Key Post How the proposed limits will affect you...

[Brendan Burgess]

First time buyers - very little impact

Loan to income: 3.5 times.

Loan to Value: 90% of the first €220,000, and 80% of the balance over €220,000



Exemptions

If you have a valid Approval in Principle before the regulations are official ( probably early February), you are not affected.

The lender can exceed the LTV limits in some circumstances, so even if you want to borrow 90% of €300,000, there is a good chance that you will get it.

The lender is allowed to exceed the 3.5 times LTI for 20% of its new lending in any one year.

What is a first time buyer?
A first time buyer is defined as a borrower to whom no housing loan has
ever before been advanced. Where the borrower under a housing loan is
more than one person and one or more of those persons has previously been
advanced a housing loan, none of those persons is a first-time buyer.
(page 8 of [broken link removed])

 

[Brendan Burgess]

Second time Buyers who are not in negative equity

You can borrow a maximum of 3.5 times your gross income

You can borrow a maximum of 80% of the value of the property i.e. you must have a 20% deposit

Exemptions

If you have a valid Approval in Principle before the regulations are official ( probably early February), you are not affected.

The lender is allowed to exceed the 3.5 times LTI for 20% of its new lending in any one year.

The lender is allowed to exceed the 80% LTV maximum for 15% of its lending in any one year.

 

[Brendan Burgess]

Second time buyers in negative equity

The 80% LTV restriction does not apply to you as you are in negative equity.

You may borrow up to a maximum of 3.5 times your gross income.

The lender is allowed to exceed the 3.5 times LTI for 20% of its new lending in any one year.

In practice, it's probably unlikely that the lender will exceed the 3.5 times limit if you are in negative equity.

Note: Fewer than 300 NE mortgages were issued in 2014.

 

[Brendan Burgess]

People who want to switch to another lender for a better rate

You are exempt from the regulations as long as you don't increase the amount you borrow.

 

[Brendan Burgess]

Borrowers who are trading down due to mortgage arrears

You are exempt from the regulations.

 

[Brendan Burgess]

Buy to let investors

The Loan to Income limits do not apply to you.

You can borrow a maximum of 70% of the value of the property.

The lender is allowed to exceed the 70% LTV limit for 10% of its loan book.

 

[Brendan Burgess]

From the Irish Times today

What about equity release and top-up mortgages?

These will be covered. So if, for example, you want to extend your mortgage to put on an extension, then you will need to have a 20 per cent deposit.

 

[odyssey06]

Two questions about the new rules...
(i) If I am trading up to second property, can I use the positive equity from my first home towards the deposit for second home?
(ii) It's not clear to me how these rules will work in the case of tracker move mortgages where the property is in positive equity... is that considered a 'new' loan and subject to the limits?

 

[Nicci29]

Hi Brendan
Sorry this may be an impossible question to answer.
I have been approved as a single applicant for approx 4.3 times my salary and am looking at buying an apartment (2 bed) . My mortgage approval is valid until July. Im just wondering what are the chances of being approved for the same amount if i have to reapply given the new rules ?

 

[Brendan Burgess]

Two questions about the new rules...
(i) If I am trading up to second property, can I use the positive equity from my first home towards the deposit for second home?

Yes, assuming you sell your first property. I don't think you can cross secure a second property on a first property which you retain.

(ii) It's not clear to me how these rules will work in the case of tracker move mortgages where the property is in positive equity... is that considered a 'new' loan and subject to the limits?

It's a simple trader upper mortgage - the interest rate is not relevant. You will need 20% of the cost of the new house, unless you are in negative equity, in which case you will be exempt.

 

[Brendan Burgess]

Hi Brendan
Sorry this may be an impossible question to answer.
I have been approved as a single applicant for approx 4.3 times my salary and am looking at buying an apartment (2 bed) . My mortgage approval is valid until July. Im just wondering what are the chances of being approved for the same amount if i have to reapply given the new rules ?

The 3.5 times limit applies to you. However, they are allowed to exceed the limit in 20% of cases, so you would probably be included in that if you have already been approved. It's probably better not to take any chances and buy the apartment while the loan approval is valid.

Brendan

 

[peno]

Brendan,

RE the negative equity mover. Have they given any clear guidance on this except for saying the normal rules do not apply.

My logical expectation would be that the mover would still need 20% of the new purchase price. ie the same deposit as someone with negative equity. The final LTV would then be more than 80% of the total loan amount including negative equity but then this would make it a level playing field for all movers.
Previously the banks required 10 or 15% deposit anyway for this anyway.

 

[Brendan Burgess]

My logical expectation would be that the mover would still need 20% of the new purchase price. ie the same deposit as someone with negative equity.

I am not sure why you have logical expectations. The Central Banks rules are extremely clear, whether they are logical or not.

People currently in Negative Equity are exempt from the LTV rules, but not from the LTI rules.

I don't think it can be any clearer than that. Each lender has its own rules and they can 1) Refuse moves as in the case of Danske Bank or 2) Require a deposit of 10% as in the case of ptsb.