Would we qualify for second home mortgage?

firstimer

Situation is as follows;
- Married with one child
- combined annual income of €120k, both in permanent roles in private sector
-savings of 100k
- bought house in 2007 for €345k + stamp on my own (salary unchanged since then)
-have tracker & outstanding balance of €315
- if to sell probable NE to tune of approx €100k & thus renting out rather than selling is prefered.

House is in very strong rental area & whilst location suits, its not suitable as family home.
We are just about managing with one child but would like to extend family.

Are we being completely unrealistic in thinking we might qualify for a second mortgage? Would be looking for €150k.

Any advice much appreciated

killers1

firstimer wrote: »

Situation is as follows;
- Married with one child
- combined annual income of €120k, both in permanent roles in private sector
-savings of 100k
- bought house in 2007 for €345k + stamp on my own (salary unchanged since then)
-have tracker & outstanding balance of €315
- if to sell probable NE to tune of approx €100k & thus renting out rather than selling is prefered.

House is in very strong rental area & whilst location suits, its not suitable as family home.
We are just about managing with one child but would like to extend family.

Are we being completely unrealistic in thinking we might qualify for a second mortgage? Would be looking for €150k.

Any advice much appreciated

What ages are you both? What childcare costs do you have?

firstimer

We are 31 & 33 yrs old & in the very fortunate position of not having any childcare costs.

dotsman

It's difficult to say. Certainly, I would suggest applying as there is a reasonable chance. AIB & BOI seem to eb the best banks at teh moment for mortgages. EBS and KBC also seem to be advertising (although I'm not sure how active they are).

As a matter of interest, was the original house purchased with a loan in one of your names or both?

firstimer

Funny you should ask that because the house was bought on my own before we got married so the mortgage is still in my name only and husband thankfully did not purchase during the boom. We've no loans or debts outside the current mortgage.

Any honest feedback or advice would be great

NinjaTruncs

BOI told me 3 weeks ago that they will lend 4.5x combined salary. So in your case they would lend a total of 540K, take away your existing mortgage of 315K and BOI would give you about 225K.

One thing they won't do is consider rental income from your current property as income, they will factor in that you will need to be able to cover the cost of both mortgages.

I would suggest you work out how much it will cost you to rent the current property, tax is a killer, you must pay tax on your rental income (with some deductions), I worked out for us that on 1,000 rent we would pay close to 400 a month in tax and other investment related costs.

Are you sure your NE number is right? depending on when you bought in 2007 but that was at the peak, I'd have expected that you'd be looking at closer to 150K in NE.

Also you will lose your TRS on your existing mortgage.

dotsman

firstimer wrote: »

Funny you should ask that because the house was bought on my own before we got married so the mortgage is still in my name only and husband thankfully did not purchase during the boom. We've no loans or debts outside the current mortgage.

Any honest feedback or advice would be great

If this is the case, could he not purchase the new home on his own? Obviously it would depend on what proportion of the combined 120K is his. Likewise, the savings would be now going to his name only. However, Under the Family Home Protection Act, you would still have a legal interest in it. In a few years, when things are a bit calmer, you can then maybe move to disposing of the original property (or keep it as an asset) and going joint on the new home.

To be honest, with bank lending policies changing so much in the past few years with regards these exceptional cases, the best advise I can give is to make an appointment with one of the banks that are lending and see what their advisers says.

firstimer

Ninja Truncs yes I need to be more realistic about amount of NE. I would hope to get at least 200k if we were to sell.
Tax on rental income is a killer & we have included it in our calcs. It certainly adds a fair chunk to outgoings.
In your experience with bank can you make informal enquiries with mortgage dept about whether they would entertain us or not? Or do you have to make a formal mortgage application to be told not a chance?!

Dotsman thats a very valid point you've made about husband applying on his own. I had just assumed if it was to be a mortgage for the family home that both of us would need to apply.

killers1

firstimer wrote: »

We are 31 & 33 yrs old & in the very fortunate position of not having any childcare costs.

Here's how your application will be assessed...

Existing Property
€315k stress tested @ 6.95% over 25 yrs = €2,216.32. This figure is the deficit carried over. No potential rental income factored in by Bank.

New Mortgage
€150k stressed @ 6.24% over 32 Yrs = €903.27

Combined Stressed Mortgage Repayments = €3,119.59 which is the figure you need to be able to show a repayment capacity for on a monthly basis for a consistent period of time.

So to work out your repayment capacity take the figure of
€3,119.59
Less €?? - Existing Mortgage
Less €?? - Monthly Savings or average over 6 months
Less €?? - Any existing loans not continuing after drawdown
= If the result is a negative figure i.e your existing mtg repayment + savings etc is greater than €3,119.59pm you have a proven repayment capacity for the amount you want to borrow. No proposed rental income will be considered because the property is in NE and not currently let.

Your combined incomes allow you to borrow in the region of €500k so that part is fine. If you have proven repayment capacity you stand a very strong chance. You have good incomes & excellent savings.

Any queries let me know.

NinjaTruncs

Killers1 one question, why would the existing mortgage be stress tested at a higher rate than the new mortgage?

Given the existing mortgage is a tracker I would have thought it would always be a lower rate than a SVR loan.

killers1

NinjaTruncs wrote: »

Killers1 one question, why would the existing mortgage be stress tested at a higher rate than the new mortgage?

Given the existing mortgage is a tracker I would have thought it would always be a lower rate than a SVR loan.

I've applied AIB's credit policy to the calculations as it's probably the most stringent out there and if you qualify on that one you'll have a good choice of lenders. They stress test the existing mortgage at 2% above their Buy to Let Variable Rate mortgage product (currently 4.95%) over the term remaining on the existing mortgage or 25 yrs, whichever is the lower. They don't take into a/c whether the existing mortgage is on a tracker or not.

They then stress test the new homeloan at 2% above homeloan variable rates 6.24% over the term the ages allow up to age 65 at expiry.

firstimer

Many thanks Killers1 for all that detail. Very helpful & certainly looks from calcs that we should qualify. One question you might be able to answer if you don't mind.
How would being on maternity leave (state mat benefit only) affect an application?

killers1

firstimer wrote: »

Many thanks Killers1 for all that detail. Very helpful & certainly looks from calcs that we should qualify. One question you might be able to answer if you don't mind.
How would being on maternity leave (state mat benefit only) affect an application?

That question isn't set in stone in Bank policy and is looked at on a case by case basis depending on the overall strength of the application. I've seen cases where the bank insisted on the person being back in work and providing a payslip confirming same prior to loan offer and I've had other cases where a letter from the employer confirming the return to work date was sufficient to proceed.

firstimer

Hi all just to update you since I last posted.

We did meet with the bank which we have our current mortgage with & in terms of affordibility we were well within their criteria however the LTV was the big issue. They were willing to offer us a second mortgage which would amount to the price of a mobile home!! We politely declined!

We were told they are approving second mortgages to those in a similar circumstance but who have their first mortgage elsewhere & suggested we approach other banks.

We decided to rent out our house & are now renting elsewhere. This gives us some breathing space to save some more & then who knows!

Thanks for earlier replies to post.