Slightly Different Mortgage Question

L

Lazybones

Guest
Hi All,

Looking for your help please in terms of the best course of action to take - that will give the most economic way to do waht I want to do:

Current Situation:
I have a detached house - my main residence, with 2 years remaining on the Mortgage with BOI - I currently owe them circa 13,000 Euro on the existing mortgage. Which I realise is a lucky position to be in.

Present Market Value of the house - allowing for the poor maket conditions would be circa 350,000 Euro (I hopefully am being conservative with this figure).


What I want to do:

My new wife and I wish to build a new house - on much smaller scale and plan to rent my exisiting house.

We will be building this new house by direct labour,

We have secured a site from my parents - so there will be no site cost (apart fom legal fees to transfer the site).

Question:
I am trying to work out the best way to finance the construction of the new house.

My current thinking is to use my current house as an Asset and to try and get a new mortage on this asset (based on LTV rates of less than 50%) and to use this to construct the new house.

The new house will be a modest one and construction costs are estimated to be 150,000 Euro.

What are people's opinions on my methodology outlined above? Does it make sense? Is it the most economic way to finance the new construction?
What are the best LTV rates on the market currently?

Thanks so much for any help / advice given.
 
I suggest that you contact a broker and ask for advice. Or go directly to your own bank or any of the other banks.

I would have thought that a bank will want security on your own current home and on the new build. In any event, an awful lot will depend on your ability to service the mortgage and that comes down to age, income , your outgoings and a lenders willingness to lend.

My own view is that banks are slow to offer any mortgages at all - that seems to be what is happening to my own clients and its only those who are in very secure ( and largely public sector workers) jobs. Anything remotely "iffy" in terms of job security seems to be a stumbling block.

mf
 
Hi, your proposition sounds attractive from a Banks perspective. Your options are:
1) Get a self build mortgage on the house you're building for €150k, ie finance the construction. Should be possible to get a good rate on this depending on site value.
2) Raise the money on your existing house by way of equity release. While the LTV on this would be good, the Bank will view it as an investment mortgage and reflect this in the rate.
So more than likely option 1 will work out better.
All subject to income verification, etc.
 
I agree with Alchemi. Get a loan and as a guarantee for the loan you have the plot of land of the new house itself as well as the equity on your current property. This should be more than enough for the bank to give you the loan for the construction of the new one. If you on top of that you have a steady income even better. You are in a good position from the sounds of it.
 
Would selling your current house and renting while building the new one be a player ? No borrowing and as you say even if you sell for a low price you will still be in funds with no borrowing market worries.
 
Hi All,

Thanks so much for taking the time to reply to my post.

I think it's a case of going to the bank and putting both options to them:

1) using the value of the new site a as security for the mortgage.

or

2) Using the value of my current house as security.

And see which one will give the strongest case for getting the lowest possible mortgage rate to finance the new build.

I hope this is a good summary of the advice you all are giving.

Thanks again everyone!
 
or

3) Sell your current house, rent and build new home and not have to worry about any mortgage
 
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