custom mortgage rates

Hi,

I will use rounded figures to make this easier.

Let's say I have a mortgage of 150k, with 25 years remaining. It is on an excellent tracker rate of 2.15% (+.65% over ECB). There is also an LTV of about 30%.

I have no debts apart from the mortgage and plenty of disposable income.

I want to buy some land that costs 50k.

People I talk to in branches, and brokers, all say that on paper there is no issue with my approval.

However I am getting a flat refusal when the request goes up the line because banks "are not lending on agricultural land."

I have been told they would lend me the money if it was for home improvements. I'm not prepared to pretend it is for that.


I have the following idea:

Work out the interest payable to the bank for
- 150k/25/2.15% (45,000)
- and 50k/25/2.15% (15,000) = 60,000

Entice the bank to offer me the 50,000, by giving up my tracker.
i.e. remortgage the entire lot (200k) but at a variable rate.

200k/25/current variable% = interest of 130,000 (approx)

This is obviously WAY too much interest


So, would there be a possibility of them doing a custom rate????

i.e. 200k/25/2.75% = 75k interest

My monthly repayments would be OK, I would get the land. And they would get me off a tracker and earn more interest. I am pretty sure I could pay alot of it off early.

Do banks do this kind of thing? I have a meeting with them next week and want to know if I should even bother mentioning this.


I have been told that I could simply remortgage with another provider, not mention the land, and just release the 200k in one go. But I would have to move to the high variable interest rate. The point is that this IS possible, but is just too expensive. I'm just looking for a halfway point (or less!).
Thanks.

Could you take out a second mortgage on your house, with a different provider, or is this not done in Ireland?

If you have plenty of disposable income, could you save at least part of the purchase price of the land, and get a personal/credit union loan for the remainder? It just seems to me that you might be better off holding on to your tracker

HI Fraggle

I think that the mistake you are making is that you expect that the bank should remortgage at the tracker rate you are currently on. They won't do this unless you have some form of current account mortgage. If you have a current account mortgage, then you can just take out the money and it's none of their business what you do with it.

You have a mortgage of €150k at 2.15% which is costing them about €3,000 a year. They should be deligted to do a deal to get rid of that, but many banks are not thinking straight at the moment.

But if they do agree, the real cost of borrowing for you on the €50,000 would be around 10% APR. Is the piece of land worth this?

As I say, banks are behaving very strangely at the moment. Under the circumstances, if you have to tell them that it is for home improvements, then why not do so? It's €50k which you can well afford. The LTV of your property will still be only 45%. Sometimes these things are done on a nod and a wink. If you go back to the same local branch and apply for the same amount for home improvements, they know what you are doing. If they agree to do it, then that is fine. You are not really misleading them. They are misleading their superiors.

Or as Greta says, go to another bank for a remortgage. However, you should really want the land as 10% is a very high rate to pay.

Brendan

@Greta. Yes I would be putting some cash into the deal, the figures are just examples. At the moment I am intending to save up more and delay any purchase.

@Brendan. Thanks. I am not expecting that they will remortgage at the current rate. I am expecting that I can do equity release at the current rate, or that they will remortgage at the current variable rate. The question is can I haggle on that remortgage rate, with my bargaining chip being giving up the tracker. I understand your points though.

I do not feel comfortable telling a white lie. I know I sound like I polish my halo every morning, but I generally do things by the book. Anyway, if I say the money is for home improvements, will they look for cost estimates and/or receipts? I'm not sure I want to get involved in all that.

I would not go to another bank or do a deal that is costing me the 10% as you state. I would rather save for a little while more, which is what I think will happen. Hopefully land prices will drop even more than they have done recently too.

I would rather save for a little while more, which is what I think will happen. Hopefully land prices will drop even more than they have done recently too.

Click to expand...

This would be by far the most sensible thing to do. I had assumed that the parcel of land you want to buy had some special significance e.g. beside your house. If so, it might not be available when you have the cash ready to buy.

Would any other bank lend you the money just secured on the land and with a second mortgage on your home? Or if the loan to value was low enough, they might just lend it to you secured on the land.

Brendan

I really want this land. A few years ago I was outbid on a number of pieces, and pulled out of one due to access issues after spending on solicitors etc. I then gave up.

This land is ideal, and is only 15 minutes from my house... and I can afford it. I'm very frustrated!

I haven't asked about lending just on the land but secured against my home. I did speak to a broker about this and he said i would have to remortgage the whole lot, or get a personal loan, but the monthly repayments are too high and the rates too high.

The mortgage person at my local branch is arranging a meeting to speak about a branch loan. I'm not sure what these are. Are they like personal loans but with custom rates? or are they loans with collateral secured against them. If they offered me a branch loan over 10 years at a low rate, I could probably scrape cash together to reduce the amount required and the monthly payments. Any info on these types of loans?

a personal loan at 10% on €50k may well be cheaper than losing your tracker.

The 10% will be expensive but only for a few years as you seem to have excess income from which to reduce the loan over time.

Brendan

If I had to, I could put 20k towards it. I do have disposable income, but not enough to feel comfortable spending c. EUR500+/month on a personal loan on 30k(ish).

I will consider the "home improvements" route. If anybody has done this recently I would appreciate it if they could let me know if they were asked for cost estimates/receipts.