Can't trade down due to Mortgage Credit Directive ban on sterling mortgages

Discussion in 'Mortgage arrears & negative equity case studies' started by Daisy duke, Nov 10, 2017.

  1. Daisy duke

    Daisy duke New Member

    Posts:
    6
    Purchased a house in 2006. Relationship with partner broke down after 12 months and I took on the mortgage in my sole name. At the time the lender allowed my 6.5 times loan to income!! Fast forward to now I want to sell the property and get a smaller house . We are in negative equity and I thought I would be able to approach the bank for a negative equity trade down. All was fine until I encountered the Mortgage Credit Directive. Both my husband and I are paid in sterling and although the bank are happy to accept our current monthly payments they will not grant us a mortgage on a new property due to foreign currency income.
    Can’t switch mortgage to alternate bank due to negative equity.
    The house is on the market at present for €300k and we have secured an offer of €285. We have seen a property we are interested in for €150k. We can pay the negative equity balance from savings but are short on deposit for new property.
    Overall we want to reduce our debt by almost 50% but seems mad that we are not allowed to do this.
    We have perfect credit history with no arrears, both in full time employment earning £50k each. Any advice as to what we can do?
     
  2. RedOnion

    RedOnion Frequent Poster

    Posts:
    542
    Hi,

    A few questions:
    Which bank is Mortgage currently with?
    What's the balance ( or How much negative equity)?
    How much total savings have you got (Euro equivalent).
     
  3. Daisy duke

    Daisy duke New Member

    Posts:
    6
    Hi,

    Mortgage is with KBC.
    Balance of mortgage is €300k, currently valued at €280.
    Savings of €10€.

    When I took the decision to downsize U hoped I would be eligible to a new equity trade down mortgage, which I discovered I’m not. Well not with KBC anyway!
     
  4. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    33,045
    Hi Daisy

    But even if you have a deposit, you won't be able to get a mortgage will you?

    Let's say that KBC allowed you to pay the shortfall over 10 years at the mortgage rate, what difference would that make?

    Is it a cheap tracker? If so, then you should hold onto the property, rent it out and rent a property more suited to your needs.

    Brendan
     
  5. Daisy duke

    Daisy duke New Member

    Posts:
    6
    Hi

    Don’t understand, if we had deposit why would we not be able to get a mortgage?

    No it’s not a cheap tracker, currently paying 4.25% with no option to switch to cheaper alternative.

    Renting not really an option due to rural location . Would only achieve approx €600 pm rental but have repayments of €1500. Limited properties available to rent again to location.
     
  6. TLO

    TLO Frequent Poster

    Posts:
    183
    This has come up before. The real issue is that you and your husband are paid in a "foreign" currency, GBP. Have a look at this thread:

    https://www.askaboutmoney.com/threa...-employees-paid-in-foreign-currencies.198326/

    It would appear that some folks have been successful with Irish mortgage applications, denominated in EUR, even though they are paid in GBP. But I note that KBC is one of the banks that won't entertain such an application.
     
  7. Daisy duke

    Daisy duke New Member

    Posts:
    6
    Thank you, yes KBC have firmly closed the door on foreign income. They will however continue to accept my current payments from the source, so it is quite a bitter pill to swallow!
     
  8. RedOnion

    RedOnion Frequent Poster

    Posts:
    542
    It's worth bearing in mind that even if you were being paid in Euro, you still wouldn't meet KBCs criteria for negative equity mover. You need to have at least 10% deposit (plus legal fees and stamp duty).
    At the salary levels and price point you're looking to buy, I'm sure you will have other options with other lenders down the road, but you'd need at least 20% deposits at that point. I'd concentrate on getting your current property out of negative equity (if you don't sell it now) and building up savings as much as possible over the next 12 months plus, and work from there.
     
  9. Daisy duke

    Daisy duke New Member

    Posts:
    6
    That criteria applies to a negative equity trade up, I am trying to trade down by around €130k - thus reducing risk for both parties, so not sure how it doesn’t make sense.
    I will sell as it is difficult to realise tangible savings with current repayments of 1600 pm. It would take me about another 10 years to acquire the 20% deposit
     
  10. RedOnion

    RedOnion Frequent Poster

    Posts:
    542
    I agree with you on the making sense part, but if it wasn't for offerings like the negative equity trading up products, people would need 20% deposits under CBI rules.

    I'm not aware of any bank that distinguishes between trading up or down with a negative equity mortgage, but I'm open to correction on that.
     
  11. Daisy duke

    Daisy duke New Member

    Posts:
    6
    KBC have clearly defined criteria for both negative equity trade up and trade down products, and the 10% deposit applies only to the trade up product, and I don’t have an issue with this.

    My issue is just around the salary piece, if I was with AIB or BOI it wouldn’t be a problem
     
  12. RedOnion

    RedOnion Frequent Poster

    Posts:
    542
    My apologies, I didn't realise that KBC offered that option. Please disregard my earlier posts.
     
  13. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    33,045
    Check out the code of conduct on mortgage arrears.

    If you are facing repayment problems , they are supposed to facilitate a trade down. Not sure where the mortgage credit directive fits in though