Taking out 2nd mortgage possible?

FrankC21

Hi,

We're thinking of buying another property a bit bigger than we currently in right now in next 5 years, is it possible to have a 2nd mortgage, if we already have an existing one.

We want to rent out the current house to cover the mortgage repayments. We are paying €850 on our current one with 5years fixed rate and estimated rental value of the current house between €1,300-€1500 close to shops and general hospital.

Is it 20% deposit for 2nd buyer?

Is it the same process/requirements as first_time_buyers? (Savings, payslips, etc.)

DubCount

Yes its a 20% deposit for 2nd time buyer. Yes the process for application is the same. Yes its possible to have a second mortgage.

The requirements though are going to be a little different to a first time buyer however. The bank will be assessing your ability to repay. If you need a bigger house, I'm guessing you have added some children since being a first time buyer, so the bank will be taking account of childcare costs etc. in working out your ability to repay. Having a rental property may sound like a benefit, but this would also add risk for the bank. What happens if your tenant stops paying rent, what happens if there is damage to the rental property, what happens if there are void periods - can you still pay 2 mortgages.

Being a Landlord in Ireland with one (mortgaged) rental property is a mugs game. The money you can make is just not enough to cover the risk. Read up on why landlords are leaving the market. Read all the current and proposed legislation about residential letting in Ireland. If you are still bonkers enough to want to do it - speak to a mortgage broker to see if any bank will lend you the money for your insanity.

L1011

That rent won't cover that mortgage unless you've got a high interest element to the repayments and/or standard rate cutoff left over. If you have the latter I'd doubt you could finance a second property

So you'd need to top up the mortgage payment as well as be able to pay it in full should you have vacant periods or non payment.

Browney7

You need to do the maths OP. You'll also open yourself up to CGT on future sale of the existing property. You'll get relief for the time you've been there but the longer you rent it out for, the lower the CGT exemption. If you are sitting on a decent gain you may be better off selling

Bass Reeves

OP
Any time one someone put up a post about going into property investment in the rental sector on boards there is huge antipathy by a section of posters. Property is a good mid level investment it has certain advantages such as being able to leverage you equity at mid to low risk levels.

The answer to you question is yes banks will lend however they will look for a higher deposit. However they look for 30% deposits when upgrading anyway most of the time. It is good you are looking ahead as opposed to making a snap decision. I imagine your present property will have 40-50% of the mortgage period gone through in five years time.

Any bank will look at your investment plans on the house and consider it break and ignore it to a so.e extent. There are some things to be aware of. If you try to get a second mortgage form your present lender they may try to transfer you present loan to investment status and charge a higher rate. They may do it anyway if they become aware of your second loan. The increase in rate might be 1-2% so just be aware of the risk.

On tax a 1300-1500 rental income will cover an 850 euro mortgage if it didn't we all be all gone out of business. In any small busines there are certain write downs and offsets. Rental income is classed as unearned income so it cannot be used for pension purposes. Capital gain is calculated with reference to the nu.bers of years you are in the house V number of years owned. If you were in it 10 years and sold after 13 years renting 10/23th of the capital gain are shielded. The other 13/23th are libel for CAT

Yes borrowing us similar to original mortgage with bank statements rage slips etc

FrankC21

You've been very good guys, Do you guys have any helpful links I can read on to get my head around it?

DubCount

Bass Reeves wrote: »

Any time one someone put up a post about going into property investment in the rental sector on boards there is huge antipathy by a section of posters. ...

100% correct - and with good reason.

Many of the posters who advocate a single property residential investment with a mortgage have never actually done it. Historically it was seen as an easy way to supplement your income. In the last number of years - the game has completely changed. There are massive potential risks.

Review the RTB annual reports for the numbers of cases involving overholding and non-payment of rent. Also review the RTB annual report for the trends in the numbers of Landlords in a market where price controls are required to stop rising rents. Search RTB cases and WRC cases for discrimination against HAP determinations. If you have the deep pockets to take the risks, go for it. Most "accidental landlords" dont, and dont even realise the risks they take.