2 mortgages while moving home? Central bank lending criterias

C

Cilar

Registered User
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We're looking into buying and moving to a new house. Being in a chain put us at a disadvantage based from what I understand when visiting a few new houses. Given that bridging loans no longer exist in Ireland, I wonder whether there are some common way to do this, as smoothly and fast as possible, ie: without having to rent for a short period of time between the moment when we sell house and get the new house.

Current house:
- Value: 240k. Mortgage left: 128k over 23 years (around 680 euros / mth).

New house:
- Value: 375k.

We have 20% of 375k as deposit (75k), so I could "technically" get a second mortgage for 300k and still meet the central bank deposit criteria, buy the new house, move to that house, and then sell the old house (or maybe rent it, we haven't decided yet). Assuming that it takes 3 months to sell the old house, I would have at worst to pay 2 mortgages for 3 months, but I'm sure we can minimize this period of time by putting on market earlier. We could also rent it for a period of time as the rent would more than cover the mortgage even if it moves to a BTL rate.

A few online banks calculators tells me that they would lend us 300k, including with the existing 680 euros monthly repayment ("loans commitments"). Now, the old mortgage + new mortgage would be 128+300=428k, which is way above 3.5 times our income, so I'm not fully certain that we won't get rejected at a latter stage in the process due to the central bank rules. Perhaps someone knows better?

Before I go further in an application, I was wondering whether:
- Anyone may have experience in doing the same to move house
- There may be other ways to move house in a smooth way when in a chain?

Thanks.
 
What are your salaries?

As I understand it, once you meet their affordability criteria, most banks are fine with investment properties which do not seem to count towards the Central Bank Rules.

e.g. I have an investment property, and bought a property at 75% LTV and around 3.5 times income. The investment property is at 66% LTV.
 
From what I can see, its very hard these days to get a second mortgage for a PPR and the days of the bridging loan are well gone. Most banks wont let you draw down your new mortgage until the old one is paid off.
 
Not in my experience. A significant cohort of my friends and colleagues are getting mortgages to buy PPRs whilst hanging on to their starter homes.

In the main, the investment properties are on trackers.
 
Gordon Gekko said:
A significant cohort of my friends and colleagues are getting mortgages to buy PPRs whilst hanging on to their starter homes..
Click to expand...

I suspect that's one of the reasons the IMF is pressing the Central Bank to substitute a debt-to-income ratio for the current loan-to-income ratio ASAP.
 
Sarenco said:
I suspect that's one of the reasons the IMF is pressing the Central Bank to substitute a debt-to-income ratio for the current loan-to-income ratio ASAP.
Click to expand...

Hopefully any such move will take account of the cost of the debt and the income generated by the property. Many of these properties have gone from being massively underwater to being massively profitable, whilst maintaining the cheap funding. For example, when my current tenant moves out, my investment should be close to cashflow neutral (i.e. the rent should cover everything including capital repayments and tax). Clumsy treatment of that investment just wouldn't be fair.
 
Understood but the macro prudential rules are designed to enhance the stability of the financial system.

It's obviously possible that you and/or your tenant will lose your jobs or suffer a significant reduction in income so the banking system has a greater exposure to you as a borrower than would be the case if your only had a PDH loan. I'm certainly not suggesting that your loans are at imprudent levels but I do think it would make sense if the rules addressed a borrower's overall debt-to-income position.
 
Gordon Gekko said:
Not in my experience. A significant cohort of my friends and colleagues are getting mortgages to buy PPRs whilst hanging on to their starter homes.

In the main, the investment properties are on trackers.
Click to expand...

I'm with Gordon on this one. An asset which is any where around positive equity with a tracker is a very valuable investment in the right location.

Not sure that any of these will be cash flow neutral. I did an exercise on a 7% yield with a .75% tracker over 20 years (the remaining term) and client still had to sub it by €5k per year.

Still an outstanding investment for €5k per year!
 
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