Getting a second mortgage, rent out first home

mossy464 · 19-04-2019 9:46pm #1

Hi there,

Wondering how feasible this would be or am I dreaming.

Originally from Cork, bought a house in Dublin two years ago.

Eventually would love to move back home to Cork and buy a house there.

Ideally we would like to keep the Dublin house. Rent it out.

How feasible is it to get a second mortgage in this scenario? Assuming finances deposit etc. Are in order??

blindside88 · 19-04-2019 9:49pm

It is possible if you have the deposit for the new property and you can afford the repayments. Bear in mind the interest rate on a rental property is higher than on a principal residence.

ted1 · 19-04-2019 11:07pm

mossy464 wrote: »

Hi there,

Wondering how feasible this would be or am I dreaming.

Originally from Cork, bought a house in Dublin two years ago.

Eventually would love to move back home to Cork and buy a house there.

Ideally we would like to keep the Dublin house. Rent it out.

How feasible is it to get a second mortgage in this scenario? Assuming finances deposit etc. Are in order??

Very feasible, in fact I know people who have been advised by banks to keep properties.

utmbuilder · 20-04-2019 2:17am

Tax as a landlord is 40 to 50%

Being a landlord is a terrible job. But if done right could be a nice pension with an inflation proof assett

Everyone is anti hap welfare tenants although if I was investing in property I wouldn't as it can be a diaster I would take a hap tenant at least rent is gaurenteed and paid by the state think hap can be 1800

A private tennent can not pay rent for 18 months leaving you in financial ruin

If you had a brother sister to rent it to that could be an option.

End of the day what age are you , is this the only way to get a half million pension pot, by selling the Dublin home in 20 years

Personally I wouldn't risk it.

Grumpypants · 20-04-2019 6:36am

Totally doable. I’ve done it.

The bank will just look at the spread sheet of money in v money out and your ability to repay them.

Just don’t think that the house down in road is rented for 1500 so you could get that and pay your mortgage and make a little income on top. About 400-800 will go in tax and maintaining the property. Maybe more if you have property management fees.

If your Dublin mortgage is over 1k it could cost you money to rent it out.

AndrewJRenko · 20-04-2019 6:40am

Make sure you understand how tax is calculated - that only the interest part of your mortgage payment is an allowable expense when calculating your profit.

Henry Ford III · 20-04-2019 6:58am

Tax is a killer in this kind of scenario

Mad_maxx · 20-04-2019 7:00am

utmbuilder wrote: »

Tax as a landlord is 40 to 50%

Being a landlord is a terrible job. But if done right could be a nice pension with an inflation proof assett

Everyone is anti hap welfare tenants although if I was investing in property I wouldn't as it can be a diaster I would take a hap tenant at least rent is gaurenteed and paid by the state think hap can be 1800

A private tennent can not pay rent for 18 months leaving you in financial ruin

If you had a brother sister to rent it to that could be an option.

End of the day what age are you , is this the only way to get a half million pension pot, by selling the Dublin home in 20 years

Personally I wouldn't risk it.

HAP rent is not guaranteed, if the tenant ceases making their contribution to the council, the council will cease paying the landlord

Brego888 · 20-04-2019 9:30am

utmbuilder wrote: »

Tax as a landlord is 40 to 50%

Being a landlord is a terrible job. But if done right could be a nice pension with an inflation proof assett

If you had a brother sister to rent it to that could be an option.

Doesn't renting to a relative have the same tax implications?

utmbuilder · 21-04-2019 1:50am

Brego888 wrote: »

Doesn't renting to a relative have the same tax implications?

Yeah but less chance of not getting rent for 18 months

NIMAN · 21-04-2019 2:08am

Been there, done that, wouldn't do it again.

Grumpypants · 21-04-2019 8:07am

Let’s also assume you are about 30 with a 30 year mortgage in Dublin for a house that cost 300k. That means you have to rent it at a loss for 30 years and will pay the bank 450k. All to be 60 and have a house you don’t want in a city you don’t live in.

I’d flog the Dublin house, buy something a bit bigger, nicer and cheaper in cork and use the extra to pay down some of the mortgage or just live a little bit.

mossy464 · 21-04-2019 8:17am

Thanks for all the comments.

Would rent a room scheme work in this situation.

If I was still working in Dublin myself and living in the house 4/5 nights a week and going to cork at the weekends would rent a room scheme be eligible?

Could rent two bedrooms while having one for myself

Grumpypants · 21-04-2019 8:24am

mossy464 wrote: »

Thanks for all the comments.

Would rent a room scheme work in this situation.

If I was still working in Dublin myself and living in the house 4/5 nights a week and going to cork at the weekends would rent a room scheme be eligible?

Could rent two bedrooms while having one for myself

Much better scenario.

If you have to travel to Dublin then it will be much cheaper to stay in your own house than try find an alternative. Plus you can earn 14k tax free, can keep an eye on the place and kick out bad tenants at the drop of a hat.

sunnyday1234 · 21-04-2019 8:50am

mossy464 wrote: »

Hi there,

Wondering how feasible this would be or am I dreaming.

Originally from Cork, bought a house in Dublin two years ago.

Eventually would love to move back home to Cork and buy a house there.

Ideally we would like to keep the Dublin house. Rent it out.

How feasible is it to get a second mortgage in this scenario? Assuming finances deposit etc. Are in order??

We did this a few years back and still have the original house rented out . Ignore most of the comments here about 50% tax , unless you have no mortgage on the Dublin house then your tax bill will be low

The way you look at it is simple . If the amount left on the mortgage drops more each year than the amount of money you put into it ( excluding capital appreciation ) then you keep the house in my opinion , For example if the amount you owe the bank drops 7k a year roughly and you have to put 3k into the house (incl taxes) then you keep it

Brego888 · 21-04-2019 9:06am

How many nights a week do you technically need to stay in your property to properly qualify for rent a room scheme as your primary residence?

AndrewJRenko · 21-04-2019 10:00am

sunnyday1234 wrote: »

We did this a few years back and still have the original house rented out . Ignore most of the comments here about 50% tax , unless you have no mortgage on the Dublin house then your tax bill will be low

The way you look at it is simple . If the amount left on the mortgage drops more each year than the amount of money you put into it ( excluding capital appreciation ) then you keep the house in my opinion , For example if the amount you owe the bank drops 7k a year roughly and you have to put 3k into the house (incl taxes) then you keep it

You know that only the interest part of the mortgage is an allowable expense for tax? And the interest part reduces steadily over the years, right?

sunnyday1234 · 21-04-2019 10:29am

AndrewJRenko wrote: »

You know that only the interest part of the mortgage is an allowable expense for tax? And the interest part reduces steadily over the years, right?

Yes of course . The amount of interest you can write off against tax is now at 80% and if you rent to HAP then it’s 100% and also even when the interest reduces then the monthly payments will be reducing the principal by more also

I do the maths each year and until now it makes sense . If that changes then I will sell

listermint · 21-04-2019 10:34am

Grumpypants wrote: »

Let’s also assume you are about 30 with a 30 year mortgage in Dublin for a house that cost 300k. That means you have to rent it at a loss for 30 years and will pay the bank 450k. All to be 60 and have a house you don’t want in a city you don’t live in.

I’d flog the Dublin house, buy something a bit bigger, nicer and cheaper in cork and use the extra to pay down some of the mortgage or just live a little bit.

Put the extra money into a pension plan. Especially if your employer is paying contributions.

banie01 · 21-04-2019 10:40am

utmbuilder wrote: »

Yeah but less chance of not getting rent for 18 months

I'd always always avoid renting to friends or family.
The potential for a falling is far too high.
Landlord/tenant relationships already have too many potential risks without risking a familial relationship too.

As for the less chance of a relative being delinquent, I'd argue the opposite.
Along with less chance of an actual tenancy agreement because, ah sure we are family

Try evicting family for non payment and dealing with the fallout.

bidiots · 21-04-2019 11:21am

sunnyday1234 wrote: »

Yes of course . The amount of interest you can write off against tax is now at 80% and if you rent to HAP then it’s 100% and also even when the interest reduces then the monthly payments will be reducing the principal by more also

I do the maths each year and until now it makes sense . If that changes then I will sell

Ball park figures, if I can get rent of 2k per month, with 160k left on the mortgage, how much will the tax man get?

AndrewJRenko · 21-04-2019 11:37am

sunnyday1234 wrote: »

Yes of course . The amount of interest you can write off against tax is now at 80% and if you rent to HAP then it’s 100% and also even when the interest reduces then the monthly payments will be reducing the principal by more also

I do the maths each year and until now it makes sense . If that changes then I will sell

Glad to hear you do the calculations yourself. The monthly payments don't generally reduce. The mortgage will be calculated to be cleared with steady payments over the 25 or 30 year period. At the start, it is almost all interest with a little bit of principal. At the end, it is almost all principal with a little bit of interest - but the monthly payment generally remains steady.

AlmightyCushion · 21-04-2019 11:39am

AndrewJRenko wrote: »

Glad to hear you do the calculations yourself. The monthly payments don't generally reduce. The mortgage will be calculated to be cleared with steady payments over the 25 or 30 year period. At the start, it is almost all interest with a little bit of principal. At the end, it is almost all principal with a little bit of interest - but the monthly payment generally remains steady.

He didn't say the payments reduce, he said the interest reduces which means you're paying off more capital which is true.

sunnyday1234 · 21-04-2019 12:19pm

AlmightyCushion wrote: »

He didn't say the payments reduce, he said the interest reduces which means you're paying off more capital which is true.

Yep - exactly what I meant. So while your tax bill may increase , your principal is reducing more

sunnyday1234 · 21-04-2019 12:23pm

bidiots wrote: »

Ball park figures, if I can get rent of 2k per month, with 160k left on the mortgage, how much will the tax man get?

All dependent on how much interest you are paying . Look at the account for last years interest , add it up and calculate 80% off it

Then minus that from 24k and that amount would be your taxable income( not taking into account all the other things you can do to reduce the tax bill like insurance , Prtb , capital depreciation of furniture , repairs etc

AndrewJRenko · 21-04-2019 12:45pm

sunnyday1234 wrote: »

Yep - exactly what I meant. So while your tax bill may increase , your principal is reducing more

Apologies, my mistake.

machalla · 21-04-2019 4:52pm

sunnyday1234 wrote: »

All dependent on how much interest you are paying . Look at the account for last years interest , add it up and calculate 80% off it

Then minus that from 24k and that amount would be your taxable income( not taking into account all the other things you can do to reduce the tax bill like insurance , Prtb , capital depreciation of furniture , repairs etc

I thought PRTB fees were not allowed as a tax deduction?

sunnyday1234 · 21-04-2019 5:48pm

machalla wrote: »

I thought PRTB fees were not allowed as a tax deduction?

It is allowed as a tax deductible

barnabyjones77 · 10-07-2023 5:02pm

Reviving this old thread.

Did you do it? I'm considering the same. Have an apartment worth 300k and a mortgage of 185k. Looking to leave dublin and buy a house. Debating whether to sell the apartment or keep it and be a landlord.

Any updated advice welcome

iniscealtra · 12-07-2023 5:58am

Thanks @sunnyday1234

o1s1n · 14-07-2023 1:55pm

https://www.boards.ie/discussion/comment/120831369#Comment_120831369

I did something similar in 2020 but stayed in Dublin with my new PPR.

All going well so far... apart from the ever increasing interest rate on the rental property.

The interest is tax deductible at least but it's annoying seeing larger and larger amounts coming out to cover it each month.

barnabyjones77 · 14-07-2023 5:22pm

https://www.boards.ie/discussion/comment/120851124#Comment_120851124

What is the interest rate differential on a rental property compared to standard? Can you get a fixed term?

J_1980 · 14-07-2023 5:52pm

Always keep your property.

wealthy people in Ireland always own multiple ones and thanks to the general left wing sentiment expect further population in increases and favourable rental market (as a landlord).

Caranica · 14-07-2023 6:05pm

https://www.boards.ie/discussion/comment/120852139#Comment_120852139

You've clearly never had nightmare tenants. The day we sold our rented property was one of the happiest days of my life

3DataModem · 15-07-2023 11:25am

I've done in multiple times OP. It was the "done thing" in the late 90's early 2000's to keep your old gaff when you moved and rent it out.

It can be a good idea, but depends on the details;

Think about what rent you get. Then half that for tax. Then knock about 20% off that for maintenance and other costs. Then deduct the mortgage. The result is probably negative and that's OK if you can afford it. If that amount is less than the amount you are clearing off your mortgage each month then you are making money (although it won't feel like that).
Get a letting agent. Get a letting agent. Get a letting agent. "But you can do it yourself" you'll say. "Why waste 10% of the rent". Next time you are snuggled up on a Sunday night of a bank holiday and you've had a glass and a half of wine think about what would happen if your phone rang with a burst pipe. Get a letting agent. My advice is get one (a) who does a lot of lettings locally and (b) is local.

DubCount · 15-07-2023 12:59pm

https://www.boards.ie/discussion/comment/120854225#Comment_120854225

I agree with the agent point.

On the financial side, you need to be able to sustain being able to pay the mortgage if you have a void period or if your tenant stops paying or falls behind in rent etc.. The question is can you afford the mortgage even if you are not receiving any income for a period.

herbalplants · 15-07-2023 5:01pm

https://www.boards.ie/discussion/comment/120854225#Comment_120854225

Also, maybe that Sunday you are snuggle up with a glass of wine, your agent is also snuggled up with a glass of wine and won't answer his phone in an event of burst pipe.

o1s1n · 15-07-2023 5:06pm

https://www.boards.ie/discussion/comment/120852008#Comment_120852008

Up to 7.5% at the moment, so twice the house interest rate.

No fixed options available no :(

newmember2 · 15-07-2023 5:08pm

https://www.boards.ie/discussion/comment/109977686#Comment_109977686

HAP rent is not guaranteed, if the tenant ceases making their contribution to the council, the council will cease paying the landlord

They changed that no, or has the change not been implemented yet?

3DataModem · 15-07-2023 8:16pm

https://www.boards.ie/discussion/comment/120855666#Comment_120855666

Yeah OP don't get a **** agent.

JCN12 · 16-07-2023 7:10am

Irish people just don't learn seemingly. 🤔

barnabyjones77 · 17-07-2023 9:46am

https://www.boards.ie/discussion/comment/120855684#Comment_120855684

Ugh. That's a game changer. I'm on a 2.3% fixed at the minute, which i took out about2 years ago and i know the going rate is higher now. I naively thought the same principles would apply for a 2nd mortgage and id be able to fix around 3 or 3.5%. Anything over 4% probably wouldn't make sense income v outgoings wise.

In my experience as a renter, agents are fairly useless too. I'd be optimistic i could source good tenants and manage it myself. My apartment is beside a hospital so I'd be hoping for some trustworthy doctors or nurses. Again, maybe I'm very naive based on some "renter nightmare" stories on this!

o1s1n · 17-07-2023 9:58am

https://www.boards.ie/discussion/comment/120861834#Comment_120861834

Do keep in mind that the interest on your BTL mortgage is 100% tax deductible though.

So yes, it's painful seeing the mortgage amount increasing with the rates going up and the rental income staying relatively unchangeable due to rent pressure zone limitations - however once the end of the year hits and you are doing your tax returns, you can knock absolute lumps off of the amount of tax owed with the mortgage interest relief.

whacker1982 · 16-08-2023 10:19pm

Thinking of going down this road myself, only difference is to relocate abroad, and rent out my home and second mortgaged house and only pay 20% tax on the properties

Vinny Cleary 25 · 17-08-2023 8:17am

https://www.boards.ie/discussion/comment/109985279#Comment_109985279

That’ll be raided in the future to keep paying teachers their cushy pensions, entitlements and salaries.

Put the extra money into a pension plan. Especially if your employer is paying contributions.

DubCount · 17-08-2023 10:06am

https://www.boards.ie/discussion/comment/120988604#Comment_120988604

Where are you emigrating to that you will only be paying 20% tax on your profits?

You would need to pay Irish tax first, then be assessed for tax in your new country of tax residence taking a credit for any Irish tax paid (assuming its somewhere with a standard double tax treaty with Ireland). Not many places where you will have a job and a marginal tax rate of 20% on additional income.

I also assume you are aware of requirements on your tenants to withhold tax on rent payments if you become a non0resident landlord.

Getting a second mortgage, rent out first home

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