would cover cost of mortgage with some money left over) and go to buy a house, would I be able to use the apartment as collateral or would we have to save up a deposit again?

Should I forget about the apartment and just go for a house? As I am not in a pensionable job I am thinking the apartment might be a good investment for down the line?

Thanks in advance for any advice..

happywithlife

I'd. Hold off and just get the house.
It's hard enough getting one mortgage I can't see many getting approved for two in a short space of time.
But that is me.
The same person that fixed her mortgage at 5.5 % for 5 yrs .. So dunno if my advise is worth much :-/
What's does your spouse to be think?

Superman54321

She's also unsure what to do for the best. Perhaps should have mentioned that we are currently renting ourselves -paying 600 per month and as her job has been cut to two day week presently we will not get a large enough mortgage for the type of house we want. Is this apartment our best option or should we hold tough? Such a hard decision. Whether or not we would have to save up another deposit for a house is a big factor for us as well...

unclebill98

If it don't fit into your long term plans don't do it.

Chances are it interested you cause of the price etc. Being a landlord is a pain in the arse and a 2nd house can quickly become a money pit with management fees, broken items and you will find it hard to find the dream lodgers.

Go with the house if you feel like getting on the property ladder.

Superman54321

Thanks for your advice..it's such a tough decision to make. Are house prices going to keep dropping or have they reached rock bottom? Think we are just sick of renting at this stage. Anyone know if the apartment could be used for collateral to secure a second mortgage or if a another deposit would need to be saved..this is a huge factor of consideration for us.

roro2

Superman54321 wrote: »

Thanks for your advice..it's such a tough decision to make. Are house prices going to keep dropping or have they reached rock bottom? Think we are just sick of renting at this stage. Anyone know if the apartment could be used for collateral to secure a second mortgage or if a another deposit would need to be saved..this is a huge factor of consideration for us.

No, the apartment couldn't be used as collateral in lieu of a deposit. You'll need the 8-10% plus costs again, and it's likely the rent would be excluded from repayment capacity calculations so you'd have to be able to repay both mortgages on a stressed basis. I can't see any reason for buying the apartment based on the info you've given.

bee06

Keep your savings, don't buy the apartment. As others have said the banks will assume you are paying both mortgages if you go back for a second mortgage. Most don't take into account rental income.

Unless you are a professional landlord renting out a property is a pain. You've got so many extra costs involved and also have to pay taxes and PRSI on the rental income.

I bought an apartment 4 years ago and now want to build a house and trust me ... it would be a lot less stressful if I didn't have the apartment to deal with.

Zaph

I completely agree with what roro2 has posted.

There is also the possibility that a bank might not lend you €40k as a mortgage due to the relatively small amount you require. It's not particularly attractive to a bank to lend that amount and have it repaid over an extended duration. The only other option would be a personal loan, but I'm not sure if that can be secured against a property the same way a mortgage can, which might mean that you could fall between two stools when it comes to financing the apartment.

If you want some security for your future you would be better off discussing a PRSA with an independent financial advisor than counting on property to provide you with a retirement fund.

skippy2

Personally i would not touch any apartment that was built in the last 15 years especially one for €80K. I think you should steer well clear of apartments as the build quality in general is disgraceful to put it politely.

okiss

I would not buy an apartment. I know that you are sick of renting but if you buy an apartment it will be very hard to get out of it.
You will have to save a large deposit to get on the property ladder again and the apartment mortgage will be taken into consideration when you come to move.
If you are planning to get married and have a family in the next few years you would be better off to keep saving to buy a house.
Another thing to consider with renting is that if your circumstances change or if you need to move for a job it is far easier to do this when renting.
Also I would not plan to buy to an apartment that long term you can rent it out when you retire. By that stage the apartment building will be old, have high maintenance charges and may not be that easy to rent. You will also have all the previous item costs mentioned by the other posts here.

phormium

Agree with all the above, forget the apartment, more hassle than it is worth.

You say the rent will cover the mortgage but don't forget the tax. As for using it instead of deposit on new house that is basically an equity release and I don't know of any bank offering that at the moment.

Furthermore there is no guarantee there will be equity in it by the time you want to use it.

Don't do it!

Liam D Ferguson

roro2 nailed it above. Even if the rent you're receiving exceeds the mortgage repayments, the mortgage repayments would still make it harder for you to get another mortgage. Keep saving and hang in there until you can afford the house you actually want.