Tryin to switch from commercial mortgage to Private Dwelling mortgage..banks won't facilitate

Lookingforadvic

Registered User
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Hi all, looking for some advice.
When I took out commercial mortgage - to buy agri land - there was no dwellings on land and so could not apply for PD mortgage.
Subsequently got planning to build home on the land, built house from money from the sale of my home in another location, now in the process of creating new land registry portfolio number of newly built house on 1 acre. This will be taken from the larger land portfolio number. Commercial loan secured on the larger portfolio number.
Am finding my current bank and another bank unwilling to finance the switching of outstanding mortgage from commercial mortgage to residentiàl mortgage 'no appetite they said'... No arrears, not in negative equity, AAA credit history...Naturally I want to take advantage of lower residential mortgage rate compared to higher commercial mortgage rate... I know my commercial mortgage lender will loose out about 3% but I can't understand why another bank doesn't want a new residential mortgage customer..I'm baffled about how to make such a switch..any advice would be welcome.
 

RedOnion

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3,132
So, in summary, you're looking to take out a residential mortgage to repay a commercial loan?
What are the numbers involved?
 

Brendan Burgess

Founder
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37,832
So you want to borrow €160k to "buy" a house worth €430k?

Try a mortgage broker to present your case.

Brendan
 

Lookingforadvic

Registered User
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12
I already spoke with an Authorised advisor, they had conversation with two banks and 'no appetite' from either because of 'the purpose'...using home to clear commercial loan...
Tried to explain that it was always our intention to buy agriland to part time farm as well as move to live on land once planning granted...it was never our intention to just part time farm..We always wanted to move to live on farm (knowing we would need to continue our jobs off the farm as well)...

It seems like it's a no go area to move commercial debt into home debt!! (only that way cos when we purchased land there was no planning on it for home, so we couldn't have applied for residential mortgage on a house that didn't exist, so the only source of funds had to have been commercial mortgage)
 

Brendan Burgess

Founder
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37,832
If you were trying to take out a mortgage of €160k to buy a home worth €430k, it would be a straightforward transaction.

So, you could investigate the following.
Sell the house to a relative or friend for €160k.
Then apply for a mortgage of €160k to buy it back from them.

The problem with this is that they would have to pay €4k stamp duty buying it from you and you would have to pay €4k stamp duty buying it from them.

If the stamp duty were only on the €160k , instead of the value of the property, it would be worth doing.

But not sure if there is any legal way around this.

Brendan
 

RedOnion

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3,132
Unfortunately this is a black & white issue for the main banks. They had a lot of bad debts during the crash in these scenarios, so just won't touch them now.

What interest rate are you paying on the commercial loan, and you're obviously getting tax relief on it if you're farming?

You could try refinance it with Finance Ireland, they might have a different view if it. And then after 12 months you could switch to any lender without issues.
 

Lookingforadvic

Registered User
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12
The differential rate between commercial and residential is 2.3% (hard to ignore it)
Finance Ireland was the bank that had issue with purpose.

I'm frustrated with current lender, have been AAA customer for 30 years and it means squat..
I've requested meeting with bank manager to try to convince them to reduce commercial rate.The problem is, it's a cartel and they know the other Banks won't, so they don't have to!!
Whatever happened to 'in the customers' interest'..that code means nothing!!

Anybody know of anybody/company who would do bridging...I think this is my solution but I can't identify any org/finance entity/ person happy to make a higher than normal % on their money on deposit..

Anybody know if a company who would be open to this.
 

Lookingforadvic

Registered User
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12
Forgot to say..thanks so much to all so far for your input..helping to clear my mind..bridging is the way just I can't id who does this in Ireland???
 

RedOnion

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3,132
bridging is the way
Say you get bridging from a private lender (banks don't do it) then what? No bank will refinance it for you. You're back to the same situation.

I'm surprised Finance Ireland weren't interested - this is the kind of area Pepper Money were interested in before they were taken over.

You need to get yourself prepared - split house into a separate folio so if it becomes possible then you can get a mortgage. It's a bit late now, but you should have got a self build mortgage to finance it.

Also, shop around on the agri rate. Secured lending should be possible at 4.5%, and check if you qualify for any of the SBCI or EIB rates. Ask your accountant - if he deals with farm accounts, he'll know what other farmers are paying.
 

Lookingforadvic

Registered User
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12
Thanks Redonion, yes you are correct re self build mortgage but I had a lot personally going on at the time (battling cancer) and so my focus was entirely on my health and making sure our kids actually had a home to live in...if the inevitable happened.

What does SBCI and EIB stand for btw?
 

RedOnion

Frequent Poster
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3,132
SBCI is a strategic banking something... Government funded loans at reduced rates for targeted areas, but available via the main banks.

EIB is a similar one 50% funded by the European Investment Bank. Again, available through the banks.

I know of young farmers that got interest only loans at 2.75% for farm development work. It's not my knowledge area, despite being from a farming background.
 
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