Thinking aloud...

Outsidethebox

Hi folks,

Wife and myself who are both in our 20's are ball hopping here.

We bought a 2 bedroom house for 169K on which we owe 150K in 2007. We were offered upto 299K at the time - bananas!

Our mortgage is a tracker on which we pay €517 a month with PTSB. We also have two loans on which together are about 6K. (Though if needed we could clear these quickly)

Now, we're happy enough where we are and if we were told we're here forever we'd be fine with it. It's a lovely home. However, we have a young son and since last September my wife's mam is living with us as she is ill.

"IF" we were to look into upgrading what we be our chances of getting some muladh? (Haven't bothered to ask our bank yet as we're not really sure whether we will bother doing anything or not)

Our queries:

1, Would we be better to sell ours for what we could get then take our negative equity with us? I estimate we'd sell ours for 60/70, meaning we'd have a negative equity debt of 80/90K.

We'd be looking for about 90/100K to upgrade meaning we'd be owing around 180/190K.

2, Highly unlikely but would it be possible a bank would leave us keep our place to rent and up our mortgage by 90K? The rent would more or less cover the existing mortgage and then in years to come when/if the market picks up a bit we could sell on.

3, Could we approach a different bank for a 90K mortgage?

Basically, we're wondering what, if any, are our options? What's peoples opinions? If a bank would go with option 2 I'd be inclined to go with it. The reasoning being that the tracker mortgage is very low and we'd rent it easily. Therby not taking the hit of 80/90K of a loss. Also, a second mortgage of 90K wouldn't be a huge bearing either.

Now, I know a few of you are probably thinking jaysus look at these idiots trying to get a second mortgage. Did they not see what has happened the last few years and maybe you're right.

As I said, we're happy out where we are as we have a lovely home with a low mortgage payment rate, but we are curious. We have the capabilities of paying a few hundred euro a month more on a mortgage and maybe this might interest the banks?

Will probably add a bit to this over the next day or so but will leave it at this for now.

Thanks to anyone who takes the time to read and answer this long winded effort.

PS. As regards income, ones a public servant on just over 50K and the others on just under 40K.

Go raibh maith agaibh,
OTB.

Sarn

I know a couple who were offered option 2. They were living in an apartment, had a kid, so wanted a more child friendly home. They rented out the apartment and got a new mortgage for a house.

Of course, I don't know how much negative equity etc. that they had, but it is something that the banks consider. Your best approach is to contact your mortgage lender and see if your income would meet their lending criteria. The fact that you are on a tracker could help, but they may try and pull you off it.

Arciphel

Why not build an extension? Could you do that with your current property?

StillWaters

Arciphel wrote: »

Why not build an extension? Could you do that with your current property?

That or no. 1 are your best bets. With the others you lose your tracker and you have the hassle and expense of being a Landlord.

Ando's Saggy Bottom

I think that even if you tell the bank you can rent the current house out it will still affect your ability to get a second mortgage i.e. they would take you not being able to rent it out and having to pay both mortgages into their calculations.

Outsidethebox

Arciphel wrote: »

Why not build an extension? Could you do that with your current property?

We've discussed this alright, though I don't think we'd get planning permission. We're in a large housing estate in a row of semi-d's with another row behind us whose garden backs onto ours.

No other house in the estate has any extension built on.

Also the garden is fairly small too.

pwurple

Attic conversion possible? Can you change the roof slightly to push out an attic window?

In your situation I'd investigate extending if at all possible. Ask an architect for advice. They can advise on the planning permission, as they put through that application for you.

Outsidethebox

Pete Campbell wrote: »

I think that even if you tell the bank you can rent the current house out it will still affect your ability to get a second mortgage i.e. they would take you not being able to rent it out and having to pay both mortgages into their calculations.

I think you're probably right, Pete.

To me it seems the best option for us financially as hopefully in years to come the value of our place could rise a bit so when we eventually would sell it on our negative equity wouldn't be as much as it is now.

But obviously the bank wouldn't want us not being able to pay our mortgage so I can see where they'd be coming from.

I guess it'd boil down to how much the bank feels we'd be able to pay per month.

What would 90K over 25/30 years work out at per month do you think? If this added to our current 517 a month fell within what the bank say we can afford we'd be okay. Doubt it though.

They might just tell us feck off and don't be annoying them but they might see that they could draw in a few extra hundred a month off us too.

Ah sure we'll see. no panic. We know how fortunate we are to both have jobs and be able to afford our current mortgage.

D3PO

re 2. Forget it.

Also people need to forget this rent wil cover the mortgage though process. You will have periods of unoccupancy, you will owe tax on the rental income. Note INCOME not PROFIT being the keyword.

Plus you will owe PRSI, and potentially lose your tracker rate aswell.

In other words even if the bank allowed option 2 which they wont, its not financially viable.

the extension option defo worth looking at as is a loft conversion. Outside that getting a neg equity mortgage should you qualify (option 1) would be the best bet. Im not sure how willing banks are to offer these but you could do much worse than PMing Killers1 on this forum and giving him your details.

Hes a very very good broker and if anybody can tell you how likely this or getting another mortgage is then its him

Outsidethebox

pwurple wrote: »

Attic conversion possible? Can you change the roof slightly to push out an attic window?

In your situation I'd investigate extending if at all possible. Ask an architect for advice. They can advise on the planning permission, as they put through that application for you.

Have thought of this too.

Videod my attic on my phone and showed it to a buddy who is a carpenter/builder/cowboy but he reckons it isn't possible. He knows his stuff in fairness but it'd be no harm to ask an architect maybe?

(Also, we'd be kind of looking to have a bedroom that'd be accessible without climbing a stairs)

D3PO

Outsidethebox wrote: »

Have thought of this too.

Videod my attic on my phone and showed it to a buddy who is a carpenter/builder/cowboy but he reckons it isn't possible. He knows his stuff in fairness but it'd be no harm to ask an architect maybe?

(Also, we'd be kind of looking to have a bedroom that'd be accessible without climbing a stairs)

im not a builder but id imagine he would really need to actually look in the loft to say weather its possible or not and not just a view that wouldnt show proportions where beams are located exactly etc. But then again maybe im talking through my hat

Outsidethebox

D3PO wrote: »

re 2. Forget it.

Also people need to forget this rent wil cover the mortgage though process. You will have periods of unoccupancy, you will owe tax on the rental income. Note INCOME not PROFIT being the keyword.

Plus you will owe PRSI, and potentially lose your tracker rate aswell.

In other words even if the bank allowed option 2 which they wont, its not financially viable.

the extension option defo worth looking at as is a loft conversion. Outside that getting a neg equity mortgage should you qualify (option 1) would be the best bet. Im not sure how willing banks are to offer these but you could do much worse than PMing Killers1 on this forum and giving him your details.

Hes a very very good broker and if anybody can tell you how likely this or getting another mortgage is then its him

Cheers d3po.

How does it work with killers1?

Does he give you free advice or is there payment or what's the story?

Outsidethebox

D3PO wrote: »

im not a builder but id imagine he would really need to actually look in the loft to say weather its possible or not and not just a view that wouldnt show proportions where beams are located exactly etc. But then again maybe im talking through my hat

I'm probably going to sound a little mad here but I actually brought up the measuring tape with me and all to show distances!

It was in early 2010 when the little lad was in the post we first looked at it. I suppose my mate could of just been lazy and/or didn't want to be dealing with a pregnant/hormonal Ms. OTB

NinjaTruncs

D3PO wrote: »

re 2. Forget it.

Also people need to forget this rent wil cover the mortgage though process. You will have periods of unoccupancy, you will owe tax on the rental income. Note INCOME not PROFIT being the keyword.

Plus you will owe PRSI, and potentially lose your tracker rate aswell.

In other words even if the bank allowed option 2 which they wont, its not financially viable.

the extension option defo worth looking at as is a loft conversion. Outside that getting a neg equity mortgage should you qualify (option 1) would be the best bet. Im not sure how willing banks are to offer these but you could do much worse than PMing Killers1 on this forum and giving him your details.

Hes a very very good broker and if anybody can tell you how likely this or getting another mortgage is then its him

I don't think this post is quite accurate.

It's not about the rent covering the mortgage it's which is cheaper to finance, a loan to cover the negative equity or to subsidise renting out the property. Depending on where the property is it could be relatively easy to rent out and keep rented out. I'm not saying it's best to keep the first property but in my case It'd cost me half as much to finance renting out my property than it would to sell and pay off the negative equity, even if the apartment was empty for two months a year it would still be cheaper.

RE the bank allowing it, BOI are going to allow us to keep our apartment and rent it if we wanted to take out another mortgage to move. I'm not saying we will do that but they are going to allow it.

OP go talk to your bank, only they can tell you what they will offer. We can offer what the banks have told us, but different people get told different things by the banks.

D3PO

Outsidethebox wrote: »

Cheers d3po.

How does it work with killers1?

Does he give you free advice or is there payment or what's the story?

Pretty sure he is free. He gets commission from the bank in the case of a mortgage drawdown.

now i could be wrong maybe he charges some kind of fee. I can tell you for a face he will happily reply to you with information for nothing anyway

D3PO

NinjaTruncs wrote: »

I don't think this post is quite accurate.

It's not about the rent covering the mortgage it's which is cheaper to finance, a loan to cover the negative equity or to subsidise renting out the property. Depending on where the property is it could be relatively easy to rent out and keep rented out. I'm not saying it's best to keep the first property but in my case It'd cost me half as much to finance renting out my property than it would to sell and pay off the negative equity, even if the apartment was empty for two months a year it would still be cheaper.

RE the bank allowing it, BOI are going to allow us to keep our apartment and rent it if we wanted to take out another mortgage to move. I'm not saying we will do that but they are going to allow it.

OP go talk to your bank, only they can tell you what they will offer. We can offer what the banks have told us, but different people get told different things by the banks.

Ninja afraid your incorrect. Banks now a days will not consider rental income on BTL's which means the OP would have to have the capabilities of covering both mortgages with no rental income taking into account.

I understand what your saying re the maths of the situation but the current prudence of the banks means its not a viable option.

my other main point was to stress that covering the mortgage with rent is not the correct mindset. Perhaps OTB didnt mean it in the literal sense but many do without the knowledge that the income is taxable and its not about making a profit.

many think if rent - mortgage payments no tax due which isnt the case and as such their whole budgeting process is way off.

NinjaTruncs

D3PO wrote: »

Ninja afraid your incorrect. Banks now a days will not consider rental income on BTL's which means the OP would have to have the capabilities of covering both mortgages with no rental income taking into account.

I understand what your saying re the maths of the situation but the current prudence of the banks means its not a viable option.

my other main point was to stress that covering the mortgage with rent is not the correct mindset. Perhaps OTB didnt mean it in the literal sense but many do without the knowledge that the income is taxable and its not about making a profit.

many think if rent - mortgage payments no tax due which isnt the case and as such their whole budgeting process is way off.

Hey, talk about moving the goalposts, you never said anything about using the rental income as consideration for getting the mortgage. You are right though the banks won't consider rental income, so you need to allow for paying both mortgages.

OP if you did decide to try renting out your current property also take into account you will lose TRS, that is only available for your primary residence and it was abolished in December so you won't get it on your new mortgage, if you took one out.

You haven't mentioned savings, you're going to need some for a few reasons:
1. Banks won't give you 100% of the mortgage, most likely 90% at most so you will need that 10% yourself, add on stamp duty and fee too.
2. The banks will want to see that you have disposable income that you can afford to devote to the new mortgage.
3. You will need to furnish one of the properties, either the one you leave behind of the new one you take on

Given your total income and current mortgage you should have a lot of disposable income available unless you have other outgoings that you haven't told us, Also don't forget creche fees for the little nipper when he/she arrives, they are a killer.

D3PO

NinjaTruncs wrote: »

Hey, talk about moving the goalposts, you never said anything about using the rental income as consideration for getting the mortgage. You are right though the banks won't consider rental income, so you need to allow for paying both mortgages.

OP if you did decide to try renting out your current property also take into account you will lose TRS, that is only available for your primary residence and it was abolished in December so you won't get it on your new mortgage, if you took one out.

You haven't mentioned savings, you're going to need some for a few reasons:
1. Banks won't give you 100% of the mortgage, most likely 90% at most so you will need that 10% yourself, add on stamp duty and fee too.
2. The banks will want to see that you have disposable income that you can afford to devote to the new mortgage.
3. You will need to furnish one of the properties, either the one you leave behind of the new one you take on

Given your total income and current mortgage you should have a lot of disposable income available unless you have other outgoings that you haven't told us, Also don't forget creche fees for the little nipper when he/she arrives, they are a killer.

my intention wasnt to move the goalposts. its early on a Sunday morning, im pretty erm groggy perhaps didnt explain myself well enough.

The OP would need more than 10% as a BTL would require significantly more of a deposit, now whilst the OP would actually be looking to use the current property as a BTL the bank would consider this mortgage application as the BTL.

I mean we dont have all the OP's financial details but its a fair assumption to say that they are very very unlikely to find any favour with that option.

Outsidethebox

Don't have any savings at the minute lads as we got married in November. (Can't be happy all your life )

Would be able to save a few K easy enough.

Say, as regards building on or converting the attic.

Would a bank treat this as a new mortgage and we'd lose our tracker or could we get a term loan?

PS. The little man was 2 last November. I am aware of the cost of childcare etc.

Outsidethebox

PS. Going to PM killers1 and see what the craic is.

NinjaTruncs

Outsidethebox wrote: »

Don't have any savings at the minute lads as we got married in November. (Can't be happy all your life )

Would be able to save a few K easy enough.

Say, as regards building on or converting the attic.

Would a bank treat this as a new mortgage and we'd lose our tracker or could we get a term loan?

PS. The little man was 2 last November. I am aware of the cost of childcare etc.

Congrats, I read it as one the way, but I see that was in relation to looking into the attic conversion previously.

You'd want to take a second mortgage, if possible, adding to the capital of the tracker would mean the bank would take away the tracker rate. The one problem I could see is what are you going to secure the new mortgage on, I can't see the bank allowing it to be secured against your current place since it's in negative equity, but that is why you would need to talk to them you could try argue that the value of your home will increase in line with the amount spent on the conversion, I just don't know if they will take that it will really depend on how much you need.

But talk to them, I went to BOI a few weeks ago thinking we didn't have a chance of getting any kind of approval off of them and I was pleasantly surprised with what they told me.

Outsidethebox

Cheers NinjaTruncs.

Am off at easter and will pop in.

I suppose another option would be to just save for an extension/conversion.

D3PO

Outsidethebox wrote: »

Cheers NinjaTruncs.

Am off at easter and will pop in.

.

bloody teachers and their holidays :pac::P

Outsidethebox

Aye, they've this country ruined!

Barracuda1

Outsidethebox wrote: »

Cheers NinjaTruncs.

Am off at easter and will pop in.

I suppose another option would be to just save for an extension/conversion.

You could rent a bigger house and wait until all the mortgage arrears are completed. These mortgages could drive prices down in parts of the country alot more that a year or two rent

Outsidethebox

What do you mean by mortgage arrears, barracuda?

The renting was something we looked at too.

Would it make economic sense? Some say yay, some say nay...

Barracuda1

There are some 80,000 mortgages that haven't being paying for >90 days. The government has given the green light for banks to start removing these toxic loans whether it be repossession of the property. The buy to Let market seem to be bigger % of distressed and the banks need to act on them. The other ones are home owners that have borrowed way more than they should have and maybe lost their jobs and are only meeting intrest only payments. You are in a very similar suitation as I am and I thinking of renting a bigger house renting my home and wait and see what happens to house prices

D3PO

Barracuda1 wrote: »

There are some 80,000 mortgages that haven't being paying for >90 days. The government has given the green light for banks to start removing these toxic loans whether it be repossession of the property. The buy to Let market seem to be bigger % of distressed and the banks need to act on them. The other ones are home owners that have borrowed way more than they should have and maybe lost their jobs and are only meeting intrest only payments. You are in a very similar suitation as I am and I thinking of renting a bigger house renting my home and wait and see what happens to house prices

You need to realise that 80,000 court cases for reposession is going to take a LOOOOOOOOOOOOONG time. This isnt going to be a quick fix.

Whilst there might be some credence in what your saying, from a practicality perspective for the OP and many others its just not viable. You could be looking at 5-6 years to sort the arrears mess out. Most probably a good bit longer.

Barracuda1

D3PO wrote: »

You need to realise that 80,000 court cases for reposession is going to take a LOOOOOOOOOOOOONG time. This isnt going to be a quick fix.

Whilst there might be some credence in what your saying, from a practicality perspective for the OP and many others its just not viable. You could be looking at 5-6 years to sort the arrears mess out. Most probably a good bit longer.

You are correct but they have to start somewhere and I'd say the people who will not pay will be first on the list. I still would not buy a house in this market as anything could happen. In the op case I'd rent for a year and see what the story is then.

D3PO

Barracuda1 wrote: »

You are correct but they have to start somewhere and I'd say the people who will not pay will be first on the list. I still would not buy a house in this market as anything could happen. In the op case I'd rent for a year and see what the story is then.

I think its certainly something they should look at. Renting a larger home whilst renting out their own one is something I think many people will end up doing given the current market and individual prediciments

Barracuda1

D3PO wrote: »

I think its certainly something they should look at. Renting a larger home whilst renting out their own one is something I think many people will end up doing given the current market and individual prediciments

True and you wouldn't know what taxes the government will stick on second homes in the coming budgets and banks will easily raise intrest rates on investors over home owners. Currently buy to let rates are 3/4 to 1% higher than residential mortgages. Op you could rent an unfurnised house and take your contents with you and rent your own as unfurnished. Assumimng the house is in a urban area where rental demand is high you could easily have it taken off your hands.

killers1

Outsidethebox wrote: »

Hi folks,

Wife and myself who are both in our 20's are ball hopping here.

We bought a 2 bedroom house for 169K on which we owe 150K in 2007. We were offered upto 299K at the time - bananas!

Our mortgage is a tracker on which we pay €517 a month with PTSB. We also have two loans on which together are about 6K. (Though if needed we could clear these quickly)

Now, we're happy enough where we are and if we were told we're here forever we'd be fine with it. It's a lovely home. However, we have a young son and since last September my wife's mam is living with us as she is ill.

"IF" we were to look into upgrading what we be our chances of getting some muladh? (Haven't bothered to ask our bank yet as we're not really sure whether we will bother doing anything or not)

Our queries:

1, Would we be better to sell ours for what we could get then take our negative equity with us? I estimate we'd sell ours for 60/70, meaning we'd have a negative equity debt of 80/90K.

We'd be looking for about 90/100K to upgrade meaning we'd be owing around 180/190K.

2, Highly unlikely but would it be possible a bank would leave us keep our place to rent and up our mortgage by 90K? The rent would more or less cover the existing mortgage and then in years to come when/if the market picks up a bit we could sell on.

3, Could we approach a different bank for a 90K mortgage?

Basically, we're wondering what, if any, are our options? What's peoples opinions? If a bank would go with option 2 I'd be inclined to go with it. The reasoning being that the tracker mortgage is very low and we'd rent it easily. Therby not taking the hit of 80/90K of a loss. Also, a second mortgage of 90K wouldn't be a huge bearing either.

Now, I know a few of you are probably thinking jaysus look at these idiots trying to get a second mortgage. Did they not see what has happened the last few years and maybe you're right.

As I said, we're happy out where we are as we have a lovely home with a low mortgage payment rate, but we are curious. We have the capabilities of paying a few hundred euro a month more on a mortgage and maybe this might interest the banks?

Will probably add a bit to this over the next day or so but will leave it at this for now.

Thanks to anyone who takes the time to read and answer this long winded effort.

PS. As regards income, ones a public servant on just over 50K and the others on just under 40K.

Go raibh maith agaibh,
OTB.

Hi OP,
I not here to debate the merits of buying a second property, the property market, the pros/cons of being a landlord etc etc but simply to address the figures in your mortgage query & your chances of getting a second mortgage. I do find it a little surprising that other posters feel combined borrowings of €250k on a salary €90k is excessive? I wouldn't really consider borrowings of 2.7 times income as overly excessive even if you never earn a cent in rent.

Negative equity is not a deal breaker for the banks. They will still lend to applicants who's existing property is in NE where they can show they have sufficient income, are not reliant on the proposed rental income and have a proven repayment capacity for the combined stressed repayments. Your combined incomes qualify for you have total borrowings in excess of €400k as per the banks calculators. You have a combined net monthly income in the region of €5,400. The stress tested mortgage repayment on your existing property treated as an Inv Prop for the purposes of calculations amounts to €1,055pm (€150k @ 6.95% over 25 yrs). No potential rental income will be factored into the calculations because the property is in NE and isn't currently let. The stress tested repayment on the new €100k mtg @ 6.24% over 35 yrs is €586. These combined amount to €1,671pm and when subtracted from your income leaves €3,759 for you to live off which is well within bank guidelines. If you can prove that you can afford €1,641pm you have a good chance of approval. If you add your existing mortgage repayment €517, personal loan repayments (?) and monthly savings contribution together and the figure exceeds €2k you've an excellent chance of approval. Seeing as you are in no rush to do this you have plenty of time to build up a repayment capacity evident for 6 months or more which will ensure approval when the time comes. There are other factors like savings, childcare costs etc etc but I am 100% confident that if you can show a proven repayment capacity as outlined the banks will have no issue with a couple in secure employment earning €90k having borrowings of 2.7 times that...

Outsidethebox

Very grateful for that killers1, thank you!

It's late, I'm tired and there's a few figures in there so I will have a closer look tomorrow.

Just on one small point on "No potential rental income will be factored into the calculations because the property is in NE and isn't currently rented"

Would it be an idea to sign it over to the council for the 20 years where we'd get 80% of market value? Would this benefit us looking for a second mortgage?

Again, thanks a million.

killers1

Outsidethebox wrote: »

Very grateful for that killers1, thank you!

It's late, I'm tired and there's a few figures in there so I will have a closer look tomorrow.

Just on one small point on "No potential rental income will be factored into the calculations because the property is in NE and isn't currently rented"

Would it be an idea to sign it over to the council for the 20 years where we'd get 80% of market value? Would this benefit us looking for a second mortgage?

Again, thanks a million.

No problem. You might decide to hand it over to the council for 20 yrs to guarantee rent for the future but whether you do or not will have absolutely no bearing on the mortgage application because they won't factor any potential income into the calculations either way. It'll neither help or hinder your application. Your application stacks up on income, now it just needs to stack up on repayment capacity and you have plenty of time to get this right if you are not planning on buying for a while.

Outsidethebox

Killers1.

Am I right in saying you're a broker?

How would a man go about arranging a meeting?

Cheers,
OTB

killers1

Outsidethebox wrote: »

Killers1.

Am I right in saying you're a broker?

How would a man go about arranging a meeting?

Cheers,
OTB

Hi OTB,

I sure am. PM me your contact details and I'll give you a shout tomorrow.

Cheers,
Killian