House Deposit required for Couple - One FTB, One STB

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uptomyeyesin

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Hi,
Hoping someone can help clarify or see if anyone else has had any experience of this situation.

Myself and a friend purchased and apartment in 2007. The usual negative equity applies. I live in the apartment but we plan to rent it out in the future.

My husband and I are saving to buy a house. The issue and question I have, is what deposit do we need?

Two brokers have advised that they can secure a mortgage with 10% deposit only (up to €220K), as my husband is FTB, taking into account both salaries combined (~120K).
Two banks have advised directly that they won't entertain 10% and 20% on full amount is required as I am STB.

So mixed messages are leaving us very confused as to how to plan to save.

Has anyone successfully obtained a mortgage with one FTB and one STB, with only 10% of the first €220K and if so with who?

Or are the brokers too optimistic and we need just to plan to save the full 20% deposit.

Thanks for your help.
 
I've have thought that the deposit is the least of your issues, how much negative equity is there and how much are you subbing the apartment by?
 
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uptomyeyesin said:
Myself and a friend purchased and apartment in 2007. The usual negative equity applies. I live in the apartment but we plan to rent it out in the future.
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This is complicated, so there is no clear answer.

The Central Bank LTV rules do not apply to borrowers in negative equity if they are moving home.

Lenders have their own 10% rules in these cases.

Do you have a cheap tracker?

Which lender is it?

Provide the figures - value, mortgage outstanding, rate and lender.

If it's possible to get the mortgage into your name or into your husband's and your name, then you may have more options.

Brendan
 
Apartment is valued at 200000.
Mortgage is 230000.
Rate is 3.9% variable with Kbc.
Not a tracker mortgage.
Repayments are 1623 (we are currently paying 1723 as a small overpayment).
Rent in the area is about 1400 for similar properties, so if we rent, we would have to sub by 200 per month (assuming rate stays the same).

We only have 20k in savings so whichever deposit is needed will take at least a year to three years to save, depending in what is needed.

Thanks for the replies.
 
OK, as it's not a tracker, KBC should have no problem in allowing your husband to take over the mortgage.

While you are in Negative Equity, you will be exempt from the CB rules.

So it's complicated. Is there any chance the friend would give you €15k to buy herself out of the negative equity?

If not, then I don't think you should take over the mortgage.

Of course, you should make a submission to the Central Bank on their consultation on CB limits.

They are keeping your husband, a FTB out of the market.

Brendan
 
Sub it by €200 per month.

Is there a management charge? €1,000-€1,500 per annum? Repairs, maintenance, management agent fees, replacing appliances to rent property and then there's the tax.

€1,400 x 12 = €16,800
Less MC = €1,500
Less interest €6,728
Less Capital allowances €1,000
Taxable €7,572 x 50% = €3,700

Outside the mortgage repayments I'd imagine it's more like €500 per month.

How much tax is your friend paying currently?
 
The Central Bank rules on this point are crystal clear:-

"Where a borrower under a housing loan is more than one person and one or more of those persons has previously been advanced a housing loan, none of those persons is a first time buyer".

If your husband takes out a joint mortgage with you, he won't be considered a FTB and therefore the 20% deposit requirement is applicable (although a lender is obviously entitled to make exceptions from this requirement).

https://www.centralbank.ie/press-area/press-releases/Documents/FAQ – New regulations on residential mortgage lending.pdf

Yourself and your husband won't be taking out a negative equity mortgage so I don't see how that exemption from the Central Bank rules is relevant.

However, I would agree with Joe90 that the deposit requirement is really a bit of a red herring in your case - your ability to service both loans would appear to be a much bigger issue. Bear in mind that you are jointly and severally liable with your friend for the full amount of the existing €230k mortgage.

I don't think you should be happy to hang on to your interest in the apartment - I think you should be trying to offload your interest and settle your "share" of the related mortgage as soon as possible. The fact that you have already spent a lot on the apartment is not really relevant at this stage.
 
Thanks Joe, yes the full bill for the apartment would be higher when you add in the above. I would be splitting that with friend. Do banks really care if I'm not paying my MC, taxes etc though? I didn't think they would include that in calculating new mortgage liability. As an active member of the mgt co I'd also love to think that banks would be interested but don't think they are. I do appreciate your point though that as long term investment, these have to be taken into account by me, husband and friend, that's very valid.

Thanks Sarenco, I understand now what you and I think Brendan meant. We can only get exemption form 10% rules if we take over the negative equity. That is definitely food for thought and might be the best course of action.

Thanks all for your advice, much appreciated.
 
uptomyeyesin said:
Do banks really care if I'm not paying my MC, taxes etc though?
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Actually, they do care. So if you are behind, you won't get a mortgage.

But it's a much bigger issue than that. You should not be overextending yourselves. There are plenty of casualties of the last burst of madness.

So it's not really about the Central Bank rules or even the lenders' own rules, it's about what is wise for you and your husband to do.
Having two properties and two mortgages is not a good idea for you.

Brendan
 
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OP - where are you looking to buy? If it's Dublin you might find it very difficult.

I'm in a similar situation to yourself and after initial conversations with brokers we've been told that keeping the original property will knock approx €100K off the amount we can borrow for a second mortgage. We're based in Dublin so that's obviously a massive issue with prices.
 
uptomyeyesin said:
Myself and friend are happy to the apartment, we've put a lot into it that we hope some day to see a benefit to keeping it long term.
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Possibly. That's the upside. Have you taken a hard look at the downside?
From a money point of view, sunk cost shouldn't enter into the equation - we should make decisions based on the situation as it stands today, and our best guess about the future.

Edit: here's a better hypothetical
Imagine you had no assets or liabilities today, and your friend came to you with an offer - she's got agreement on a 120% mortgage on this 200k property. If you agree to go halves, you will get 20k, a 50% share of a 200k apartment, and a 120k liability.
Would you sign up?
 
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starbar said:
I'm in a similar situation to yourself and after initial conversations with brokers we've been told that keeping the original property will knock approx €100K off the amount we can borrow for a second mortgage.
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I don't mean to sound preachy but looking at this from the point of view of trying to maximise your borrowings is all wrong.

Debt - all debt - should be treated with extreme caution.
 
Sarenco said:
I don't mean to sound preachy but looking at this from the point of view of trying to maximise your borrowings is all wrong.
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You're misunderstanding me Sarenco - I'm not looking at ways of trying to maximise borrowings. I'm simply trying to establish if there is ANY possibility of even being able to buy a second property.

What the OP presented above was a pretty simple plan to rent out her property and get a new one - her only question was what deposit she would need. I just want to give her a heads up that there may be bigger problems to overcome than saving for a deposit.
 
starbar said:
You're misunderstanding me Sarenco - I'm not looking at ways of trying to maximise borrowings. I'm simply trying to establish if there is ANY possibility of even being able to buy a second property.

What the OP presented above was a pretty simple plan to rent out her property and get a new one - her only question was what deposit she would need. I just want to give her a heads up that there may be bigger problems to overcome than saving for a deposit.
Click to expand...

Fair enough - apologies if I misconstrued your post.
 
Hi there,

Here is an update on our situation in case it helps anyone else out.

We decided to try and get mortgage approval to see if we could confirm once and for all what deposit we needed.

We went through a broker as thought they could advise us best. We got approval in principal for a mortgage of 90%, that is 252k for a house worth 280k with 28k deposit. Approval is from Haven. This includes holding on to apartment as an investment property, with friend remaining as co owner.

We are currently considering our options and whether to go ahead or not.
 
That is great news.

They are obviously using their 15% exceptions wisely.

You should also apply directly to EBS and, if approved, you will get the 2% cash back.

Brendan
 
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