Funding a new car via extension of the mortgage

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munster_fan

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Looking to borrow €25K over 4 years to purchase a new car.
I have a tracker mortgage with AIB. To avail of the best interest rates I was thinking of the following:
- Borrow the €25K from the mortgage account
- Increase the monthly mortgage payment such that the €25K is paid back over the 4 years.
Thus the loan will be paid back in the same time frame as a car loan but with lower interest charges.

Will the bank allow me to increase the mortgage in order to fund a car. Or can I just tell them that I am doing a house extension (will they look for documentary proof that I am intend extending the house).
Note: By adding the €25K to the mortgage I will still be below the 60% loan/to value threshold for the tracker mortgage.

All feedback welcome!
 
Will this affect your mortgage protection in any way and will the bank require a valuation?
 
I would imagine that if you tell the bank that it's for a car they won't allow your loan at the mortgage rate 3-4%. much lower than the 8-9% they will charge you on a persional loan.

If you tell the bank the whole loan is for home improvements a problem for you will be that you will be given tax relief at source which, you don't want, as Revenue wouldn't be too happy about giving tax relief on a car loan.

I wonder could you work out what tax you have been allowed and go into your local tax office and repay this money to them as concience money. I'm sure that the tax officials aren't looking for a way for the (honest?) bank to charge you higher interest.

You will need to engage a solicitor so that the banks interest in the property is noted but the bank don't look for receipts estimates etc.

Murt
 
>Will this affect your mortgage protection in any way and will the bank require a valuation?
Didnt think about the mortgage protection - will look into it.
I think the bank will only require a valuation from a 3rd party if the loan-to-value ratio is above a certain threshold.

> that you will be given tax relief at source
hadn't thought of that ?

>go into your local tax office and repay this money to them as concience moneyWould imagine this could be a complicated transaction and could cause confusion.
> You will need to engage a solicitor
Was hoping to do this without a solicitor.
 
Hi

I am currently arranging finance in exactly this way for a car too - except my mortgage is with a building society. They are giving me a good variable rate of 3.75% which means I can pay it off early without penalty if I manage to get a few quid extra sometime. You should check this out with AIB too.

The TRS is not an issue as you are unlikely to be below the ceiling for interest relief even after you reduce the eligible part of your loan by the carloan amount - lookup the website www.revenue.ie and search for TRS FAQ

HTH
 
hullabaloo said:
They are giving me a good variable rate of 3.75%
Click to expand...
While that's a good rate for a car loan it's not a good rate for an owner occupied PPR mortgage.
 
yes i should have pointed that out - I have a lower rate for the mortgage alright - 3.75% is for the car only.
 
Is it not the case that if you have equity in your house then the Bank won't really care what the money is for? Sure don't Permanent TSB have a Mortgage Cheque Book service that allows you to borrow money at mortgage rates once you have the equity?
 
My (probably unpopular) opinion is that if you need to borrow, you can't afford a €25k car. By a €5k car while you save for a bigger/better car.
 
Agree Rainy Day and if you do not pay off the cost of the car quickly from the mortgage it becomes a very expensive car.
 
munster_fan did say that the car loan top-up would be repayable over 4 years so at least it's not spread over the full term of the mortgage.
 
I'm hoping to do the same thing...I recently got my first mortgage as a single buyer in the past 6 months - 92% LTV ratio. New house has gone up 10K and will probably go up again in next phase to be released in March or so though increasing value of the house isn't a concern for me as it is my home.

I want to borrow 15K over 5 years for tiling and decking, pay off high interest rate credit union etc.

I didn't qualify for a 100% mortgage at the time but recently got 25 - 30% pay increase due to low wage for field etc.

I look at banking 365 and see that I am pre-approved for €15K at whatever high interest rate they charge. I would still probably qualify for a lower rate graduate loan with them 7% or so.

Would I better borrowing from BOI or to get a top up mortgage? Or would I be entertained for a top up mortgage so soon even with pay increase.

Would have SSIA with some savings in it to be released Apr 2007 but don't want to touch it until then.

Any info appreciated.

Thanks.
 
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