Second Mortgage

smccart6

Age: 27
Spouse’s/Partner's age: 30

Annual gross income from employment or profession: €45k
Annual gross income of spouse: €45k

Type of employment: e.g. Civil Servant, self-employed: I am in the Health Service and he is a IT Programmer (Permanent)

In general are you:
(a) spending more than you earn, or
(b) saving?

Saving: €1,500 a month savings combined

Rough estimate of value of home: 110k
Amount outstanding on your mortgage: 205k (I bought this on my own)
What interest rate are you paying? Traker 1.75% Mortgage is €590 per month

Other borrowings – car loans/personal loans etc: No loans

Do you pay off your full credit card balance each month? Yes
If not, what is the balance on your credit card? No Balance

Savings and investments: 35k saving combined

Do you have a pension scheme? Yes Both of us

Do you own any investment or other property? Yes stated above

Ages of children: 0

Life insurance: Yes


What specific question do you have or what issues are of concern to you?

I own the property on my own and bought it in 2007 and have rented it out since I bought it as I have moved home as it is closer to work, the rental income makes a profit of €50 per month.

I now want to take a mortgage out with my partner (he is FTB) for €280K would the banks entertain us?

Dannyboy83

smccart6 wrote: »

I now want to take a mortgage out with my partner (he is FTB) for €280K would the banks entertain us?

I'd be fairly surprised if they didn't.

AIB might tell you to get lost, try BOI tho.

Sleepy

Well, ye have a deposit of 11% and stable jobs, a good financial record etc. so it's certainly worth talking to them if you don't mind owning another home with negative equity in a few years time: property is almost certainly still over-valued in Ireland, the market's pretty stagnant, prices are still falling and the interest hikes and subsequent default wave haven't happened yet.

Your o/h's income wouldn't be high enough to get that level of a mortgage on his own either and you already being in negative equity to a figure exceeding 100k makes it seriously unlikely imho.

Why not look at the rental market together?

Tipp Man

If i read your post correctly, Your 90k in negative equity and want to borrow a further 280K in a market where house prices continue to fall??

RichardAnd

Tipp Man wrote: »

If i read your post correctly, Your 90k in negative equity and want to borrow a further 280K in a market where house prices continue to fall??

I agree with this. 280k is over three times your combined anual earning before anything comes out of them and you already have a mortgage. I wouldn't be so quick to take on more debt even if the banks agree which they might just.

Squall19

You've already been hit and want to go again?

You should count yourself lucky that your on a tracker and the rent market is being kept high by the goverment ( all that can change )

Your doing great at the moment.

Both of you are coming out with about 700 euro a week after tax and saving about 200 euro a week each.Thats very decent.

House prices in that price region of 280k+ are plus are falling at more than 7% a year going by recent reports, thats almost 20k a year!!!

Rent will cost you what 800 a month/ 7600 euro a year for a great place, doesnt take a genius to see which would is the smart move.

http://www.irishpropertywatch.com/

Dont believe me, check your location and be suprised. House across the road from me sold at 170k 2 years ago and the exact same house is now advertised at 140k and they have had no interest at all.

Forget about it for now

whiteonion

Please think about what you're doing, for your sake I hope you don't get a second mortgage. Why on earth would you want to take on more debt?
Why should the banks lend out way more than the property itself is worth on top of your existing mortgage?

smccart6

I forgot to say that I will be building a house not buying one. We are getting the site from a friend .75acre for 30k.

whiteonion

smccart6 wrote: »

I forgot to say that I will be building a house not buying one. We are getting the site from a friend .75acre for 30k.

If you already own a house why would you want to get another one? You're already in negative equity. Piling on more debt is not a good idea at the moment.

smccart6

It is a two bedroom apartment and I want to upgrade so down the line I can have a family

Tipp Man

smccart6 wrote: »

It is a two bedroom apartment and I want to upgrade so down the line I can have a family

so if your want to borrow 280k and have 35k thats circa 315k for the house and site. The site is 30k leaving you 285k to build??

In todays climate that should build a mid size hotel, is that what you want??

Sleepy

Are you planning to spend 280k on the build or to borrow that much, add your own 35k and spend 315k on the build?

Given the going rates for building at the moment, just how many kids are you planning to have if you're going to spend 250 - 285k on the house-build?!

ei.sdraob

smccart6 wrote: »

It is a two bedroom apartment and I want to upgrade so down the line I can have a family

Can the appartment be rented out to at least pay of some of the mortgage?
Does that site have planning permission to build? because if it doesnt 30K is a insane amount for a site that size without planning.
280K build budget would allow you to build a home of about 220-250sq meters (ie huge!) and furnish to high spec

edit: i found this forum on boards very usefull and informative myself when building

smccart6

The total loan would be for €250K (I forgot to include the deposit of 30K).

smccart6

ei.sdraob wrote: »

Can the appartment be rented out to at least pay of some of the mortgage?

The apartment is currently rented and has been for the past 3 years teh mortgage is €590 per month and rental €650 per month. It is an easy property to rent as it is in a very good area and own entrance and back garden.

Tipp Man

What would happen if 1 of you lost your job and you couldn't rent out the apartment?

Could 1 salary cover the apartment mortage, the house mortage, feed the kids, pay the bills etc etc etc??

You need to weigh up the risks of job loss/wage reductions for either of you and the risk of not renting the apartment against the want/need for a house

Nobody here can weigh up those risks except yourself. all i will say is 4 years ago plenty of people didn't weigh up any risks and are now in a huge mess

whiteonion

I know people who has one kid and a 2 bedroom apartment is enough for one kid, even two because when they are small they can sleep in the same room. If you only plan on having two children there is no need for anything bigger than a 3 bedroom house. Even in many Dublin suburbs you can get a 3 bedroom house for less than 200k.

waffleman

is this a wind up?

at least wait for prices to stop dropping to minimze the amount borrowed for the second mortgage - who knows by then prices might be low enough that you wont need another mortgage.

gigino

Tipp Man wrote: »

You need to weigh up the risks of job loss/wage reductions for either of you and the risk of not renting the apartment against the want/need for a house

Nobody here can weigh up those risks except yourself. all i will say is 4 years ago plenty of people didn't weigh up any risks and are now in a huge mess

Good advice. These 2 young ( 27 + 30 ) public servants on 45 k a year each need to realise the IMF will make changes over the next several years. Average public sector pay across the border is only 22 to 23 k a year stg. Our government cannot continue to borrow to pay big salaries.

smccart6

gigino wrote: »

Good advice. These 2 young ( 27 + 30 ) public servants on 45 k a year each need to realise the IMF will make changes over the next several years. Average public sector pay across the border is only 22 to 23 k a year stg. Our government cannot continue to borrow to pay big salaries.

If you read properly you would see that we are not both public servants.

dan_d

Fair enough, but have you thought about what would happen should you have to take a pay cut?

All you can do is ask the bank OP. They'll let you know straight away whether they'll give you the money or not.

Be wary, all the same.

gigino

smccart6 wrote: »

If you read properly you would see that we are not both public servants.

Apologies, only one of you are. All the same, as someone else said "Be wary, all the same." The govt cannot keep on spending 5 euro for every 3 euro it takes in. There will be a knock on effect in the wider economy when spending is cut further.

professore

In the next 5 years assuming you both keep your jobs on the same salaries (highly unlikely IMHO) factor in child minding of 800 - 1000 per month http://www.askaboutmoney.com/showthread.php?t=80671

Also factor in 500 - 600 per month "running costs" for your new child.

You should also factor in a further 10% drop in income from you being in the public sector and a property tax of maybe €1000 p.a. I would also as your partner get some sort of insurance against losing his job.

If I were you I would look for a 3 bed somewhere, and try and keep your debt at what it is or less if possible. Once you have kids your lovely house will get that "lived in" look. A nice house is not so nice if it's an effort to push open the door in the evening with the piles of bills on the mat.

For most people it becomes financially unprofitable for both of them to work when you have 2 kids, unless on a big salary.

I wish you well but please think about this. I was listening to a friend in a similar situation a few years ago and I still regret not saying to him then what I have said to you here.

The above is probably optimistic as the govt will push through a raft of stealth taxes and charges to close the current account deficit.

professore

Looking at the figures in the old way .... before the world went mad

2 1/2 times one earner + 1 time second earner

€ 157,500

Current mortgage is 205 K - 110 K = 95 K mortgage outstanding

This would lead me to say you could borrow 62.5 K after selling your apartment and putting the proceeds into your mortgage.

Squall19

professore wrote: »

In the next 5 years assuming you both keep your jobs on the same salaries (highly unlikely IMHO) factor in child minding of 800 - 1000 per month http://www.askaboutmoney.com/showthread.php?t=80671

Also factor in 500 - 600 per month "running costs" for your new child.

You should also factor in a further 10% drop in income from you being in the public sector and a property tax of maybe €1000 p.a. I would also as your partner get some sort of insurance against losing his job.

If I were you I would look for a 3 bed somewhere, and try and keep your debt at what it is or less if possible. Once you have kids your lovely house will get that "lived in" look. A nice house is not so nice if it's an effort to push open the door in the evening with the piles of bills on the mat.

For most people it becomes financially unprofitable for both of them to work when you have 2 kids, unless on a big salary.

I wish you well but please think about this. I was listening to a friend in a similar situation a few years ago and I still regret not saying to him then what I have said to you here.

The above is probably optimistic as the govt will push through a raft of stealth taxes and charges to close the current account deficit.

Great post professore.

Kids are a mortgage in itself it seems:o

12k a year for day care and maintenance wow

The_Honeybadger

OP, read professore's posts, and then re-read them. Myself and my wife have two young children, and take it from me it becomes unprofitable and unworkable for both partners to work in this situation (unless of course you are on a mega salary, at 45k each it is not practical). The level of debt you are talking about taking on and the manner in which you are proposing to spend the money is puzzling, 200k plus for a self build? Unless it is a palace I'd have another look at that figure. It is hard to call whether the banks would work with you on this but if it was me I'd forget about it for a while at least. You seem confident that you will be able to rent your apartment in the long term at a good rent which is good for you, but be aware interest rates are not going to stay at historically low levels forever, even though you are making a profit on it now your apartment could quickly become a drain on your finances. I do understand that you would like your own home to raise a family, as we all would (myself and my wife also rent), however in a market where prices are collapsing rapidly (and we haven't even had property tax yet) and there is an oversupply of finished properties does spending almost 300k on a self build sound like a good idea? If a friend asked you for the same advice what would you tell them, take your emotions out of the equation for a minute. BTW I haven't even mentioned falling wages and extra taxes but other posters have gone through those. Best of luck whatever you do but I think you'd be mad to pursue this with the figures you have laid out.

RichardAnd

gigino wrote: »

Good advice. These 2 young ( 27 + 30 ) public servants on 45 k a year each need to realise the IMF will make changes over the next several years. Average public sector pay across the border is only 22 to 23 k a year stg. Our government cannot continue to borrow to pay big salaries.

gigino, with respect, please stop brining up public service pay in threads that have absolutly nothing to do with the matter. Your points are valid but I've seen you derail threads like this before and it's distracting fromt he discussion at hand.

Fratton Fred

The bank will look at how safe their money is. They will give you 280, which means you owe them 485k. This will be secured on a flat with 110k worth of equity and a bit of land worth 30k.

I don't think you have a cat in hells chance to be honest, but good luck.

later12

Hi OP, just a few questions

Is your first property a one bedroom apartment or is it larger?
Is it part of an apartment block?
Are you looking to consolidate the two mortgages, and,
if you don't mind me asking, who do you currently bank with?

Marcusm

I don't think you have hope of finding an Institution which would lend to you on this basis. IF you should find oe then let everyone here know as it would be proof that nothing has changed. Leaving aside the negative equity position on your apartment (and I'm shocked that you disregard t), you are currently on a favourable rate which may or may not subsist. Additionally, a young couple without a family may ave a double income nw but a lender should not assume that will continue. I do not think that 285k of borrowings is sustainable on your income. How would you cope at 9% interest - which is closer to long term norms?