Asset Rich, Cash Poor first time buyer - Options?

Azizur Rahman

Hello all,


If you are asset rich but cash poor and a first time house buyer, what, if any, mortgage options are available? Can't seem to find much information about that scenario on any of the banks websites. Thanks.

Senecio

I expect you'd have to liquidate some of your assets to raise the cash for the deposit on the house?

TheShow

Sell assets, buy house, no mortgage required. Job done.

If you need a mortgage then calculate how much you need and sell assets for the remainder.

If you only recently inherited the assets and can’t demonstrate paying rent or saving regularly then you may have a problem. But if they are assets you have invested in over time and can liquidate sufficient for a deposit and satisfy the affordability criteria and central bank rules, then it should be plain sailing.

Rows Grower

Azizur Rahman wrote: »

Hello all,


If you are asset rich but cash poor and a first time house buyer, what, if any, mortgage options are available? Can't seem to find much information about that scenario on any of the banks websites. Thanks.

Not trying to be smart here but how could you be asset rich and not have bought a house?

Do you own loads of land or jewelry or drive a new Rolls Royce?

davo10

Rows Grower wrote: »

Not trying to be smart here but how could you be asset rich and not have bought a house?

Do you own loads of land or jewelry or drive a new Rolls Royce?

Inheritance?

Turkish1

Rows Grower wrote: »

Not trying to be smart here but how could you be asset rich and not have bought a house?

Do you own loads of land or jewelry or drive a new Rolls Royce?

Shares, bonds, crypto, commercial property, agri land etc... not everyones first port of call is buying a house.

Rows Grower

Turkish1 wrote: »

Shares, bonds, crypto, commercial property, agri land etc... not everyones first port of call is buying a house.

Wouldn't shares, bonds and crypto all be a form of gambling and frowned upon by a bank?

Turkish1

Rows Grower wrote: »

Wouldn't shares, bonds and crypto all be a form of gambling and frowned upon by a bank?

No to the first two, not sure how the banks look at crpyto given its volatility.

Rows Grower

Turkish1 wrote: »

No to the first two, not sure how the banks look at crpyto given its volatility.

News to me, would like to know what assets the thread starter actually has.

Wesser

Maybe he has a combine harvester?

Heres Johnny

Rows Grower wrote: »

Turkish1 wrote: »

Shares, bonds, crypto, commercial property, agri land etc... not everyones first port of call is buying a house.

Wouldn't shares, bonds and crypto all be a form of gambling and frowned upon by a bank?

Banks sell shares and bonds so can't see them chastising people for having them

Rows Grower

Heres Johnny wrote: »

Banks sell shares and bonds so can't see them chastising people for having them

More news to me, learning a lot on this thread.

TheShow

Rows Grower wrote: »

Wouldn't shares, bonds and crypto all be a form of gambling and frowned upon by a bank?

No, it’s all just investing, granted crypto currency is high risk so any of those stocks may be disregarded as they are too volatile.
Gambling is done at the bookies.

fritzelly

If you are cash poor I can't see any bank giving you any kind of mortgage unless they can get a lein on some tangible assets to guarantee the mortgage (does that work in Ireland?) - stocks and the ilk wouldn't count.

Azizur Rahman

Rows Grower wrote: »

Not trying to be smart here but how could you be asset rich and not have bought a house?

I'm a farmer by trade, been investing in and expanding my land, equipment, livestock etc over the last two decades but never actually built my own home. I've been living and home with the odd bit of renting a house over the last few years.


I know I could sell land etc to make the deposit but then that puts my farming activities in a precarious position.

antoinolachtnai

If you have the land in your own name and use some of the land along with the house as security.

There are a few ways you could structure this depending how strong your balance sheet is and what the legal structure is. You really need tax and accounting advice.

Do you have a commercial bank that lends to you for the farm?

You have plenty equity. The question is going to be whether you have adequate income from the farm taking into account any other repayments that need to be made.

Don’t go rushing off selling land anyway. Get professional advice.

fritzelly

Azizur Rahman wrote: »

I'm a farmer by trade, been investing in and expanding my land, equipment, livestock etc over the last two decades but never actually built my own home. I've been living and home with the odd bit of renting a house over the last few years.


I know I could sell land etc to make the deposit but then that puts my farming activities in a precarious position.

Even if you sold the land for a deposit you probably (judging by the OP) don't have enough money coming in to support a mortgage
I doubt even the banks would loan against land which is probably just purposed for farming so no real future value increase

aido79

Azizur Rahman wrote: »

I'm a farmer by trade, been investing in and expanding my land, equipment, livestock etc over the last two decades but never actually built my own home. I've been living and home with the odd bit of renting a house over the last few years.


I know I could sell land etc to make the deposit but then that puts my farming activities in a precarious position.

I'd be more worried about the fact that as a business owner you have invested in a business for 20 years and are still cash poor.

GingerLily

Do you want a residential mortgage? If so then you need a normal deposit aka cash - 10% for first time buyers.

If you are not asking about residential mortgage then you need professional advice!

TheShow

You still need to meet all the Mortgage criteria. If the farm is not giving you much of an income then it will be very difficult for you to get a mortgage.

djPSB

Turkish1 wrote: »

No to the first two, not sure how the banks look at crpyto given its volatility.

One has to pay tax on crypto profits. Harsh if regarded as gambling.

antoinolachtnai

GingerLily wrote: »

Do you want a residential mortgage? If so then you need a normal deposit aka cash - 10% for first time buyers.

If you are not asking about residential mortgage then you need professional advice!

There is no requirement that I know of, certainly no central bank requirement, that there be a cash deposit for a residential mortgage. What matters is the LTV ratio.

GingerLily

antoinolachtnai wrote: »

There is no requirement that I know of, certainly no central bank requirement, that there be a cash deposit for a residential mortgage. What matters is the LTV ratio.

I meant rather than money tied up in an investment! I don't think the OP has money in a deposit account - and I don't think he wants to cash in his investments.

For someone with so many financial investments in shocked about how clueless the OP is about standard lending requirements.

aido79

aido79 wrote: »

I'd be more worried about the fact that as a business owner you have invested in a business for 20 years and are still cash poor.

Welcome to farming in Ireland unfortunately. You have to invest to keep things going but you don’t necessarily see a big return on the investment but it still has to be done.

antoinolachtnai

GingerLily wrote: »

I meant rather than money tied up in an investment! I don't think the OP has money in a deposit account - and I don't think he wants to cash in his investments.

For someone with so many financial investments in shocked about how clueless the OP is about standard lending requirements.

He doesn’t need to cash in his investments. He doesn’t need money in a deposit account.

The required loan amount divided by the total value of the security offered just needs to be less than 90 percent to meet the LTV requirement.

GingerLily

antoinolachtnai wrote: »

He doesn’t need to cash in his investments. He doesn’t need money in a deposit account.

The required loan amount divided by the total value of the security offered just needs to be less than 90 percent to meet the LTV requirement.

Where does that 10% come from?

antoinolachtnai

GingerLily wrote: »

Where does that 10% come from?

In brief, the bank.

Let’s say the OP owns a farm. The land of farm is worth one million euros.

The farm, let’s say, is unencumbered by any other debt.

The OP now wants to buy a house. Let’s say the house is adjacent to the farm but it might not be. Or the house might need to be built. But let’s keep it simple.

The house is €240,000.

The OP could apply for a mortgage for 250,000 euros he needs to cover the house and expenses tgat will qrise like legal fees and stamp duty abd very basic furniture abd moving fees. The OP would offer the farm and the house together as security.

The combined value of the house and land is 1.24 million euros.

The bank will assess the application on the basis of the loan to value being just under 20 percent.

If the bank is satisfied the OP has income to repay and the security is good, then there is no reason why the bank wouldn’t advance the entire 250,000 the OP woild require.

The fact that the amount being advanced is more than 100 percent of the value of the house actually being purchased is immaterial to the bank.

GingerLily

antoinolachtnai wrote: »

In brief, the bank.

Let’s say the OP owns a farm. The land of farm is worth one million euros.

The farm, let’s say, is unencumbered by any other debt.

The OP now wants to buy a house. Let’s say the house is adjacent to the farm but it might not be. Or the house might need to be built. But let’s keep it simple.

The house is €240,000.

The OP could apply for a mortgage for 250,000 euros he needs to cover the house and expenses tgat will qrise like legal fees and stamp duty abd very basic furniture abd moving fees. The OP would offer the farm and the house together as security.

The combined value of the house and land is 1.24 million euros.

The bank will assess the application on the basis of the loan to value being just under 20 percent.

If the bank is satisfied the OP has income to repay and the security is good, then there is no reason why the bank wouldn’t advance the entire 250,000 the OP woild require.

The fact that the amount being advanced is more than 100 percent of the value of the house actually being purchased is immaterial to the bank.

So your telling the OP to mortgage the farm? Is that good advice? Should they not just cash in on their crypto currency? Would they be subject to commercial rates? Are they higher?

antoinolachtnai

GingerLily wrote: »

So your telling the OP to mortgage the farm? Is that good advice? Should they not just cash in on their crypto currency? Would they be subject to commercial rates? Are they higher?

I am not advising the OP to do anything. In general terms it is a good idea to mortgage assets to buy a house to live in in Ireland so that you can avoid the high cost and uncertainty of renting. I do not know anything about the OP’s crypto currency holdings. It is up to the bank how they price the loan.It’s evidently a residential property loan not a commercial loan to develop a business.

aido79

Cayden Millions Shortchange wrote: »

Welcome to farming in Ireland unfortunately. You have to invest to keep things going but you don’t necessarily see a big return on the investment but it still has to be done.

Regardless of what the business is the OP after 2 decades hasn't enough money for the deposit for a house. Why should farming be different from any other business? If it's not working out maybe it's time to try something different or a different approach to farming.
This is way off topic though.

antoinolachtnai

aido79 wrote: »

Regardless of what the business is the OP after 2 decades hasn't enough money for the deposit for a house. Why should farming be different from any other business? If it's not working out maybe it's time to try something different or a different approach to farming.
This is way off topic though.

It is easy to confuse cash and wealth. The whole point of a bank loan is to convert wealth into cash. Cash is the end result of a loan, not the precondition.

GingerLily

antoinolachtnai wrote: »

It is easy to confuse cash and wealth. The whole point of a bank loan is to convert wealth into cash. Cash is the end result of a loan, not the precondition.

What??

jlm29

aido79 wrote: »

Cayden Millions Shortchange wrote: »

Welcome to farming in Ireland unfortunately. You have to invest to keep things going but you don’t necessarily see a big return on the investment but it still has to be done.

Regardless of what the business is the OP after 2 decades hasn't enough money for the deposit for a house. Why should farming be different from any other business? If it's not working out maybe it's time to try something different or a different approach to farming.
This is way off topic though.

He didnt say he’s not making money from farming, he said he’s been re-investing it to expand his business. Without a bit more information, no one can assume his business isn’t working out. Maybe he inherited a 30 acre farm, a David brown tractor and a few disused outhouses, and now he’s farming 100 acres with state of the art machinery and lovely new sheds. He may have reached a point where he doesn’t need to reinvest quite as much and can draw a bigger wage for himself.
OP, your best bet is to go into the bank and talk to whoever is assigned to deal with your account there. They should be able to advise you what to do. Presumably you have a couple of years of accounts to show them.

jlm29

GingerLily wrote: »

So your telling the OP to mortgage the farm? Is that good advice? Should they not just cash in on their crypto currency? Would they be subject to commercial rates? Are they higher?

The OP never said he (or she) had crypto currency (whatever that is!). An earlier poster surmised that that might be the asset they were talking about. In the not very distant past, a person who owned their own site outright could get a 100% mortgage to build a house, because the finished product would still be worth more than the mortgage. I.e. the site would be the deposit, and the LTV would still be within the limits. The rest of the farm probably wouldn’t come in to play really, once the OP can show that they have sufficient income to repay the loan. I can’t remenver if the OP specified whether they wanted to buy or build a house though!

TheShow

djPSB wrote: »

One has to pay tax on crypto profits. Harsh if regarded as gambling.

Not regarded as gambling but you couldn’t rely on the value of the account. Could be 10k one day and 10p the next.

TheShow

antoinolachtnai wrote: »

In brief, the bank.

Let’s say the OP owns a farm. The land of farm is worth one million euros.

The farm, let’s say, is unencumbered by any other debt.

The OP now wants to buy a house. Let’s say the house is adjacent to the farm but it might not be. Or the house might need to be built. But let’s keep it simple.

The house is €240,000.

The OP could apply for a mortgage for 250,000 euros he needs to cover the house and expenses tgat will qrise like legal fees and stamp duty abd very basic furniture abd moving fees. The OP would offer the farm and the house together as security.

The combined value of the house and land is 1.24 million euros.

The bank will assess the application on the basis of the loan to value being just under 20 percent.

If the bank is satisfied the OP has income to repay and the security is good, then there is no reason why the bank wouldn’t advance the entire 250,000 the OP woild require.

The fact that the amount being advanced is more than 100 percent of the value of the house actually being purchased is immaterial to the bank.

As per cca and ccp and mortgage conduct of business and a few other bits of legal framework, you can’t take out a resi mortgage on anything other than the proposed property.
He could raise equity against the farm by way of a commercial loan to purchase a property, providing that the farm generates sufficient income to service the debt. And that’s assuming that the land isn’t already held as security for farm debt...

TheShow

antoinolachtnai wrote: »

It’s evidently a residential property loan not a commercial loan to develop a business.

Not true, it’s a business loan against the farm so it will be at commercial rates. The purpose of the loan is largely irrelevant. You look at what is primary economic activity of the entity.

Azizur Rahman

All farm related loans were cleared last year. No loans on the go. Things have been going reasonably well for farm income over the last few years.

I could save for the deposit, be able to have that in three or four years. Looking to build a house near the farm. The way family life has been, I've never really needed to leave home as I was able to help the folks out around the house with maintenance and up keep etc.

Just wondering is there any way I can use my graft from the last 20 years to help speed things up up with mortgage and building.

And I don't know what cypto currency is!

antoinolachtnai

TheShow wrote: »

As per cca and ccp and mortgage conduct of business and a few other bits of legal framework, you can’t take out a resi mortgage on anything other than the proposed property.
He could raise equity against the farm by way of a commercial loan to purchase a property, providing that the farm generates sufficient income to service the debt. And that’s assuming that the land isn’t already held as security for farm debt...

There are going to be issues with the structure, sure and it needs a bit of imagination. He could raise a small commercial loan to provide the ten percent. He could use part of the land adjacent to the house as collateral. If he is building the house the OP could develop the house as part of the farm business and then buy it out of the business with a mortgage while it is complete.

The main problem with all of the above is tax.

But if the OP has a strong balance sheet then there should be a way.

jlm29

Are you hoping to use a site of your own or to buy another site? On the AIB website it says that for self build mortgages you can borrow 100% of the cost of the build if you have the site gifted to you (I presume that also stands if you own the site already). If you can show that you have sufficient income to afford the mortgage it really shouldn’t be an issue.

handlemaster

aido79 wrote: »

Cayden Millions Shortchange wrote: »

Welcome to farming in Ireland unfortunately. You have to invest to keep things going but you don’t necessarily see a big return on the investment but it still has to be done.

Regardless of what the business is the OP after 2 decades hasn't enough money for the deposit for a house. Why should farming be different from any other business? If it's not working out maybe it's time to try something different or a different approach to farming.
This is way off topic though.

Agree with this whats the point