Bank Loan to cover difference.....

JustCurious

Hi there,

Basically myself and him-indoors have just bought a second house. While we don't need to sell the first house we'd like to. Only problem is that we owe more on it than we would get for it.

Is it possible to get a bank loan to cover the difference?

D3PO

you could contact the bank and see if they will accept this. Its likely that they will expecially if its evident that you can repay the difference.

That said if you dont need to sell whats your motivation in selling ? Are you trying to cut your losses in terms of capital depreciation of the asset with falling house prices ?

Would it work out better for you to rent out the property as an LTI whereby you still retain the asset and have most / all of the replayments made by your tennants ?

seamus

Depends on the extent of the difference and your financial situation. You can get a loan to cover it if it falls within the bounds of a personal loan (up to 50k with some banks), but these are more expensive than mortgages.

Do you have enough room on your other mortgage to cover it, as that's another option.

JustCurious

Firstly, thank you both for your suggestions.

We're fine at covering both mortgages at the moment - however if I were to become pregnant (on the cards <hopefully>) I'm not sure how we'd be for the 3 months unpaid mat.leave. Obviously we'd be saving and would be in a better position than we suppose but it's there hanging over our heads.

Currently we can just about get 50% of the mortgage repayment covered by renting out house number 1. We're not sure though, with both of us working full time and himself being out the country a fair bit, if we are cut-out to be landlords. It was never in the plan tbh.

I did some quick back of the envelope sums there and what we would need would deffo be outside the 50k mark so in all reality we are stuck with house number 1 aren't we? I'm concerned that the house will drop even more and then we're just throwing good money after bad and will never be able to catch it.

Himself is saying that even if we were to pay off 1200 a month towards a personal loan that's still less than our mortgage on house number 1 and we'd be clear in X years.

Thoughts?

D3PO

thanks for the clear response its amazing how many of them are vauge and you really cant give a good opinion of.

Doing some quick sums here renting out house 1 doesnt seem to be a viable option for you so selling seems to be the only route you have.

Like I said the bank should be accomadating. From their perspective you owing circa 50k with them having no colateral or them having a house as colatoral but it being a depreciating asset its a no brainer that option A provides them less risk and also some extra liquidity.

Ideally for you you could sink the difference owed into your mortage on house 2. Better for you because you get a preferential interest rate and can spread it out over the longer term. Not sure the bank will agree though

bes tof luck either way with the house and your soon to be faimily

astrofool

Maternity leave is 6 months (26 weeks) paid by the government, not 3 months unpaid. Some companies will even make the difference up to your full pay packet.

D3PO

astrofool wrote: »

Maternity leave is 6 months (26 weeks) paid by the government, not 3 months unpaid. Some companies will even make the difference up to your full pay packet.

yes but ontop of your 6 months most companies will allow you take up to a further 26 weks unpaid.

seamus

D3PO wrote: »

Ideally for you you could sink the difference owed into your mortage on house 2. Better for you because you get a preferential interest rate and can spread it out over the longer term. Not sure the bank will agree though

Really does depend on your sums though. You may end up paying more overall in interest, as well as increasing the term of your mortgage. Whereas if you can cover a large personal loan over a shorter time period, you could pay less and not significantly affect your mortgage.

For example, it appears as though BOI offer a personal loan up to €65k over 5 years.

If the rate on this loan is 9% (though I suspect it would be less), It'll cost €1350/month over five years to pay it back. The total cost of the credit is €16k.

However, let's say you add it to your mortgage and pay it back over 25 years (if that's how long you have left in your mortgage) @ 3% p.a. That will increase your mortgage repayments by €300, and will cost roughly €27k in interest. But remember that it will increase your mortgage repayment for the rest of your mortgage.

So it's really about weighing up the short-term against the long-term. The personal loan will have more short-term grief, but at the end of it you're shot of one property and you're back to your current mortgage repayments. Just about the time that junior is going to school and you either have or are considering junior no. 2.

Another factor to consider is that interest rates are at an all-time low. So you're likely to see much bigger variances and increases in these rates over the lifetime of your mortgage than over a 5-year period.

JustCurious

Again, thank you for the responses. These are all v.good food for thought!

My company provides a top-up sum to the government maternity but still leaves me short of about 1k of my monthly salary. The 3 months unpaid is exactly that and that would leave us in a tight situation.

The sums I did, including selling fees etc - we're looking at close enough to 75k I'd imagine. We'd also be breaking our fixed mortgage of 5 years by 2 years if we were to sell.

The more I'm writing it out the more I'm seeing that we're schtuck!

I wouldn't say we're alone though - small comfort that it is! :rolleyes:

astrofool

D3PO wrote: »

yes but ontop of your 6 months most companies will allow you take up to a further 26 weks unpaid.

There is 14 weeks parental leave which can be taken at any stage up to 8 years of child age.

http://www.citizensinformation.ie/categories/employment/employment-rights-and-conditions/leave-and-holidays/parental_leave

Anything else is up to your employer.

I was correcting the OP's assertion of 3 months unpaid leave, which does not match any of the leave periods related to having a child, and might affect their plans with the house.

JustCurious

astrofool wrote: »

There is 14 weeks parental leave which can be taken at any stage up to 8 years of child age.

http://www.citizensinformation.ie/categories/employment/employment-rights-and-conditions/leave-and-holidays/parental_leave

Anything else is up to your employer.

I was correcting the OP's assertion of 3 months unpaid leave, which does not match any of the leave periods related to having a child, and might affect their plans with the house.

Sorry for any confusion - I was referring to the 16 weeks unpaid maternity leave (state gives you no benefit and job gives you no salary/top-up) you can take after the 26 weeks of state maternity benefit/job top-up.

astrofool

Ah, that's covered here:
http://www.citizensinformation.ie/categories/employment/employment-rights-and-conditions/leave-and-holidays/maternity_leave

Also remember that you can count your annual holidays towards your maternity leave as well, which can usually add another month to the initial 6.