Take someone who purchased a house in the past and subsequently rented it out due to emigration, renting in a different location or renting to accommodate a growing family.
Let's say the house is now worth €200,000 and mortgaged to the tune of €180,000, i.e. it's in positive equity but not by a significant amount. Let's also assume it's a profitable BTL through either high rent or being on a tracker mortgage.
If they now wish to purchase a new home, whilst keeping the investment property, what are the rules?
Is the investment property ignored by the Central Bank rules, meaning that a 20% deposit and 3.5 salary multiple applies solely to the new home/mortgage?
My reading of it is that the Central Bank rules will allow the new mortgage to be determined without consideration of the investment property. However, the individual banks will then apply their own rules taking the whole picture into account.
I've read in the past that banks do not consider rental income when calculating maximum mortgage amounts they're willing to advance. With this in mind, the banks may consider that the above person already has €180,000 borrowings.
If the person/couple is on an €80,000 gross income, they may only be willing to lend up to €100,000 (€80,000 * 3.5 less the €180,000 existing borrowings).
Assuming they're allowed to ignore the investment property for the new mortgage, they may also just use their previous income multiples when assessing affordability, i.e. before the new rules, some banks appear to have been approving 4.5 income multiples so, ignoring rental income, they may be willing to loan up to €180,000 (€80,000 * 4.5 less the €180,000 existing borrowings).
It's going to be interesting times and it'll probably be 6-12 months before people have a good idea, based on anecdotal evidence, of how the banks deal with various situations.
Let's say the house is now worth €200,000 and mortgaged to the tune of €180,000, i.e. it's in positive equity but not by a significant amount. Let's also assume it's a profitable BTL through either high rent or being on a tracker mortgage.
If they now wish to purchase a new home, whilst keeping the investment property, what are the rules?
Is the investment property ignored by the Central Bank rules, meaning that a 20% deposit and 3.5 salary multiple applies solely to the new home/mortgage?
My reading of it is that the Central Bank rules will allow the new mortgage to be determined without consideration of the investment property. However, the individual banks will then apply their own rules taking the whole picture into account.
I've read in the past that banks do not consider rental income when calculating maximum mortgage amounts they're willing to advance. With this in mind, the banks may consider that the above person already has €180,000 borrowings.
If the person/couple is on an €80,000 gross income, they may only be willing to lend up to €100,000 (€80,000 * 3.5 less the €180,000 existing borrowings).
Assuming they're allowed to ignore the investment property for the new mortgage, they may also just use their previous income multiples when assessing affordability, i.e. before the new rules, some banks appear to have been approving 4.5 income multiples so, ignoring rental income, they may be willing to loan up to €180,000 (€80,000 * 4.5 less the €180,000 existing borrowings).
It's going to be interesting times and it'll probably be 6-12 months before people have a good idea, based on anecdotal evidence, of how the banks deal with various situations.
