Declaring uk property when applying for a mortgage

About 7 years ago I bought a buy to let flat in the UK. At the time I was living and working in the uk with a uk bank account, pps number etc. I had a friend who was into property development at the time so he helped me, putting me in contact with brokers, solicitors etc.

I moved further overseas shortly after beginning the purchase and the sale was all completed though my uk solicitor. I got an interest only mortgage (at my friends advice) with a mortgage company that seems to have since been taken over by the state. The property has been rented out ever since I bought it and the rent covers the mortgage plus additional expenses with a little to spare.

I'm now back in Ireland and trying to get a mortgage from my Irish banks. I gave them all the details of the uk property and they've told me it will reduce the amount I can borrow.

I really dont want to sell the uk property because at the current postcrash value it would repay the mortgage but I'd lose my own savings that I paid as a deposit. Plus, the value has already started rising again.

My question is, what are the implications of applying for an Irish mortgage without declaring the uk property? Or is there some way of it not been taken into account? The uk property is in my name, and if we bought in Ireland it would be in both myself and my husbands name. The rent and mortgage of the uk property all goes though my uk bank account and not my Irish account.

Options

1. Lie to the bank and not tell them about the UK property. You've now already declared it to one bank. Not sure if this means all banks will know about it.

2. Sell the UK property, and get a joint mortgage with our husband without any cuggle muggle. Rest easy on telling the truth, and have no worries about dealing with property in another country.

The question is would option 1 work out. UK property value is equal to the mortgage, rent is covering the mortgage. All good. Apparently property is rising in the UK, but it can just as easily go down. But and it's a bit BUT, you are paying interest only, so I think you are lucky to be able to sell in the UK without any cost to yourself. I'm not counting your 'lost' deposit. And you shouldn't focus on that. I imagine the Irish mortgage you are proposing will take all your income, so if anything at all were to go wrong with the UK property, damage, bad tenants how would you cover it.

My advise would probably be different if you didn't have an interest only mortgage.

One question, with what did or do you intend to pay back the capital on the UK property? Rising property prices?

Thanks for the quick reply.

The area I have bought in the uk is pretty solid, and has already risen in value in the last two years so I'm pretty confident it will continue to rise which is why I'm so reluctant to sell. My plan for the future was to turn the interest only mortgage into a repayment mortgage once I had been approved and bought in Ireland. I thought (perhaps mistakenly?) that I'd be more mortgageable with lower repayments.

The mortgage we are seeking is only a little more than our current rent and so I feel we'd be able to handle both.

An additonal confusion is I've just discovered that the company I have my uk mortgage with has been taken over by the uk government - UKAR - which I'm guessing is the equivalent of NAMA. I've no idea what, if any, implications that has for repayment?

Finavd said:

I'm pretty confident it will continue to rise which is why I'm so reluctant to sell.

Click to expand...

I don't think that is a good investment strategy but others might think otherwise. Does the property on it's own make sense as an investment. To me that would be does it pay for itself. And a capital appreciation is a bonus. If rent covers most costs then in the event of a massive bubble you will not be forced to sell. And the UK and Ireland have been through two massive bubbles. What would you do if your rents fell 10%, if you had a nightmare tenants, a massive repair bill, and property collapse. Would it still be ok? Then hold onto it.

One thing I think most people would agree on, and we debated it long and hard on AAM, the idea of interest only mortgages is a risky strategy, it can make tax sense. But if you're going to do it that way, you must not overextend. And a lot of people would also agree that is where they went wrong. I absolutely agree with you converting it into a standard mortgage. No idea about the UK Nama, look at the equivalant of AAM in the UK, but I do believe we Irish are quite unique when it comes to Nama.

Have you stress tested your current mortgage proposal in Ireland?

Finavd said:

The mortgage we are seeking is only a little more than our current rent and so I feel we'd be able to handle both.

Click to expand...

Have you actually done any calculations to see what you can and can not handle? What happens if five years out the rate has doubled, can you handle that?

You'll probably find that the bank will look for a UK credit report if you've lived there in the last five years or so, so you may not be able to keep the UK property a secret.

It's been about seven years since I lived in Uk, so don't know if that's long enough ago that the banks won't seek a credit report.

At the moment the rental income is double the mortgage, and we are pitching our Irish mortgage request so that we should still be able to afford it even if it doubled. I'm not a high risk person by nature, and I'm not keen on over stretching myself financially (which is why I've kept it as interest only mortgage until I knew what my Ireland mortgage commitments would be). It seems like because the uk mortgage is now with UKAR they will accept overpayments, which should give me flexibility as I could set up regular overpayments rather than officially change to a repayment mortgage. But that seems a bit *too* easy! so there is likely a catch.

Either way I'm realising that I need some help in figuring this all out. Would a financial advisor be the best bet? Or a mortgage broker? Does anyone have any recommendations for someone who would be able to advise on both the uk and Ireland system?

Finavd said:

At the moment the rental income is double the mortgage,

Click to expand...

Well it's an awful pity you didn't use that income to pay down the capital on the mortgage. Any chance of some figures?

I'm sure that any of the buys on here who deal in this area would be able to advice you. Try 44brendan for example.