Movers Mortgage - less being offered than our existing

[Aislingob]

My husband and I are considering moving house and looking at mortgage options. We owe about 260k on our existing BoI mortgage. Our house is worth about 460k. In addition to the 200k equity, we have 200k to put towards a new house for 660k so that would mean we'd need about the same mortgage as our existing mortgage balance of 260k. The LTV would be just below 40%.

Since our last mortgage application 7 years ago my husband earns more money but I stay at home with the kids. He earns 75k p.a. in a safe job. I have inherited money from my father.

My husband spoke to BoI recently (and briefly) and they are saying they we could only borrow 220k as that's all our income would support given we now have kids and I earn nothing. They asked what we save and the inheritance was mentioned - they only wanted to hear about 'regular savings'; the lump sum didn't seem to register.

Allowing for a 1% increase in the rate we pay currently and increasing the term slightly would make our repayments the same. We've never even had to need a direct debit be re-presented; never mind miss a repayment. Surely the bank can see this?

Where do I take this from here? Based on the above, should I have an issue getting the 260k off them?

 

[RedOnion]

How many children?
Did you have a tracker mortgage?
What age is your husband?

 

[Aislingob]

3 children. Yes ECB+0.75%. He's 43.

 

[Brendan Burgess]

When you applied for the the mortgage 7 years ago, were you working? What was your income?

 

[Cervelo]

They asked what we save and the inheritance was mentioned - they only wanted to hear about 'regular savings'; the lump sum didn't seem to register.

How did you answer this, in your current situation are you able to save on a monthly basis or are you just about getting by each month

 

[RETIRED2017]

First thing you need to do before if you have to give up the tracker is work out the repayments on new mortgage over its life time and how you will structure paying it back , when I hear the words only give us a mortgage of 220 K on a household earnings of 75K supporting 2 adults and 3 children I would say they are all offering max unless the want to get into trouble again ,

safe job only works well if you get good health and still together by the time mortgage is paid off,

I would say good health in your working life is more important you can find and follow work once you have health to do so,

You need to be careful you are not risking all of the money you inherited from your father on the soaring value of the house you are looking at increasing the risk to both yourself and the lender which may mean higher interest rates in the future,


I have moved 3 times in my life time if I move again it will be to down size ,

I always kept within the lending guides lines the only money I risked was the equity already built up in existing house and a mortgage I could well afford with my income family of 3 also , The best Thing I ever did was to make sure I always had enough money to enjoy life with my kids without spoiling them ,


If you were to go off the value of the house you are looking at in 2013/2014/2015 values What LTV are you looking at,

You may be offered less but the repayments 220K may be higher than 260k when you add in the extra Local Property Tax/and insurance your total repayments will be higher,

There is a very good chance you are paying Local Property Tax on your present house at 2013 rates but you will be paying Local Property Tax on full 660K when you move,

 

[NoRegretsCoyote]

How did you get a tracker in 2011?


The issue is that you need a new mortgage, and no bank will give you ECB+0.75pp today. You are looking at 3.0% or so, and even if you were working the dynamics of a mortgage 2 percentage points more per annum is very different.

 

[RedOnion]

There is a very good chance you are paying Local Property Tax on your present house at 2013 rates but you will be paying Local Property Tax on full 660K when you move,

This is incorrect.
If it's 2nd hand, the 2013 valuation will continue to be used until end of 2019. If it's a new build, there is no property tax until end of 2019.

The issue is that you need a new mortgage, and no bank will give you ECB+0.75pp today. You are looking at 3.0% or so,

The OP stated that their current mortgage is with BOI. They have a mover mortgage that adds 1% to the rate for remainder of original term, so they are looking at ECB + 1.75%.

He earns 75k p.a

On 75k a year, he has to support 2 adults and 3 children.
His take home is about 4480, assuming no pension contribution.
Mortgage over 22 years, stressed at 3.75% is 1450, leaving just over 3k. That looks to meet the criteria - although just. I suspect the bank might have stressed at 2% above new lending rates rather than your rate. I don't have the exact amounts that BOI use for dependents.

Really all you can do is talk properly to the bank, and make a formal application. Make sure it's a mortgage advisor you are speaking to in the branch.

The key question is as Cervelo posted:

are you able to save on a monthly basis or are you just about getting by each month

I can't imagine there's much left over at the end of each month with 3 little ones.
You need to demonstrate that you are not already stretched. It doesn't matter that you only want to borrow the same as your current balance - the bank has to satisfy that you can afford it.

Apart from all the above, I agree with @RETIRED2017 sentiment. Do you really need a house worth 200k more? You're in a position to make a serious dent in your current mortgage, maybe aim to repay the balance within 7 years without too much stress, and be debt free before second level school starts.
Having moved house myself, with children, it's extremely stressful. It always takes longer than planned, and costs more to do renovations than you think it will.

Best of luck.

 

[RETIRED2017]

Thanks RedOnion
correction re the Local property Tax,

 

[NoRegretsCoyote]

Thanks RedOnion. I wasn't aware that BoI were allowing people to keep their tracker. This is long overdue.

The OP is sadly reflective of the one-size-fits-all approach to underwriting taken by the Irish banks these days:

1. No allowance for the fact that the wife has a history of earning and the potential to earn in future.
2. No recognition that they have not missed a mortgage payment.
3. No benefit given for the fact that they will have a very low LTV.

From the bank's perspective, there is really very little risk involved. There is a solid income and a track record of repayments. There is so much equity that if something goes wrong the bank will be able to call in the loan in full eventually.

From the borrower's perspective, if financial circumstances change for the worse there is room to sell up, pay off the mortgage in full and buy a house outright in a cheaper location.

 

[RedOnion]

This is long overdue.

It's been around for a long time, but until this year they restricted the tracker term to 5 years.

The OP is sadly reflective of the one-size-fits-all approach to underwriting taken by the Irish banks these days:

This is not entirely the banks choice. It's a requirement of the consumer protection code issued by CBI.

if something goes wrong the bank will be able to call in the loan in full eventually

You understand the repossession process in Ireland?

But, from banks perspective, you are correct - they would love to be lending to people like this.

 

[NoRegretsCoyote]

You understand the repossession process in Ireland?

Yes I do

Still, many forced sales take place quietly without any trip to the courts.

Even five years of non-payment arrears and protracted legal costs would not eat up all of the equity.

With the new mortgage the bank would actually have more buffer than it currently does!

 

[Aislingob]

Thanks everybody for the inputs. Its much appreciated.

When you applied for the the mortgage 7 years ago, were you working? What was your income?

Yes. I was. I was earning slightly more than my husband with share options etc. We had a combined income of circa 120k. I still have the shares etc. I'm frugal these days. The time with my kids and helping them with their homework is worth much more to us.

How did you answer this, in your current situation are you able to save on a monthly basis or are you just about getting by each month

To be honest, we're comfortably getting by. I've started to put 500 per month into a regular saver account because I realize the banks like to see savings and I did have the prospect of a move on my mind. I have started a part time job (school term, 38 weeks) in the mornings and earn 200 per week - all above board with whatever state deductions I am due to pay. We both have some dividends that we use for holidays etc. We no loans or any other type of debt.

First thing you need to do before if you have to give up the tracker is work out the repayments on new mortgage over its life time and how you will structure paying it back , when I hear the words only give us a mortgage of 220 K on a household earnings of 75K supporting 2 adults and 3 children I would say they are all offering max unless the want to get into trouble again ,

safe job only works well if you get good health and still together by the time mortgage is paid off,

I would say good health in your working life is more important you can find and follow work once you have health to do so,

You need to be careful you are not risking all of the money you inherited from your father on the soaring value of the house you are looking at increasing the risk to both yourself and the lender which may mean higher interest rates in the future,

I have a bit more number crunching to do but I'm very confident we can cover the extra interest plus a hike or two. We would have the option of reducing the repayment with a capital repayment if we ran into difficulties. Health is definitely wealth. Agree 100%. Hopefully, health is always on our side. If not, my husbands income continuance covers 75% of his salary and I am a qualified accountant so I would go back to work full time if I needed. The 200k isn't my full inheritance. There's about another 100k plus my shares and savings in my own name. My husband's equities were worth about 260k on Friday after being hammered since October ... the US stuff anyway, the ISEQ stuff less so, the UK stuff, well we're holding our breath bit.

This is incorrect.
If it's 2nd hand, the 2013 valuation will continue to be used until end of 2019. If it's a new build, there is no property tax until end of 2019.


The OP stated that their current mortgage is with BOI. They have a mover mortgage that adds 1% to the rate for remainder of original term, so they are looking at ECB + 1.75%.


On 75k a year, he has to support 2 adults and 3 children.
His take home is about 4480, assuming no pension contribution.
Mortgage over 22 years, stressed at 3.75% is 1450, leaving just over 3k. That looks to meet the criteria - although just. I suspect the bank might have stressed at 2% above new lending rates rather than your rate. I don't have the exact amounts that BOI use for dependents.

Really all you can do is talk properly to the bank, and make a formal application. Make sure it's a mortgage advisor you are speaking to in the branch.

The key question is as Cervelo posted:

I can't imagine there's much left over at the end of each month with 3 little ones.
You need to demonstrate that you are not already stretched. It doesn't matter that you only want to borrow the same as your current balance - the bank has to satisfy that you can afford it.

Apart from all the above, I agree with @RETIRED2017 sentiment. Do you really need a house worth 200k more? You're in a position to make a serious dent in your current mortgage, maybe aim to repay the balance within 7 years without too much stress, and be debt free before second level school starts.
Having moved house myself, with children, it's extremely stressful. It always takes longer than planned, and costs more to do renovations than you think it will.

Best of luck.

Thanks for the clarifications. One of the reasons I am looking for the same amount is because I could carry the same amount for teh same term at 1.75%. Point absolutely taken about moving with children. Whether we need to put the 200k in is definitely very pertinent. However, we have a lot of assets. We've seen our US equities hammered. Part of me just likes the idea of enjoying the money we have. Moving closer to the village for walk and a drink together or a meal when the kids are bigger; having the kids closer to public transport moving to a more mature estate; bit more space is all playing a part. The alternative is to pay something off the mortgage or to play it extra prudent and watch our assets grow a couple of percent p.a. In the future, if we did sell and down size, the extra we put in would be free of CGT. We've also considered 200k cash into a holiday home. I'm more coming down on the side of a bigger home in Dublin.Thoughts on this as an aside, welcome!

Thanks RedOnion. I wasn't aware that BoI were allowing people to keep their tracker. This is long overdue.

The OP is sadly reflective of the one-size-fits-all approach to underwriting taken by the Irish banks these days:

1. No allowance for the fact that the wife has a history of earning and the potential to earn in future.
2. No recognition that they have not missed a mortgage payment.
3. No benefit given for the fact that they will have a very low LTV.

From the bank's perspective, there is really very little risk involved. There is a solid income and a track record of repayments. There is so much equity that if something goes wrong the bank will be able to call in the loan in full eventually.

From the borrower's perspective, if financial circumstances change for the worse there is room to sell up, pay off the mortgage in full and buy a house outright in a cheaper location.

Just my thoughts. I hadn't realized the BoI mover terms until very recently - very welcome from my perspective.

It's been around for a long time, but until this year they restricted the tracker term to 5 years.


This is not entirely the banks choice. It's a requirement of the consumer protection code issued by CBI.


You understand the repossession process in Ireland?

But, from banks perspective, you are correct - they would love to be lending to people like this.

That makes me feel much better RedOnion. A formal application is probably the way to go as you've suggested.

Should I dig up an old bank contact that I used previously in BoI or just apply as an existing customer and resort to the contact if the offer of the 260 is not forthcoming? Apart from selling the children, is there anything else I could consider doing in advance of an application?

 

[RedOnion]

is there anything else I could consider doing in advance of an application?

Yes, set up a regular saver account and put in a few hundred a month to show you can afford it if you need to.

Check if your previous contact is still working in mortgages. Most of the underwriting in centralised, but if you have a contact they might be able to present your case for you.

However, we have a lot of assets.

You have other, non pension, assets apart from the 200k? Have you considered liquidating some of them and reducing the amount you need to borrow anyhow?

 

[Aislingob]

Yes, set up a regular saver account and put in a few hundred a month to show you can afford it if you need to.

Yes. Have one and will keep the 500pm up. Can't totally demonstrate the 500 pm is solely from income e.g. received money from Standard Life Aberdeen recently as part of the share consolidation but the account is showing 500 lodgement per month since June.

Check if your previous contact is still working in mortgages. Most of the underwriting in centralised, but if you have a contact they might be able to present your case for you.

Will do. I got my first mortgage through her when I was 25 and then the one I am on now.

You have other, non pension, assets apart from the 200k? Have you considered liquidating some of them and reducing the amount you need to borrow anyhow?

After the putting in the 200k equity plus the 200k cash (400k), we'd still have about 350k (not pension related) (Maybe more if the Santa Clause rally plays out over the next week or so. I'm not holding my breath though.) Low interest rates and volatile global markets is one of the reasons I'm looking to put more into the family home. I suppose one of the reasons we want to go for the 260k is because we would get it at 1.75% and we find the repayments very affordable at the moment. But liquidating more I should consider - thanks again.

 

[RETIRED2017]

Aislingob
In your first post you were on about extending the term of the mortgage ,It is nice to be Mortgage free before you retire in fact if you have your mortgage paid off you husband might retire early ,
I never seen a Brink's van follow a hearse to the cemetery''

 

[Aislingob]

I joke with him that if he retired early, I would definitely go back to work full time! Although by then, nobody would have me. I'd only extend the term slightly to keep the repayment the same as existing - primarily to keep the bank happy. If he did decide to retire early, there would be the option of his retirement lump sum, I suppose. But point taken, mortgage free is a great position to be in.

 

[RETIRED2017]

I joke with him that if he retired early, I would definitely go back to work full time! Although by then, nobody would have me. I'd only extend the term slightly to keep the repayment the same as existing - primarily to keep the bank happy. If he did decide to retire early, there would be the option of his retirement lump sum, I suppose. But point taken, mortgage free is a great position to be in.

When a man retires, his wife gets twice the Husband but only half the income,
A retired husband is often a wife's full-time job ,

 

[NoRegretsCoyote]

If I read it right you have €550k in cash and other liquid assets. Why not use all of this to buy a house for cash? Potentially in a better location than now.

Your exising house would turn a profit as a rental, even after tax. In the meantime you could save to fund renovations in the new house.

 

[Aislingob]

If I read it right you have €550k in cash and other liquid assets. Why not use all of this to buy a house for cash? Potentially in a better location than now.

Your exising house would turn a profit as a rental, even after tax. In the meantime you could save to fund renovations in the new house.

Have considered this somewhat but it would leave us with all our money tied up in property. We like the idea of having some liquid assets to pay towards college fees etc in years to come. Maybe we might also be able to use some of the money to set the kids up with a house deposit when that time comes. Before the market meltdown of the last couple of months, we were focused on growth. That's been a risky business.