Equity Release Conflicting Information

Hi All,

Looking for some advice as Ive been getting conflicting information on the phone to various banks. Im looking at the possibility of borrowing about 80K from a family member to build an extension this summer and in the near future releasing the equity and borrowing to pay back the loan.

BOI have general info on their website around this possibility and I was told by one adviser some weeks ago it is possible and they would consider it, obviously depending on the LTV and amount of equity etc. Today I was told by another BOI adviser they only release equity for home improvement loans.

The problem is I will not be in a position to apply for a loan for at least 18 months (as my wife is on a career break) but the extension is needed ASAP!

There is about 260 K on the current mortgage, Id say its worth about 290,000 we've a combined income of about 80,000, no other loans, 3 kids!

Any advice? Obviously I now there's no guarantees but I just want to know if its as has just been stated to me i.e banks don't do that ever, or if they consider equity release for paying loans on a case by case basis!

Thanks

I think it's very unlikely that your existing lender, BoI, I presume, will give you €80k to pay off a family loan, irrespective of the purpose of that loan.

It's possible that another lender would refinance the whole mortgage. The most likely candidate being Pepper, but that would be at a higher than market rate.

I suggest that you apply to Bank of Ireland now for the loan. They will refuse you. You could then ask them if they would refinance it after 18 months. When they see the reason you initially borrowed the money, they might do so.

Brendan

What's the value going to be on completion of the extension? That will determine if you have any hope of refinancing but it's a risky thing to do as it could well be hard to get an equity release for work already completed.

Brendan Burgess said:

I think it's very unlikely that your existing lender, BoI, I presume, will give you €80k to pay off a family loan, irrespective of the purpose of that loan.

It's possible that another lender would refinance the whole mortgage. The most likely candidate being Pepper, but that would be at a higher than market rate.

I suggest that you apply to Bank of Ireland now for the loan. They will refuse you. You could then ask them if they would refinance it after 18 months. When they see the reason you initially borrowed the money, they might do so.

Brendan

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Thanks Brendan, yes its BOI, refinancing would probably be a bad idea as we would most likely lose the tracker we currently have making payments then unsustainable! Sorry Im not sure I understand the logic behind them possibly refinancing after 18 months but not if the initial application is 18 month! Any chance you could explain it to me again!

Monbretia said:

What's the value going to be on completion of the extension? That will determine if you have any hope of refinancing but it's a risky thing to do as it could well be hard to get an equity release for work already completed.

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Hi Monbretia, Id make a rough estimate that once the work has been completed the house would increase significantly in value as it will be going from a two bed to 4 bed in South Dublin and my understanding is family homes ion the area are high in demand, thats the logic I am working of, going to them with substantial equity to borrow on the strength of it

Just having substantial equity though doesn't mean you will fit their criteria for releasing it. How much extra are you going to be looking for? Is it an amount that would even fit within an equity release type product or is it going to be a second mortgage on the property, not a major issue either way but you'd need to know what criteria will apply. If it's that big I presume you need planning permission etc, make sure you have all your costings and engineer type sign offs as well. You see once the deed is done then you are no longer borrowing for home improvements, you are borrowing to refinance a family loan, that is unlikely to be within the criteria for refinancing/equity release.

I know it seems obvious to all of us that while yes it's now a family loan it was used for home improvements but logic like that doesn't always exist in banks anymore!

I hear you on the logic part of banks! On the estimates I did i think the amount we want to borrow would fall within the LTV ratio but I suppose like you say its all about the purpose of the loan and paying back a family loan may not fit the bill unfortunately!