The 20% deposit - is there any way around it for a 2nd property??

Barack Obama

Hi. Because of a change in job we need to sell our house and move. The thing is that it's been up for 3 months and even after a price drop, there is no sign of us selling it. It's not just us - plenty of others in the area have been up for sale for the same period of time and from where we have been looking at things seem to be stagnant as well.

We are becoming a bit desperate and in a nutshell, our house is values between €500 and €550k. We are looking at a property of similar value. So, I'm thinking about renting our current house.

And therein lies the problem - the 20% deposit! We have about €50k at the moment so are obviously way off the required amount. Is there any way around this if you are purchasing a 2nd home and there is obviously value and income coming from the first home? The outstanding mortgage is only about €70k.

Thanks!!

Rackstar

Surely the houses are overvalued if they aren't selling?

Get rid of the house before buying again. This is what happened to a lot of people back in 07/08/09 they kept there first house and bought a second, then the crash came and they had to deal with the negative equity on both houses / job losses and not being able to pay both mortgages. They became the so called reluctant landlords.

The rules are there to try and protect people.

Saipanne

Rackstar wrote: »

Surely the houses are overvalued if they aren't selling?

Get rid of the house before buying again. This is what happened to a lot of people back in 07/08/09 they kept there first house and bought a second, then the crash came and they had to deal with the negative equity on both houses / job losses and not being able to pay both mortgages. They became the so called reluctant landlords.

The rules are there to try and protect people.

Protect them from themselves.

johnnyskeleton

Barack Obama wrote: »

Hi. Because of a change in job we need to sell our house and move. The thing is that it's been up for 3 months and even after a price drop, there is no sign of us selling it. It's not just us - plenty of others in the area have been up for sale for the same period of time and from where we have been looking at things seem to be stagnant as well.

We are becoming a bit desperate and in a nutshell, our house is values between €500 and €550k. We are looking at a property of similar value. So, I'm thinking about renting our current house.

And therein lies the problem - the 20% deposit! We have about €50k at the moment so are obviously way off the required amount. Is there any way around this if you are purchasing a 2nd home and there is obviously value and income coming from the first home? The outstanding mortgage is only about €70k.

Thanks!!

The 20% rule applies to all purchasers except first time buyers. So regardless of whether you keep your current home or not, you will still need the 20% deposit. Even if you were first time buyers, you would still need 20% over €220k.

However, you have a large amount of equity in the current house so if you sell it you could easily afford the other house on a small mortgage or even paying fully by way of cash.

If you want to keep both houses, and you have been warned against doing this above, then you could see if you could get an equity release or increase your mortgage on the first home and use that for the deposit on the second.

Saipanne

johnnyskeleton wrote: »

The 20% rule applies to all purchasers except first time buyers. So regardless of whether you keep your current home or not, you will still need the 20% deposit. Even if you were first time buyers, you would still need 20% over €220k.

However, you have a large amount of equity in the current house so if you sell it you could easily afford the other house on a small mortgage or even paying fully by way of cash.

If you want to keep both houses, and you have been warned against doing this above, then you could see if you could get an equity release or increase your mortgage on the first home and use that for the deposit on the second.

Will any bank be ok with them using a (albeit secured) loan to use as a deposit?

johnnyskeleton

Saipanne wrote: »

Will any bank be ok with them using a (albeit secured) loan to use as a deposit?

Don't see why not if they have a good savings record, a good income and a substantial other asset. The banks won't lend if a deposit is wholly a gift and will be cautious if the deposit comes from the sale of a previous property, but the latter, as far as I know, is a symptom of not having a good savings record rather than being a reason in itself to refuse to lend.

Butters1979

Saipanne wrote: »

Will any bank be ok with them using a (albeit secured) loan to use as a deposit?

seriously doubt it. A loan for the extra deposit is just the lower deposit plus two loans (the mortgage and the additional loan) instead of one. It makes no sense.

If you have positive equity in the old house, you won't be able to use that until you free it up. However these 20% rules can sometimes have exceptions, have you talked to the bank?

It is strange you can't sell your house for what's it's valued at. The market has cooled a bit but there is still high demand. Are you sure the valuation is right?

I Am The Law

Barack Obama wrote: »

Hi. Because of a change in job we need to sell our house and move. The thing is that it's been up for 3 months and even after a price drop, there is no sign of us selling it. It's not just us - plenty of others in the area have been up for sale for the same period of time and from where we have been looking at things seem to be stagnant as well.

We are becoming a bit desperate and in a nutshell, our house is values between €500 and €550k. We are looking at a property of similar value. So, I'm thinking about renting our current house.

And therein lies the problem - the 20% deposit! We have about €50k at the moment so are obviously way off the required amount. Is there any way around this if you are purchasing a 2nd home and there is obviously value and income coming from the first home? The outstanding mortgage is only about €70k.

Thanks!!

Don't forget someone has to have a 20% deposit (€100k) and an income of €400k / 3.5 (114k per annum) for the remainder if they are to buy your house.

April 73

You have a large amount of equity in the house. If you really want to sell you could drop the asking price. A good value house will always sell.

Bank exemptions for 2015 to the new mortgages rules have been used up. A buyer for a house of €500k-€550k may need an exemption on deposit or income limits. In which case you have a better shot at selling in the new year.

Someone in the market for a house of that value is likely to have a house to sell in order to trade up. The stagnation may be happening at the €350k first time buyer level because of deposits.

The alternative is rent it out & move to the location of the new job and rent somewhere there yourselves. You have a large amount of equity to purchase a new house. Personally I would take this house off the market for the next five weeks. Put it back up in January priced to sell.

johnnyskeleton

johnnyskeleton wrote: »

banks won't lend if a deposit is wholly a gift

I very much doubt that's true. They may be cautious if you come in with the bare minimum 10% deposit as a gift for a first time buyer but if you walk into a bank with a 30 or 40% deposit all as a gift and a good salary no bank is going to turn you down.

ted1

Barack Obama wrote: »

The thing is that it's been up for 3 months and even after a price drop, there is no sign of us selling it.


, our house is values between €500 and €550k.

Thanks!!

A house is only worth what someone is willing to pay, clearly your house is not worth as much as you think it is

liam7831

Barack Obama wrote: »

Hi. Because of a change in job we need to sell our house and move. The thing is that it's been up for 3 months and even after a price drop, there is no sign of us selling it. It's not just us - plenty of others in the area have been up for sale for the same period of time and from where we have been looking at things seem to be stagnant as well.

We are becoming a bit desperate and in a nutshell, our house is values between €500 and €550k. We are looking at a property of similar value. So, I'm thinking about renting our current house.

And therein lies the problem - the 20% deposit! We have about €50k at the moment so are obviously way off the required amount. Is there any way around this if you are purchasing a 2nd home and there is obviously value and income coming from the first home? The outstanding mortgage is only about €70k.

Thanks!!

Must be a replica of your gaff in the states for that money.....

johnnyskeleton

Kailani Helpless Rooster wrote: »

I very much doubt that's true. They may be cautious if you come in with the bare minimum 10% deposit as a gift for a first time buyer but if you walk into a bank with a 30 or 40% deposit all as a gift and a good salary no bank is going to turn you down.

If the deposit is wholly a gift there will be no history of savings so the applicant(s) will fail the stress test.

pwurple

liam7831 wrote: »

Must be a replica of your gaff in the states for that money.....

Hardly. It would be a 1 bed bungalow on a postage stamp in d4.

Charlie George

As far as i'm aware you will have to come up with 30% for the 2nd house as thats the minimum for investors as you would be classed,new rules coming in from central bank every month.

Barack Obama

I Am The Law wrote: »

Don't forget someone has to have a 20% deposit (€100k) and an income of €400k / 3.5 (114k per annum) for the remainder if they are to buy your house.

Not really - it's a 5 bed detached house so wouldn't exactly expect a 1st time buyer to be opting for it...

Barack Obama

johnnyskeleton wrote: »

The 20% rule applies to all purchasers except first time buyers. So regardless of whether you keep your current home or not, you will still need the 20% deposit. Even if you were first time buyers, you would still need 20% over €220k.

However, you have a large amount of equity in the current house so if you sell it you could easily afford the other house on a small mortgage or even paying fully by way of cash.

If you want to keep both houses, and you have been warned against doing this above, then you could see if you could get an equity release or increase your mortgage on the first home and use that for the deposit on the second.

That's something I hadn't considered tbh. There would be no problem renting the house in the area that we live in because the rental demand is quite high and from looking around, the income would be twice the current monthly mortgage payment (8 years remaining). Obviously this would change with a re-mortgage.

adrian.s

Barack Obama wrote: »

That's something I hadn't considered tbh. There would be no problem renting the house in the area that we live in because the rental demand is quite high and from looking around, the income would be twice the current monthly mortgage payment (8 years remaining). Obviously this would change with a re-mortgage.

Don't forget to factor in the income tax bill from the rental. With only 8 years left on your mortgage, you probably ain't paying a huge amount of interest so you won't have much to offset the bill.

In the same boat as yourself with house not attracting interest and even reducing the asking price to 100k below sold prices of other houses in the same estate 6 months ago, nothing happening. Estate agent doesn't know what to say to me any more. All the properties I'm interested in buying are keeping their price level but not selling either and CSO reports that property prices continue to rise!

Penn

johnnyskeleton wrote: »

The banks won't lend if a deposit is wholly a gift

They will. I got the maximum mortgage available to me based on my salary with the rest of the value (including deposit) gifted from my parents. I had to show the capability to save money for over 6 months and I explained that the reason I hadn't been saving enough money previously was because I was on a much lower wage until this past year, which they could see from my transaction history.

lawred2

Barack Obama wrote: »

Hi. Because of a change in job we need to sell our house and move. The thing is that it's been up for 3 months and even after a price drop, there is no sign of us selling it. It's not just us - plenty of others in the area have been up for sale for the same period of time and from where we have been looking at things seem to be stagnant as well.

We are becoming a bit desperate and in a nutshell, our house is values between €500 and €550k. We are looking at a property of similar value. So, I'm thinking about renting our current house.

And therein lies the problem - the 20% deposit! We have about €50k at the moment so are obviously way off the required amount. Is there any way around this if you are purchasing a 2nd home and there is obviously value and income coming from the first home? The outstanding mortgage is only about €70k.

Thanks!!

is it?

lawred2

Penn wrote: »

They will. I got the maximum mortgage available to me based on my salary with the rest of the value (including deposit) gifted from my parents. I had to show the capability to save money for over 6 months and I explained that the reason I hadn't been saving enough money previously was because I was on a much lower wage until this past year, which they could see from my transaction history.

you still had to show savings record

Barack Obama

adrian.s wrote: »

Don't forget to factor in the income tax bill from the rental. With only 8 years left on your mortgage, you probably ain't paying a huge amount of interest so you won't have much to offset the bill.

In the same boat as yourself with house not attracting interest and even reducing the asking price to 100k below sold prices of other houses in the same estate 6 months ago, nothing happening. Estate agent doesn't know what to say to me any more. All the properties I'm interested in buying are keeping their price level but not selling either and CSO reports that property prices continue to rise!

100% exactly what we have witnessed Adrian, on both sides. I can only guess that it's first time buyers houses that are the one's that are keeping the CSO report rising!

Butters1979

adrian.s wrote: »

Don't forget to factor in the income tax bill from the rental. With only 8 years left on your mortgage, you probably ain't paying a huge amount of interest so you won't have much to offset the bill.

In the same boat as yourself with house not attracting interest and even reducing the asking price to 100k below sold prices of other houses in the same estate 6 months ago, nothing happening. Estate agent doesn't know what to say to me any more. All the properties I'm interested in buying are keeping their price level but not selling either and CSO reports that property prices continue to rise!

I'd speculate the reason for this is it only takes into account average prices of property sold. This won't take into account all the houses out there that aren't selling at their perceived value. Right now most sellers are waiting to see what happens short term before dropping their prices.

That means the average house price sale is still high but less are happening, they will either drop in 6 months or sales will pick up. It's hard to tell. Right now the market is becoming toxic is some places. This means the most someone is willing to pay for something is still lower than the least someone is willing to sell it at.

Jen44

We just purchased a second house in Sep with only 10% deposit. We kept our first house and rented it out. The first mortgage is with a different bank altogether

Barack Obama

Jen44 wrote: »

We just purchased a second house in Sep with only 10% deposit. We kept our first house and rented it out. The first mortgage is with a different bank altogether

Do you mind letting me know who the lender was? PM me if you feel that's more appropriate.

Thanks!

Mrs OBumble

Barack Obama wrote: »

And therein lies the problem - the 20% deposit! We have about €50k at the moment so are obviously way off the required amount.

Hmm, 20% of 250,000 = 50,000. Must be some gaff you're wanting to buy.

Why not just rent in the other location for a while, until your current house sells. Problem solved.

riclad

IF houses are not selling at 500k,
maybe they are worth 400k or less .
house values change with the economy and also with lending practices by the banks .
no one decides what house,s are worth,
its due to demand,the economy and various factors .
where people wish to live .


People mostly wish to live in urban area,s .

Maybe prices will go down in some area,s due to the 20 per cent deposit rule .if so that is how the market works .
i would prefer that the banks are careful with lending ,
than we get into another boom,bust cycle
which ends up in the tax payer paying to clean up to keep the banks going.

A House is only worth what some one will pay ,maybe backed with with a loan from a bank .
Preferably a bank that has lending policys not based on rising house values .


DO we want to go back to the time when banks would lend
joe bloggs working in dunnes stores 150k, to buy a house in cavan ?

if no one is buying at price x maybe its not worth that price.

Barack Obama

Of course it is only worth what someone will pay, but as someone in the exact same situation has already explained, the market appears to be completely stagnant.

riclad wrote: »

DO we want to go back to the time when banks would lend joe bloggs working in dunnes stores 150k, to buy a house in cavan ?

Did you even read the original post? There is only €80k outstanding on the mortgage and we have €50k in savings towards the deposit.

I also love the comparison with someone working in Dunnes Stores. Jesus wept.

BattleCorp

I thought that the banks had discretion to ignore the 20% deposit rule for a small percentage of mortgages?

BattleCorp

Barack Obama wrote: »

Of course it is only worth what someone will pay, but as someone in the exact same situation has already explained, the market appears to be completely stagnant.



Did you even read the original post? There is only €80k outstanding on the mortgage and we have €50k in savings towards the deposit.

I also love the comparison with someone working in Dunnes Stores. Jesus wept.

I would have thought that, given your circumstances, you would be a good candidate for getting a second mortgage. (Good equity, good savings etc.)

Have you tried any banks yet?

Jen44

Barack Obama wrote: »

Do you mind letting me know who the lender was? PM me if you feel that's more appropriate.

Thanks!

Its with KBC.

Barack Obama

BattleCorp wrote: »

I would have thought that, given your circumstances, you would be a good candidate for getting a second mortgage. (Good equity, good savings etc.)

Have you tried any banks yet?

Yes, we have full loan approval for up to €450k with KBC (same as Jen it appears!).

I never asked about a 90% LTV mortgage because I simply did not think it was possible. I'm certainly going to check now!

Barack Obama

Jen44 wrote: »

Its with KBC.

Thanks Jen. One last thing - did this have an impact on the total that you could borrow? What I mean is, would they let you borrow more with an 80% LTV than a 90% LTV.

Rew

Barack Obama wrote: »

Thanks Jen. One last thing - did this have an impact on the total that you could borrow? What I mean is, would they let you borrow more with an 80% LTV than a 90% LTV.

As far as I know it doesn't but the rate you will get wont be as good as the 80% LTV so that might have an impact (if they thought the higher repayments were too much).

Jen44

To be honest we didn't ask how much we could actually borrow, we had a house lined up so just asked for the 295k we needed to buy that. It was a good bit below the 3.5 times our combined annual income so I think that did have some bearing on it. They also did mention to us the fact that our 1st house was in an area with a huge rental market made them a bit more comfortable with the whole thing. Especially as our first house was in around 20K neg equity at the time. If we sold it now we would prob break even. They did mention you could only be exempt from one of the new rules so if the amount we wanted to borrow was above 3.5 times our combined salary I don't think they would have approved us. The rate we got was not as good as the 80% LTV loan. But it didnt concern us as we were living out in in drogheda commuting every day to dublin with a small baby so we were just delighted to be getting back to dublin.

antoinolachtnai

The OP should be able to get the loan, at least in principal. They can borrow at least 70 percent of the overall combined value of the two properties. There is plenty of equity. The 20 percent role doesn't really bear on the situation at all. They need to talk to the bank or the agent.

Whether it is really a good move for them is another question. They need to work that out.

dearg lady

Barack Obama wrote: »

Of course it is only worth what someone will pay, but as someone in the exact same situation has already explained, the market appears to be completely stagnant.

Perhaps the markey is stagnant as so many sellers have their expectations set too high. It doesn't matter how 'stagnant' the market is, there is a level at which your house will sell, but you, presumably do not wish to sell it at that level

Butters1979

dearg lady wrote: »

Perhaps the markey is stagnant as so many sellers have their expectations set too high. It doesn't matter how 'stagnant' the market is, there is a level at which your house will sell, but you, presumably do not wish to sell it at that level

Or to put it another way, there is a level at which a house will sell, but you as a buyer, are not willing to buy it at that level. It's not stagnant, it's toxic.

If people are not in a rush to sell, and can therefore wait and see how this plays out (I for one expect it to pick up again in the new year as people come back to the game with another years savings) or people can't sell for lower due to equity issues, then it is not about expectation, it is about practicality.

Also the more vendors refuse to lower their prices, the less sales happen, and therefore competition to buy increases, driving back up what buyers are willing to spend, bringing the vendors who won't lower their prices back into play.

Swings and roundabouts.

dearg lady

Butters1979 wrote: »

Or to put it another way, there is a level at which a house will sell, but you as a buyer, are not willing to buy it at that level. It's not stagnant, it's toxic.

If people are not in a rush to sell, and can therefore wait and see how this plays out (I for one expect it to pick up again in the new year as people come back to the game with another years savings) or people can't sell for lower due to equity issues, then it is not about expectation, it is about practicality.

Also the more vendors refuse to lower their prices, the less sales happen, and therefore competition to buy increases, driving back up what buyers are willing to spend, bringing the vendors who won't lower their prices back into play.

Swings and roundabouts.

Well unless OP as a seller reduces the price to about 150k I wouldn't be the buyer in this case!

I agree it is a kind of stalemate situation. However there is a constraint around what people are ABLE to purchase for, even putting aside their preferences. For those in negative equity there is of course a constraint again around what thwy are able to sell for. For a person selling without these constraints there is likely a bit more leeway.

Butters1979

dearg lady wrote: »

Well unless OP as a seller reduces the price to about 150k I wouldn't be the buyer in this case!

I agree it is a kind of stalemate situation. However there is a constraint around what people are ABLE to purchase for, even putting aside their preferences. For those in negative equity there is of course a constraint again around what thwy are able to sell for. For a person selling without these constraints there is likely a bit more leeway.

Agreed, I was lucky enough to find the new mortgage rules probably helped me buy by reducing competition and pressuring the vendor to take what they can get.

Buying or selling, it's a lot of money to jump into a decision and it feels like people are holding back to see where the chips fall. Christmas is coming up to so things slow down anyway.

A little of topic but to get back to the OP. Your house may well sell for your valuation in 6 months, the questions is can you wait that long. I'd imagine a bank would be willing to give you a loan in January (when their quota's reset) if you discussed the circumstances based on the equity in your old house and it's 'rentabilty' (is that a word). The risk is things go south and you just end up with negative equity and two properties.

I Am The Law

I Am The Law wrote: »

Don't forget someone has to have a 20% deposit (€100k) and an income of €400k / 3.5 (114k per annum) for the remainder if they are to buy your house.

Barack Obama wrote: »

Not really - it's a 5 bed detached house so wouldn't exactly expect a 1st time buyer to be opting for it...

Those trading up after they sell there own house and pay off the existing mortgage may have the €100k deposit but will still have to get €400k mortgage to buy your house.

April 73

Not necessarily. That's a how is a piece of string conundrum?

Depending on when people bought, how much they paid off the mortgage over the years etc etc., trader-uppers could easily have €200k-€300k to put down as a deposit. Suddenly the €500k house needs a mortgage of let's say €250k. Considering the average mortgage in the country is around €170k, that's very do-able.

Anyone who bought in the late 90s, early 00s could easily be in this position along with being established in careers & earning reasonable salaries.

Barack Obama

April 73 wrote: »

Not necessarily. That's a how is a piece of string conundrum?

Depending on when people bought, how much they paid off the mortgage over the years etc etc., trader-uppers could easily have €200k-€300k to put down as a deposit. Suddenly the €500k house needs a mortgage of let's say €250k. Considering the average mortgage in the country is around €170k, that's very do-able.

Anyone who bought in the late 90s, early 00s could easily be in this position along with being established in careers & earning reasonable salaries.

Exactly.

Rew

Barack Obama wrote: »

Exactly.

We all can come up with any number of scenarios for how someone would buy a 500k house or not buy it but real world in your case, from your own words is they haven't so far.

Rew

khamilto wrote: »

Which matters not at all to the thread topic of "Is there any way around the 20% deposit for a 2nd property?"

Why do so many people want to berate him for a decision he has already made and a question he hasn't asked?

If you check back I helped with the answer to the original question already.

Totally not berating, just engaging in the conversation as its gone which the OP is part of.

I Am The Law

khamilto wrote: »

Which matters not at all to the thread topic of "Is there any way around the 20% deposit for a 2nd property?"

Why do so many people want to berate him for a decision he has already made and a question he hasn't asked?

A rule brought in to prevent another property bubble and protect people from over stretching themselves, if we all find "a way around" then what is the point of the rule?

antoinolachtnai

It's not a matter of finding a way around it. The rule (see the actual rule at https://www.centralbank.ie/press-area/press-releases/Pages/CentralBankannouncesnewregulationsonresidentialmortgagelending.aspx) doesn't really restrict the OP. The OP can borrow 80 percent against the new home and the remainder against the existing property. The OP's income will be increased by the rent from the existing property.