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Home economics... answering your property questions


Shopping for a mortgage

Shopping for a mortgage

Shopping for a mortgage

Our property expert advises on what mortgage rate to choose and concerns over a change of property owner for a tenant.

Question: My interest only mortgage period is ending on my investment property with AIB which I took out a number of years ago. What are my best options? I have a decent tenant but haven't increased the rent in two years. Should I go fixed or for a standard variable rate (SVR) or move bank altogether?

Sinead replies: First of all, it's important to calculate if you can afford the new repayments with the remaining term that's left on the loan. They will be jacked up considerably as the mortgage moves to a more traditional Capital + Interest repayment model. Ask AIB for a calculation for both fixed and SVR using the current terms (they will be writing to you in any event outlining a range of options, as is standard).

They would certainly be happy to strike a fixed rate for you and theirs is quite good: a three year is hovering around 3.65pc, compared to 3.8pc variable, for instance. Unusually at the moment most banks are offering a cheaper fixed than variable rate in order to lock people in. If you do need to extend out the term, you can ask, but it will very much depend on your personal circumstances and be considered a 'new' loan.

The more equity you have in the house the better, so now might be a good time to work that out - ask a local estate agent for a valuation - if you go mortgage shopping, you'll need it.

Secondly, you're in the minority of landlords who hasn't increased their rent. Hop on to prtb.ie or any of the rental websites which give a good flavour of what the rent should be and start negotiations with your tenant to offset at least some of the increased costs you'll be incurring.

Question: I'm living in an apartment block where the owner went bankrupt and receivers have taken over. It's been a very anxious time since we tenants didn't know where we stood or if we'd be allowed stay. We've just been informed that the building has been bought by a Reit, which I understand is a foreign property company. Our former landlords were local builders (brothers in fact) and easy enough to deal with - I'm nervous about how things might change now and if our rent will go up.

Sinead replies: This must have been an uncomfortable experience for all - hopefully things will settle down now. A Reit, a Real Estate Investment Trust, is a company that invests in commercial and residential properties on behalf of clients. There are a number of Irish firms who operate in the market. In terms of stability, you have nothing to fear. Your previous landlords were doing their best,

I'm sure, but like many, appear to have got caught up in the hubris of the buy-to-let market. A Reit is more interested in stable, long term, moderate profits and good tenants, like you, will be of comfort to them. I can't say whether your rent will be increased or not, but it's worth getting your ducks lined up. First of all, nothing can be changed while you're still on your current lease.

As you've been there more than a year, you are entitled to stay another four and a half years by law. If the rent is hiked, it must be no more than 'market value' - so check other apartments locally to get a feel for this. Management fees may rise too - but conversely you may get much better services now that there's a company in place to look after it.

There should be a consultation or meeting for residents - ask these questions and arm yourself with rights from prtb.ie.

The Ryan review

We're not the only one with a housing crisis. In Barcelona, they've decided to come down hard on banks who are refusing to release vacant, seized properties back to the market.

The city council has handed down fines of €60,000 for just 12 homes sitting empty for more than two years. Mayor Ada Colau said "public authorities" such as State owned banks, "have an obligation to use all possible resources to confront the housing emergency". Another 62 properties are earmarked for similar sanctions. The fines accumulate if the properties are not let within two months.

More than 100 councils are undertaking similar motions after a housing activist group lobbied for the move. Spain has 3.4m vacant properties with 95 homes per day being repossessed, so it's a far greater issue than we have to contend with. However, while the numbers in arrears here may be declining overall, the number of those unpaid for 720+ days is rising, accounting for 81.5pc of all arrears outstanding. Today buy-to-lets account for 15,276 of such arrears.

The reason for the reluctance to re-market the houses is balance-sheet related - banks are waiting on the market and their 'asset base' to improve. Becoming landlords in the meantime can be simply too much bother.

Spain is an extreme example, but shouldn't banks be forced to sell on the complete basket cases to aid the stressed market?

Send your property finance queries to siryan@independent.ie or on twitter @sinead_ryan.

Indo Property