Third Mortgage?

Looking for a bit of advice or if anyone else is/has been in a similar situation.
Married with 3 kids.

Both of us had purchased a 2 bed close to the peak of the bubble prior to meeting. These are now both in negative equity but rented out and more or less washing their faces with respect to rent covering mortgage. In fact, if rents keep rising, they may turn a profit in day to day terms soon.

We are currently renting house as neither property is suitable for our family.

Question is, what chance of one day getting a third mortgage to buy a family home? There is no realistic prospect of selling either property without negative equity in the short to medium term.

We have managed to cover the mortgages on the 2 properties without using the rent for the past year (i.e. we are saving the rent and paying mortgages and our own rent out of day to day income).

I know that banks don't generally count rental income as secure income, hence the above.

Is there any hope? Or are we destined to be permanent landlords and tennants at the same time?

Thanks in advance for any advice!

A lot more info needed.
What are amounts outstanding on mortgages, what are current values, mortgage being paid ie is it interest only or interest and capital, rent received, incomes, how secure are your job etc.

Property 1: About €350k outstanding, interest and capital. Mortgage about €1200, rent €1050. Probably worth €200-250k at a push.

Property 2: About €220k outstanding, interest and capital. Mortgage about €1100, rent €1000. Probably worth €125-150k at a push.

Secure jobs, about €220k pa combined.

I know thats a very good income, but it just feels like we are going nowhere fast!

Thanks

Very high incomes but a lot of negative equity on existing properties. You will need significant savings before you could even approach bank.

If your savings are substantial enough you may be asked to sell one of the properties (and cover the negative equity), and given the strong rental potential of the other property and your very high incomes then you may get another mortgage.

Also as you have said that rent covers the mortgage on existing properties then I don't see any reason why you can't save 50k-60k per annum (comfortably) to pull yourself out of this situation?

Yep, we're doing as much saving as we can. I suppose we were just wondering, if we would be likely to get a mortgage in a couple of years or are we barking up the wrong tree?

125k in net income.

Sell the second one and buy a family home and enjoy life.

With such a high income n 2 rental income close enough to monthly pay, not wise to sell any house now. I don't see a big problem to get a 3rd mortgage.

inahoop said:

Property 1: About €350k outstanding, interest and capital. Mortgage about €1200, rent €1050. Probably worth €200-250k at a push.

Property 2: About €220k outstanding, interest and capital. Mortgage about €1100, rent €1000. Probably worth €125-150k at a push.

Click to expand...

Without knowing the term and the interest rate, this is not easy to analyse.

We also need to know who the lenders are as the policies of the lenders differ.

I am guessing

Property 1 is a tracker on ECB + 0.5% for 30 years - or else it's a BoS interest only mortgage.

Property 2 is a SVR at around 4.5% for 30 years

Assuming Property 1 is a cheap tracker, it's enormously profitable for you. You are getting €1,000 rent and the interest is €300 per month. The difference of €700 is capital which means you are knocking €8,000 a year off the negative equity.

Property 2 is at least breaking even.

I think you are better off holding onto both properties and hoping for either or both of the following:
1) Property prices rise and eradicate your negative equity
2) The lenders offer a deal to exit the cheap tracker.

You have €570k in borrowings and €370k in property.

Even if the bank agreed to give you a third mortgage, you should decline it. Even on your very high salaries, you are overexposed to borrowings and property. You are vulnerable to interest rate rises and property price falls. You should not increase this exposure.

You should build up a pot of savings instead of paying capital off your mortgages

This could be useful if a lender offers for early repayment of a tracker. I think it's unlikely that such deals will be offered, but be ready just in case. (This is yet another reason for not committing yourself to buying another house at the moment)

If you have savings, you might be able to trade-up - see below.

Your lender might offer you a trade-up mortgage
If property 2 is a SVR mortgage, the lender might allow you to transfer the negative equity to a new property. In other words, sell this property and buy a new one and move the negative equity with it. This would increase your overall exposure, but not by as much as a third property and mortgage would.


If either of your mortgages is with Bank of Ireland or Ulster Bank...

They both allow borrowers who meet their lending criteria to sell the existing property and retain a tracker mortgage at a slightly increased rate for 5 years. Worth considering.

But provide all the information, and you will get more comprehensive options.

So you are saving about 2K a month, and how much are you paying in rent?

I think it's highly unlikely you'll get a 3rd mortgage, they now add up all the mortgages in deciding their calculations and you'll get unstuck with the negative equity (NE).

What level of savings do you have, what would you like to buy, how much is the mortgage and interest rate and repayment.

How permanent are your jobs. You have to consider what would happen if one of your lost your job.

Sounds to me you need a very good broker to advice you.

I think the rentals sound fine, the value on Property 1 is a bit high, and it's the reverse with property 2. Based on rent by 12 by 15. Presumably all taxes etc are kosher on these.

Thanks Brendan, makes sense
You are pretty spot on with respect to the mortgages.
Property 1 is tracker and property 2 about 4.5% fixed for te next few years.
Both 30 year terms.
Both Ulster Bank now.
Savings €15k at present.

Bronte,

Jobs secure, taxes kosher.
Don't want anything fancy in terms of house - a 3/4 bed semi would be fine.

I realise we are better off than many bit just trying to see where we might be going. On the one hand we may get a bump from rising property prices and this will help clear the negative equity. But at the same time this makes buying another house harder, particularly if savings used to clear negative equity.

Similarly, rising rents make the existing properties more profitable but hit us at home.

Realistically we can rent out the properties indefinitely and they will mind themselves. If we decide to rent ourselves in te longer term, that is ok although not ideal. However we could probably take the foot off the pedal with savings and spend a little more

It's hard to know when there isn't a definite plan but looks like we should save lots, sit tight and wait and see?

Try EBS. My own situation wouldn't be that far away from yours and they have given me approval for a loan. AIB (owners of EBS) laughed me out of the building based on the same figures.

I'm really interested to know how you got on with Ulster bank.
I'm in situation that I'm trying to re locate to Dublin and want to know if I can get a Forth mortgage or else I'll have to rent.
If anyone can advise me?
Three current properties
1. Current home, Value approx. 220 K, owe 90 K tracker 1.1 over ECB, term left 13 years
2. Rental, Value 150 K, owe 145, tracker 1.1 over ECB, costs me 550 a month as rent doesn't cover mortgage
3. I signed for a family member we are co-signatures. They pay the mortgage it's their family home, Value 300 K, Loan 300 K. Tracker .95 over ECB. All with Ulster bank.
Basically I owe 600 K.

I earn 150 K a year, have 100 K in savings, secure job, single no kids, I'm 39. I have no loans only the above.

What I knew from last year is that Ulster bank they stress test you at 6% now on all mortgages, they don't take rental income into account into account unless
it's at a 50% equity level. they allocate costs of living at 1250 for a single person I think it's 2000 for married, and 750 per child( could be wrong there on the married and kid allocation) and they stress test on the above.

I can't go near BOI as I had a business loan that was part wrote off, ( doesn't effect my credit)

I hope to actually go in there in a week or so and find out if I can even get a mortgage.
I'd be really interested to know how you got on with them and if any one else has any advise I'd appreciate it.