Upgrading Home

House proud

Hi. New member so sorry in advance if doing wrong.

over Ten years ago my sister was trying to buy a house but couldnt on her own. I went in with her "on paper" only so she/We got the mortgage with a view to her getting me off the mortgage in few years. This mortgage was 135000 at that time, but the house is prob worth about 80,000 now. I have nothing to do with her house and she pays full mortage.

Fast forward few years later i tried to get mortgage to buy my own house but couldnt as I was listed on the other mortgage and the banks felt if she lost her job i couldnt afford both.

So, I went to the two credit unions im with and was approved a loan from each which allowed me to buy my own small two bed starter home, valued 65,000. (both houses in same estate) I have fully paid off both the credit unions loans for this house so now own the house outright. I have no other loans, have no credit cards etc except the first mortgage with my sister.

My sister tried to take over mortage but banks refused because of her salary so I am still down as part owner of house.

What is the possibility of me getting a 2nd mortgage?? Would they take into consideration that i paid for my second house in just under five years and hope to rent it out. Houses similar to mine are rented for 450 a month approx.

I would like a mortage for approx 150,000. I earn 35,000 and have deposit of 15,000 at present but am able to save quite a bit weekly now that my house is paid off. I would hope to buy next year so have another year to save.


Any comments / advise would be welcome.

Butters1979

Possibility is a difficult question.

When you and your sister applied for the first mortgage they took into account both of your incomes and security of having two people with jobs. That's why they won't allow you to go off the other mortgage. They feel it will be too insecure for your sister alone.

They would look ate your whole situation, even if you don't pay the mortgage on your sisters place if something happened her job you would be legally liable. The fact you have already got a fully paid off house will help.

The first house your sister has, how much is still owed and how much is it valued at? If you're in positive equity it helps a lot as if things go wrong you can sell to pay off the bank.

House proud

Hi Butters1979. Thanks for your reply.

The mortgage was 135,000 but i think its about 100,000 now and worth around 70,000-80,000 so it is in negative equity still.

wench

House proud wrote: »

I would like a mortage for approx 150,000. I earn 35,000 and have deposit of 15,000

Even leaving aside the house with your sister, this would be a problem.
The Central Bank rules limit lending to 3.5 times income, which would be about €120,000. You're not a first time buyer, so you'd need a 20% deposit too.

House proud

Thanks Wench for your reply. I hope to have the 20%. Im currently saving between 150-200 weekly as thats what i had been paying all along between the two credit unions to pay for the house so i figured if i just struggled for another year - year and a half, saving that i should have the deposit

TeaBagMania

Maybe she can refinance in her name alone using your paid off house as collateral. It would at least get your name off the current loan

House proud

TeaBagMania wrote: »

Maybe she can refinance in her name alone using your paid off house as collateral. It would at least get your name off the current loan

Could she do that as the 2nd house is in just my name?

Sorry if that sounds daft but i dont really know the ins and outs of mortages etc at all

TeaBagMania

I don’t see why not, of course you would have to sign the legal paperwork stating if she defaults they can take “your” house

Edit, also like to say you must have a lot of faith in your sister and a good relationship, wish I had a sibling like you

blindside88

Is there another family member that she could substitute onto the mortgage on her house instead of you? The bank may be happy to do this and it gets you off the mortgage.

House proud

blindside88 wrote: »

Is there another family member that she could substitute onto the mortgage on her house instead of you? The bank may be happy to do this and it gets you off the mortgage.

Def not. They all seen the hassle i went through trying to get a mortage on my own. hindsight is a wonderful thing.

Cuddlesworth

You can borrow 3.5 times your income.

You have a apartment worth circa 65k.
You have a deposit of 15k.
You owe 50k on a mortgage.


You earn 35k. The max you could borrow without an exception is 122.5k. At the moment its, 122.5k - 50k. So 72.5k borrowed for the new house.

If you sell the 2 bed house, that's 80k deposit + 72.5k borrowed. Which is 152.5k in total and meets the deposit requirement.

House proud

Cuddlesworth wrote: »

You can borrow 3.5 times your income.

You have a apartment worth circa 65k.
You have a deposit of 15k.
You owe 50k on a mortgage.


You earn 35k. The max you could borrow without an exception is 122.5k. At the moment its, 122.5k - 50k. So 72.5k borrowed for the new house.

If you sell the 2 bed house, that's 80k deposit + 72.5k borrowed. Which is 152.5k in total and meets the deposit requirement.

Thanks cuddlesworth. I wasnt sure if id have to sell 2nd house or not or if id have to clear of the first mortgage but that makes more sense.

PhoenixParker

House proud wrote: »

Could she do that as the 2nd house is in just my name?

Sorry if that sounds daft but i dont really know the ins and outs of mortages etc at all

No, her name would have to be added to the deeds.

How long is it since she tried to refinance and how close to being able to refinance is she? Is there any chance she can start paying more off the mortgage or has a lump sum saved? Find out exactly what the bank need to get your name off the deeds and that becomes the first target. E100K left on a E135K mortgage after 10 years seems like a lot to have left especially when she's taking advantage of your name to own it. I know she's your sister, but when it's affecting your life and it's been going on this long then it's time to start putting your foot down.

I think you should also consider selling your current house in order to upgrade.

With a salary of E35K your max mortgage is 122.5K, the 65K from your current house will cross the bridge to the house value you're looking to purchase. The answer may be to sell your current house, gift/loan your sister enough to get your own name off her mortgage and use the remaining money + savings to purchase your new house.

House proud

PhoenixParker wrote: »

No, her name would have to be added to the deeds.

How long is it since she tried to refinance and how close to being able to refinance is she? Is there any chance she can start paying more off the mortgage or has a lump sum saved? Find out exactly what the bank need to get your name off the deeds and that becomes the first target. E100K left on a E135K mortgage after 10 years seems like a lot to have left especially when she's taking advantage of your name to own it. I know she's your sister, but when it's affecting your life and it's been going on this long then it's time to start putting your foot down..

Thanks Phoenixparker.

She is a long way off trying to remortgage i think. IT was a 100% mortgage. She pays 444 monthly for the mortgage and also has a 20,000 car/house loan and earns less now than she did when the mortgage was taken out. She never seems to have a penny. She has no savings etc. She took a year off about 8 years ago paying interest only to travel so that didnt help either

MrDerp

Anyone I know who has bought a second home recently, e.g. while keeping a negative equity apartment, has had the income multiple applied to their total owed sum across both mortgages,
In theory, that means the bank will assess the overall mortgage liability for you to be 150,000 + the (presumably about) 100,000 owed on your sister's house.

The bank will allow somewhere between 8 and 10 months rent to be included as gross income in the figures, if you can prove the income (might be hard without an actual lease in place already), giving you an income of 35000 + (10months * 450) = 39500.

Your LTI (Loan to Income Ratio), if my figures are correct and counting in your sister's home, would be 250,000 / 39500, which is 6.33 LTI - I can't see the banks doing business at this debt level, the Central Bank guides 3.5. That's a far bigger problem than saving for a deposit, in my opinion. Your overall LTV would be fine due to having an existing asset.

I know of people getting LTI exemptions, but at higher salary levels than yours and with proven income potential (e.g. guaranteed increments, professionals with usual career trajectories)

If they were willing to do business at 4 times your income (exemption) that gives you:
Total owed = 4 x income
(New mortgage + Sister's mortgage) = 4 x 39500
New mortgage + 100000 = 158000
New mortgage = 58000
NB: Your existing asset will only be counted for income in LTI, it's value would only help LTV if you offered it as collateral on the new loan

I don't think the bank will consider it credit worthy, given they can instead lend the limited money to a young couple with no existing mortgages

You might be better off making a plan to save hard (you're obviously excellent at this) and trade up. You're more likely to get an LTI exemption with a bigger deposit (less risk for bank due to lower LTV)

To trade up for an e.g. 180,000 house you'd have 80,000 (65 sale + current cash) deposit right now, meaning you need to find 100,000.
Income = 35,000
Total borrowable @4.0 LTI = 140,000
Minus the 100,000 (presumed owed on sisters house) = 40,000
Further deposit required = 60,000


Unfortunately, the banks won't discount your sisters house. It doesn't matter what arrangement you think you have between you, nor does it matter who makes the payments, you are liable for the full amount. If your sister lost her job it could sink two mortgages, hers and yours.

It's rough going I know, but what's "on paper" between you and your sister is a significant liability in the eyes of the bank, and the law. It's not that the bank won't believe you in, it's that there are far less risky applications to be giving money to, and the new central bank restrictions are there to stop people building risky loans. I'm not sure the bank would lend you 150k even without your sister's mortgage

MrDerp

Cuddlesworth wrote: »

You can borrow 3.5 times your income.

You have a apartment worth circa 65k.
You have a deposit of 15k.
You owe 50k on a mortgage.


You earn 35k. The max you could borrow without an exception is 122.5k. At the moment its, 122.5k - 50k. So 72.5k borrowed for the new house.

If you sell the 2 bed house, that's 80k deposit + 72.5k borrowed. Which is 152.5k in total and meets the deposit requirement.

Unfortunately, her liability is 100k on a mortgage, not 50k

You will have to get your name off your sister's mortgage.
How much is the upgrade worth to you?
Would you give your sister a lump sum to reduce the outstanding mortgage and make it possible to remortgage in her name only?

House proud

Deleted User wrote: »

You will have to get your name off your sister's mortgage.
How much is the upgrade worth to you?
Would you give your sister a lump sum to reduce the outstanding mortgage and make it possible to remortgage in her name only?

Im beginning to think thats the only way out of this.

If there is 100g outstanding is it a case that i pay 50,000 to get off the mortgage?

PhoenixParker

House proud wrote: »

Im beginning to think thats the only way out of this.

If there is 100g outstanding is it a case that i pay 50,000 to get off the mortgage?

No, you need to ask the bank. It'll depend a lot on your sister's income and other financial circumstances. It could be that they'll be ok with getting it down to 80K or they may want far more. Probably worth talking to a broker too. They might be able to advise another strategy like transferring the mortgage to a new bank.

Cuddlesworth

House proud wrote: »

Im beginning to think thats the only way out of this.

If there is 100g outstanding is it a case that i pay 50,000 to get off the mortgage?

I think giving your sister 50k to buy you out seems like a bad idea, considering her current financials and inability to pay down current loans.

House proud

Deleted User wrote: »

How much is the upgrade worth to you?QUOTE]

Put it this way. Im living in a midterraced 2 bed house and ive always dreamt of having a dormer bungalow in the country. Maybe im living in the clouds.

Is your sister happy living in that house?
If it could be sold for 80 and you make up the remainder of the outstanding mortgage 20 you would both be clear of the mortgage.

It would be hard for us to know how much it would take to satisfy the bank that it is affordable for your sister.

House proud

Deleted User wrote: »

You will have to get your name off your sister's mortgage.
How much is the upgrade worth to you?
Would you give your sister a lump sum to reduce the outstanding mortgage and make it possible to remortgage in her name only?

Deleted User wrote: »

Is your sister happy living in that house?
If it could be sold for 80 and you make up the remainder of the outstanding mortgage 20 you would both be clear of the mortgage.

It would be hard for us to know how much it would take to satisfy the bank that it is affordable for your sister.

i dont thinks thats an option. In fairness to her she has spent a lot of money on the house, new windows, doors, insulating, new kitchen, lovely gardens etc. I think if it was sold she prob wouldnt get another mortgage.

It would probably be worth your while speaking to a solicitor about this first to be aware of any tax implications.

PhoenixParker

House proud wrote: »

i dont thinks thats an option. In fairness to her she has spent a lot of money on the house, new windows, doors, insulating, new kitchen, lovely gardens etc. I think if it was sold she prob wouldnt get another mortgage.

Why is she spending all that money on that house without first making an effort to take your name off the mortgage? I feel like she's kind of taking advantage of you.

MarkAnthony

You could come at this from the legal route. You seem a little naive if I'm honest and if you weren't given independent legal advice it might be worth canvassing the opinion of a solicitor in relation to asking the Bank a bit more formally to remove you from the mortgage on your sister's home.

Obviously it would result in a firmly burnt bridge in relation to a mortgage with that bank.

TeaBagMania

House proud wrote: »

ive always dreamt of having a dormer bungalow in the country. Maybe im living in the clouds.

You’re not living in the clouds. Country living in the west of Ireland is my dream too. Sounds like you’ve got a good head on your shoulders and are going about it logically

PhoenixParker

PhoenixParker wrote: »

Why is she spending all that money on that house without first making an effort to take your name off the mortgage? I feel like she's kind of taking advantage of you.

It might not have made much of a difference... it could even be improving the value of the house by modernising it and making it more marketable.

Miname

how about buying another 60-70k house and rentng out both properties for a year or two. move in with your sister and get some value out of the awkward mortgage. youll have two additional incomes on your existing, one completly debt free and hopefully be able to cash in both for a little under the value of what you want. Disclaimer: i know damn all about how the taxes work on this so you might want to check them out.

Cuddlesworth

Deleted User wrote: »

It might not have made much of a difference... it could even be improving the value of the house by modernising it and making it more marketable.

Doesn't seem to make a difference in the irish market. Houses that need well past 50k to bring them to spec, sell for 10k less then finished houses. I think its because of a mindset of buy at the very top of what you can afford regardless of value.