Need to downsize, how to get mortgage?

[gingernut]

We currently have a mortgage with AIB. We badly need to move; the location doesn't suit at all.

We applied for a new mortgage with AIB and they said we were well within their lending criteria for the amount we were applying for, which would leave us with a monthly payment €400 a month smaller than our current one. We got approval in principal. They sent the application on to their senior people to finalise it, and they refused, on the basis that we have too much debt.

We do have a couple of loans and a hefty credit card balance, but we've never missed a payment. And I would have thought that the fact that we're trying to shrink our mortgage repayment to have more money available to pay off the debt would go in our favour, but apparently it's not in the best interests of the bank, so it's a non-runner. They didn't refuse our application, just said it was premature and to come back when we have paid off some of the debt.

Is there any point in going to a mortgage broker with a problem like this?

 

[Brendan Burgess]

Probably best to give the numbers to get more informed suggestions.

Value of your home
Amount of your current mortgage
Amount of debt
Value of target home

 

[gingernut]

Sorry, Brendan!
Current home value: 295,000
Current mortgage: 109,000
Debt: 30,000
Target home value: 250,000
The mortgage would be over a 19 year term, rather than our current 13.

 

[Monbretia]

Were you intending clearing all the personal debt from the sale price or did you want to use all the profit from the sale towards the new house?

I would have thought that if you applied for an amount which was for new purchase price less balance of equity after clearing debt that it should work. However of course the bank may see the debt as a lifestyle/budgeting issue especially a large credit card bill.

 

[Brendan Burgess]

Are you planning to sell your home first? This would leave you with €165k cash and a need for a mortgage of about €90k. Should be easy to get.

But I presume that they refused you a "bridging loan" to buy the other house first and then sell your own. You don't give your salary, but it's clear that you can't support two mortgages as you have run up such big unsecured debt.

Brendan

 

[Dr Strangelove]

Current home value: 295,000
Current mortgage: 109,000
Debt: 30,000
Target home value: 250,000

Is this really the solution? Estate agents fees, solicitors, stamp duty, removal costs, etc will eat up a big share of the gain of €45k.

Maybe try a money makeover. It’s hard to give this advice without knowing your broader circumstances.

 

[gingernut]

The aim would be to buy and sell at the same time.

Yes, I think it's the solution; lengthening the term will reduce the repayments, and in any case, the main aim here is to change location.

 

[Monbretia]

Well you could still buy and sell the same time and as a condition of the new mortgage the existing debts would have to be cleared from proceeds of sale, have the bank proposed that option? Or is it a blanket no altogether. You would basically be taking out much the same mortgage size again but without the short term debt going forward.