Top up mortgage to fund buy to let

[Enthrope]

Hello,
I am looking at a buy to let property in my local area. The property is listed at €70 000, but it is in need of renovation.
I have €30 000 in cash myself, so I need €40 000 to purchase the property. I do not want to borrow this at a personal rate of 8-10%.

My own house is valued at €220 000 and the outstanding mortgage is €140 000. This gives me €80 000 equity in the house.
My mortgage is with Ulster Bank and I have spoken with then about a top up mortgage to borrow €40 000 more.
I have been told top up mortgages can be used only for home renovation, not borrowing to fund buy to let.

I am now thinking of switching my mortgage to KBC (or another lender) and drawing down €40 000 more to fund the house purchase.
Does anyone know if this is possible?
Or has anyone got any better ideas on how to release the equity from my house or borrow €40 000 at a cheaper rate?

Thanks
Enthrope

 

[hfp]

Outstanding mortgage of €160,000 on a property worth €220,000 gives you equity of €60,000, not €80,000.

Without securing the new borrowing on the new property it would also give you borrowings of €200,000 on a house worth €220,000 which I doubt many banks would agree to.

You also haven't mentioned how you plan to fund the renovations?

 

[NoRegretsCoyote]

I am now thinking of switching my mortgage to KBC (or another lender) and drawing down €40 000 more to fund the house purchase.
Does anyone know if this is possible?

This comes up from time to time on AAM and doesn't seem to be possible.

Why don't you just get a BTL mortgage at 4% for the second house? You would need to tell us your household income to see if this is feasible.

 

[Enthrope]

Outstanding mortgage of €160,000 on a property worth €220,000 gives you equity of €60,000, not €80,000.

Without securing the new borrowing on the new property it would also give you borrowings of €200,000 on a house worth €220,000 which I doubt many banks would agree to.

You also haven't mentioned how you plan to fund the renovations?

Hello,
Thanks for the replies.
Sorry the outstanding mortgage is €140 000, not €160 000 so the equity in the house is still €80 000.
Household income is €120 000.
I've checked with some of the banks about a buy to let mortgage and they told me you have to borrow a minimum of €100 000.

I will do the renovations myself as I work in construction.
It's a small property and in good shape apart from being a little dated so renovation should only cost €15 000 - 20 000.

 

[NoRegretsCoyote]

I've checked with some of the banks about a buy to let mortgage and they told me you have to borrow a minimum of €100 000.

You might have more luck with a broker.

I don't know the banks' rules precisely but a mortgage of €140k plus BTL at €100k is pretty sustainable with a €120k income.

A broker would give you a better picture I would think.

 

[Enthrope]

OK thanks for the advice.
So buy to let is the only way?
There is no way to convince Ulster Bank to release the equity, even if I told them I was switching to another lender?
Or by switching to another lender and drawing down my current mortgage + €30 000 extra?

 

[NoRegretsCoyote]

There is no to convince Ulster Bank to release the equity, even if I told them I was switching to another lender?

Whenever this gets asked on AAM it doesn't seem possible. When I asked BoI a few years ago they said strictly only for verified renovations.

Or by switching to another lender and drawing down my current mortgage + €30 000 extra?

I don't see why unsecured lending rates are such a big deal if you can get them. The difference between 9% and 4% on €40k is €2k in interest a year.

You seem pretty well placed to pay it back from income. Yields at your end of the market should be good as well if you can get a HAP tenant. You will be paying down capital very quickly.

Regarding tax deductibility, I don't know if you could convince Revenue that an unsecured loan was being used to fund a house purchase though.

 

[Monbretia]

CU? Depending on the CU many give loans on property, their version of a mortgage but slightly different, it's secured loan as they take deeds of property, not as cheap as bank mortgage but not as expensive as unsecured lending.

 

[Fahrenheit]

The max loan to value on an owner-occupier property - for switch & equity release - is 80%.

80% of 220Ke = 176Ke

176Ke minus 140Ke(current mortgage outstanding) = 36Ke of equity to tap into.

Only Finance Ireland & Dilosk will allow equity to used to help fund the purchase of another property.

Other lenders will only allow equity releases towards home improvements(on the proposed property to be secured), debt consolidation, education fees for children etc.

I don't have a quote portal to hand but I'm pretty sure Finance Ireland's best rate is a 3 yr fixed - 2.4%.
176Ke x 2.4% x 25/20/15 years is 780e/924e/1165 respectively - depending on your age & preferred term.
Max lending age is 67(i.e a 47 yr old applicant would qualify for a 20 yr term) albeit they can go to age 69 on a case by base basis.

Good luck!


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