Would we get a mortgage? Already own 2 properties

BODN

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I'd be grateful for opinions please as to whether we might qualify for a mortgage:

I own half of an apartment in Dublin. My parents own the other half. All 3 of our names are on the mortgage account with Bank of Ireland. The apartment is rented out but there's a shortfall of €1,000 per month so I contribute €500 and my parents contribute €500. It's €100,000 in negative equity with 20 years left on the mortgage. Not possible to sell at the moment so viewing it as owning it for the long haul.

My wife owns a house in Castlebar, where she's from. It's about €10k in negative equity but it will come into its own in the next year or so. It's rented and we top it up by €300 monthly.

We live in Cork (for the past 7 years) and have no desire to ever move from Cork. We are currently renting a 2 bed apartment and need to move and would love to get our own place, rather than forking out more rent.

We have savings of €50,000.

Current houses owned
· Tracker of + 0.75% on wife's place
· Outstanding balance €200,000 and it's worth €190,000. Rent in = €650 pm and mortgage is €950 so we top up mortgage by €300


Variable rate on my apartment in Dublin. Balance outstanding is €400,000 and it's worth €300,000. I only co-own with my parents. Rent in is €1,300 and mortgage is €2,000. Top up by €500 (me) each month and €500 (my parents) each month. We pay that little bit extra in to cover maintenance fees of apartment.

· One public servant salary of €69,000 pa
One private sector secure employment of €100,000 plus yearly bonus of approx. €10,000
· We are saving a minimum of €1,400 pm for the last year· We have approx €50,000 in savings
· We are 35 + 38 yrs old and we have 2 children·
*Childcare is €800 per month

Proposed purchase
Our proposed dwelling will cost approx €450,000.

Question: is there any possibility that we will be able to keep our existing houses as investment properties and get a mortgage to acquire a new home.

Your views will be greatly appreciated. Thank you
 
This is a difficulty query to answer without completing a full financial overview of your circumstances. Your incomes and savings record are good positives. I would suggest that you approach a mortgage broker who will be able to look fully into your details and give you more focussed advice. If you need a recommendation in the Cork area let me know!
 
Let's assume you can get a mortgage. Your position after the mortgage will be

|total|self (1/12)|wife|New house|cash
Value| 840|150|190|450|50
Loans|850|200|200|450

You have €180k of gross income a year

Current excess of repayments over rent: €10,000 a year

It seems to me that you would have excessive exposure to property at over 4 times your income.

You would also be very vulnerable to the eventual interest rate increases.

Not possible to sell (jointly held property) at the moment so viewing it as owning it for the long haul.

Why is it not possible to sell this? It would make eminent sense to sell it. You don't give the rental income, but as it's a variable rate mortgage, it's probably not making any money for you.

Your wife's house is probably very profitable in that the rent probably comfortably exceeds the interest payments.

But if you are with one of the main lenders, you should be able to sell this and transfer the mortgage to a new house. This is what you should do if allowed.

If you are not allowed to transfer the cheap tracker, then you should continue to rent. With property worth €340k already, you will have good exposure to the property market. So if property prices rise, you will benefit from the rise.
 
OP here.
Thank you so much for all responses. Reason it is not possible to sell apartment is because the value is €100k less than the mortgage. So I would have to throw €50k towards it and so would my parents have to throw the same amount and they just don't have that money. We are caught with the property.

All told, we currently have approximately €400,000 of mortgages at the moment. Yearly income from the rental income amounts to €15,000. We top up these mortgages (as rent doesn't meet mortgage amounts in both cases) by approx. €10,000 per year. So, we give the bank €25,000 approx. per year for our mortgage repayments (rental income included in this).

If we had no property and could borrow salaries x 4 = €720,000. Take the €400,000 that we owe already and I guess that's mortgage borrowing power of €320,000?

We could of course sell the house in Castlebar and put €10k towards it and that will mean we just get rid of the property thereby increasing our borrowing power to €520k?

Thanks v much
 
Hi BODN

1) Depending on the lender, you can sell the property in Dublin and carry over the negative equity to a new property. I don't know if the fact that you own only half of it affects this. I suspect that most lenders would be happy to allow you transfer €100k to another property. Your parents may have to just owe you the €50k current shortfall.

2) Likewise, you don't have to just sell the house in Castlebar. I see from the other post that the lender is BoI. They will allow you to sell it and transfer the tracker and any shortfall to a new property. They will charge you an extra 1% for 5 years and after that it will become their Standard Variable Rate. This is well worth doing.

Brendan
 
All told, we currently have approximately €400,000 of mortgages at the moment.

In the banks eyes, you have €600,000 of debt. You are jointly and severally liable for your parents debts i.e. if they don't pay, you have to pay the lot.

The banks won't expose themselves to a €1m in debt. You will have to sell something to buy something.

Try to increase your deposit too. 10% deposit leaves you with €5k to cover everything else. Depending on the property you are buying, you could use that up pretty quick.

Tip: make sure you don't go near your savings account over Christmas. The underwriters will deduct that when calculating your capacity to repay.

Best of luck!


Steven
www.bluewaterfp.ie
 
Are you in a mad rush to buy? If not I would try living on the smaller income for 12 - 18 months and just save like mad. Start a spending diary and only spend on essentials. You might even save some of the smaller income or the bonus at least. It would put you in a much better position.
 
As per 44Brendan, go to a broker. They will give you a very quick indication as to whether it's feasible.

To give you an idea we received approval in principle from two banks (€300k and €340k) under the following:

Property 1: Value €130k, Mortgage €215k, Negative Equity €85k,Tracker +1.25%, €850pm - owned by wife

Property 2: Value €190k, Mortgage €240k, Negative Equity €50k, Tracker +1.10%, €835pm, Rent €875pm - owned by husband and sibling

Holding on to both properties.

Childcare: 800pm

Savings: 2630pm, total savings €150,000

Other debt/loans: none

Joint income: €160,000pa, both private sector, with same employer >10yrs.

Banks applied a multiple of income and deducted full value of other mortgages. So over phone one bank said €160k x 4.5 = €720k - €215k - €240k = €265k (but it was rounded up to €300k when the approval came out, so other factors apply which a broker may explain)

The AIPs last until end December 2014.

Assume when the new rules come into force the above AIP will be withdrawn and new rules apply so (€160k x 3.5) - 215k - 240k = €105k
 
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Thank you all for the very informative comments. I am going to meet with the bank next week and I will keep you informed as to how I get on. Thanks again. This is a fantastic website/forum. Really appreciate all the comments on my thread.
 
I still recommend trying a broker. Unfortunately I am aware of mortgage staff in banks being inexperienced and unable to handle more complex cases such as your own.
 
Thanks. Have lined up meeting with bank manager himself. Going to also try broker to see what other banks will offer. Thanks for everything. I will update this post in a few weeks when I know more.
 
Bank managers have no discretion on mortgage lending. They are only processors of information for decision up the line. However, he should be aware of the repayment parameters and will let you know whether you can meet them!
 
I think there's another factor that you need to look at - not just how much money a bank will lend you. You have one property in negative equity that you need to top up by €300 a month at a time of very low interest rates. A second property half-owned again in serious negative equity and being topped up by €500 a month. You are still committed to childcare costs & a new 90% mortgage on €450k. Your savings will be wiped out by the deposit & costs of purchase.

I sat down recently to look at the numbers when I contemplated doing something similar. We had mortgage approval to do it but when I looked at the numbers I felt uncomfortable when I thought about interest rates rising & where we would be if there were unexpected costs for the rental properties or void periods. I felt our lifestyle & spending power would be potentially compromised too much.

Have you done a spreadsheet looking at all outgoings & expenditure & how much money you'll have over. Your tax bill will potentially increase each year as the mortgage interest reduces. Make sure you factor in all costs before deciding. It's not just a matter of how much you're allowed to borrow.
 
Ditto what Butter says.

While we got the approval noted above we haven't used it.

Having gone through the process, we came to a similar revelation as Butter!
 
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