2nd home mortgage - max amounts

[SN9]

Hi,

I've been trying to find out how much of a mortgage we'd get approved for, for a second mortgage for a holiday home. Any brokers that I've approached ask for reams of paperwork before even considering the question. I don't want to go gathering up all the paperwork if they're just going to turn around and say no!

Has anyone been through this? I'm assuming that they will give 3.5 times joint salary less our current outstanding mortgage. Is this correct? So this would leave the total mortgage at less than 3.5 times joint salary. Would age come into it (we're both late 40s)?

We have an ex-Danske tracker so no option to remortgage our current house.

Thanks!

 

[Dave Vanian]

I'm assuming that they will give 3.5 times joint salary less our current outstanding mortgage. Is this correct?

Yes but that's only part of it. They will also look at any other ongoing financial commitments you have, e.g. short-term debts, children etc.

A big thing they look at is affordability. Let's say your new mortgage is going to cost €750 per month. A bank will look for evidence in your bank statements going back around six months that you have the ability to pay €750 per month. The most popular way of proving this is to show that you've been saving at least €750 per month for the past six months, on top of meeting all your other commitments.

Would age come into it (we're both late 40s)?

If you're in PAYE employment, banks would generally want to see your mortgage paid off before your contractual retirement age, or no later than age 68. Different banks have slight variations on this, e.g. some want you to be finished no later than age 65.

In calculating your proposed mortgage repayment, you'd be looking at a 15 or maybe 20 year term, which will have a higher monthly repayment than a 25 or a 30 year term. This will have an impact on the monthly affordability calculations mentioned above.

Bear in mind you'll need a deposit of at least 30% for a holiday home.

 

[SN9]

Thanks for the very comprehensive answer. Yes 30% deposit is sorted,and able to save over 2k a month at the moment.
No loans or credit card other than mortgage.
We have 3 primary school children, no childcare costs.

Do you have any idea what the reduction for children would be?

 

[Dave Vanian]

Do you have any idea what the reduction for children would be?

That varies from one lender to the next, but as a general idea, if your €2,000 per month saving is significantly more than the monthly repayment on the proposed mortgage, then the application is probably a runner. Bear in mind that if you save €2,000 per month but withdraw €6,000 from the savings account twice a year, then you've really only saved €12,000 in the year and that would only count as €1,000 per month savings for this purpose.

 

[Brendan Burgess]

Would age come into it (we're both late 40s)?

for a second mortgage for a holiday home

We have 3 primary school children, no childcare costs.

You are in your late 40s and you have a €200k mortgage and you have three kids...

and you want to borrow money to buy a holiday home?

I think you should head over here:

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...

www.askaboutmoney.com

Sounds to me as if paying down your mortgage or building up an educational fund would be a much higher priority.

Brendan