Viability of getting a mortgage!

K

Kmac

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I recently built a house with a friend, currently valued at €230,000 builders finish (would probably be valued up around €250K fully furnished). As we both worked in the construction industry we thought it a good idea. We have a joint mortgage of €150,000 interest only for 2years. The plan was to sell the property and split the profits. However due to work commitments my partner is moving abroad for 12months and is offering me his share of the house for €100,000. I think this is a good offer considering i would own the property valued at €230,000, having cost me €175,000?

Could someone please advise me what my chances are for getting a mortgage to buy my partner out considering i already have a joint mortage (my share being €75,000)? Im living at home and have a net salary of €36K per annum and debts amounting to €20K which im hoping to combine into a new mortgage!! Because im living at home im would hope to furnish the house and rent it out for as long as possible.

So Basically i would require a new combined mortgage of approx €210,000 (€75K existing mortgage, €100K buyout, €20K debts, €15k furnish house & fee's). Am i foolish to think i could get a mortgage? Is this situation too complication for a bank manger to even consider?

Is it viable to buy him out or would i be better off to wait and sell the house and split the profits??

Any advice would be much appreciated. Thanks.
 
At almost 6 times your gross earnings, 91% loan to value ratio and with €20K of existing debts I would be very surprised if any lender was willing to lend you that amount.

Note also that you may be liable for stamp duty if you are building/buying this property to rent it out. And you friend may be liable for CGT (based on the fair market value of his share and not the discounted price that he sells it to you) on the disposal of his share.

I think that both of you really need to get independent, professional advice on the tax and other implications of this deal.
 
Thanks for the reply clubman.

Does it matter that i would be using 20K of the mortgage to clear all existing debts leaving me with no other major overheads except the new mortgage repayments. €600 a month is currently be utilised to service existing debts. Would the €600 a month and the montly rental income not considerably contribute to mortgage repayments?

As you can understand i've just given you a brief background to the situation but as for stamp duty and capital gains tax, we have sought professional advice and we're aware of what to expect.

I understand its all probably a long shot and maybe more trouble than its worth but my main concern is there any viability in even considering drawing such a task upon myself?

Again thanks very much
 
Assuming €210K at 5% (just for the sake of it) over 30 years then the repayments would be c. €1,127 excluding mortgage interest relief (which will bring that down a bit) and mortgage protection life assurance and home insurance (which will bring the total bill back up). On a gross income of €36K p.a. you should probably be clearing about €2.5K p.m. net so the mortgage repayments would be near enough to 50% of net income which is another red flag for lender. Of course they may take rental income into account. In my opinion you should (a) look at the figures objectively and honestly assess whether or not this is a viable/affordable option for you and (b) if you decide that it is then talk to a good mortgage broker or apply to a few lenders directly and see how you get on. If you have established that you can afford this venture then set your figures out as clearly as possible in case you need to present a case to the lender to convince them. Good luck with whatever you do.
 
Thanks, thats good advice. i probably could afford it as i hav a net salary of €36K as opposed to gross. But i reckon im probably better off clearing debts first if im been realistic
 
Sorry - I misread the original post and thought that you were on €36K gross not net! :eek: I guess that's about €45K gross?
 
hi sarah! Currently houses in the area are bringing in €700 per month.
 
Based on your income, the rent and the fact that you will have no loans left you should qualify for €210,000 as an investment mortgage as long as the house values at €234,000 or more (max LTV is 90% on an investment property). However as others have said you should look at the CGT implications as well as the change of your status as a FTB and possible Stamp duty clawback on the house. Would it be an option to live in the house and rent out rooms?

Sarah

www.rea.ie
 
Thanks for the reply sarah!
yeah it would be an option alrite. but would i be too dependant on rental income? taking on board CGT & stamp duty i would probably be better off clearing selling and clearing debts.

At least after selling i would be debt free...i hope! but what would you see as my major stumbling block - my existing debts or complexity of having a partner or are the figures too border line (LTV) etc?
 
If your net income (after tax) is €36,000 your gross salary must be around €50,000 so you will easily qualify for €210,000 either as a homeloan or an an investment especially with no other loans hanging over you. Do you WANT to live in the house or would you prefer to have the cash to clear everything and buy again? Do bear in mind that next time around you won't be a FTB whereas if you buy your partner out and live there I *think* you are still classified as a FTB for Stamp Duty purposes. I would advise you to get independent professional tax advice on all your options.

Sarah

www.rea.ie
 
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