Obtaining a second mortgage

costacurta

Hey guys,

Looking for people's thoughts on something, cause my bank are saying one thing one day and another the next. I've currently got a house ian Wicklow, got about €40k negative equity roughly. My partner and I are looking to move to up to Dublin as commuting has become too much for us.

We want to buy a new house. I'm just wondering what are my options?

My options as I view them;

A) We would look to get a second mortgage for the new property. I could rent my current property for more than my mortgage repayments, so we could rent current house. Even without renting our house my salary could cover both mortgages leaving my partners salary for us to live on. I'm just wondering what the % of net income do banks normally allow for people to live on (utilities, food etc)

try and sell my current home and then try take the negative equity with us into a second mortgage

My preferred option is option A, but I don't know how bank calculators work in terms of trying to see how much of a mortgage we would be eligible to get. We would have about 40-50k saved for a deposit by the time of looking for the second mortgage.

Thanks for the advice in advance guys

The_Conductor

To be honest- its almost unheard of in the current climate for a bank to allow a second mortgage in circumstances such as this. You have 40k negative equity on property 1, a lump of cash and want to buy property 2. I fully appreciate that property 1 doesn't suit your current needs- however I really can't see any lender allowing you go down this road in the current environment.

Vis-a-vis renting out property 1 and using the rental income to pay the mortgage-

1. You loose TRS on the mortgage
2. The rental income is taxable income- you can't simply apportion it to pay off the mortgage- only the NET could be used for this purpose. Presumably you're on the higher tax band, you could potentially be paying close on half your gross rental income as tax (depending on what allowable deductions you might have).

If- and its a big 'if'- a mortgage lender decided to lend you money for property 2- the calculation would be something akin to a max of 2.5-3 times principle salary and once secondary, to a max 30-35% net income in mortgage repayments (and mortgage on property 1 would probably come in here too). In addition- max lending percentage would probably be 80% (ish).

Its a dodgy proposition in the current climate- and it would take a seriously bullish approach on the part of a lender to play ball to be honest.

D3PO

theres a third option OP

Rent out your current home and rent a home in Dublin. Option A is never going to happen.

kildon

Option A is possible, I know because I'm in the same boat and I have more than double your NE

as regards mortgage calculator, assume that you don't have any rental income 'cos the bank probably won't, then see if your mortgage repayments on both mortgages at 6% is less than c. 40% of you and your partners net income. If it does, then you should be ok.

L1011

I know of someone who got Option A - by moving out, renting the NE property out and renting somewhere themselves. Have now got a mortgage based on what they're capable of paying in rent.

costacurta

kildon wrote: »

Option A is possible, I know because I'm in the same boat and I have more than double your NE

as regards mortgage calculator, assume that you don't have any rental income 'cos the bank probably won't, then see if your mortgage repayments on both mortgages at 6% is less than c. 40% of you and your partners net income. If it does, then you should be ok.

Have you been approved for a second mortgage? I'm estimating at the moment that our two mortgage repayments is coming in at about 50% of net income. This isn't taking into consideration any rental income or anything like that.

I have spoken to local county co, about a long term rental agreement, where I guarantee them my house for a period of 3-5 years then they guarantee me an agreed payment regardless of whether they have a tenant in. A bit weary of this since they could place any toe rag in there but it is a guaranteed income.

costacurta

MYOB wrote: »

I know of someone who got Option A - by moving out, renting the NE property out and renting somewhere themselves. Have now got a mortgage based on what they're capable of paying in rent.

Glad to hear that there are some positive stories at least.

Banks/gov are in a catch 22 situation, they need the property market to recover so therefore need to provide lending but then can see why they are extremely reluctant to lend on the other side, given the state of affairs.

The hope of getting a second mortgage is based on the property market recovering to some degree and then that would allow us to hopefully not have such negative equity and at that point in time sell the house

D3PO

kildon wrote: »

Option A is possible, I know because I'm in the same boat and I have more than double your NE

as regards mortgage calculator, assume that you don't have any rental income 'cos the bank probably won't, then see if your mortgage repayments on both mortgages at 6% is less than c. 40% of you and your partners net income. If it does, then you should be ok.

your use of the term that you are in the same boat rather than you were in the same boat indicates option A hasnt happened but your trying to sort it.

maybe its just grammar but I dont believe for one second the bank will grant a second mortgage in that scenario. Carrying over NE "negative equity mortgage" is one thing granting a second mortgage and holding onto the first property that is in NE I just cannot belive any bank would do that.