Mortgage Top for Extension but need new car

godtabh

Hoping to meet the bank about the possibility of getting a top up to build an extension.

House is about €220k in positive equity. Cost of extension is about €150k and based on similar houses in the estate would add the same in value.

Repayments are about €600 pm. This will be offset by reduce child care costs (moving to after school care only ~ €400 savings per month) and my wife has just got a payrise of roughly €200 pm.

We are 6 months in to a 5 year fixed rate with KBC and will be going with them.

On paper there shouldn't be an issue.

What complicates things is that our car just broke down. It may not be economical to repair and might be cheaper to replace. What do you think our changes are?

pwurple

Equity matters less than the LTV. What's the loan to value ratio?

You'll max that out at about 80-90%, depending on the bank.

It's not clear if your existing mortgage is 600 pm or the additional borrowing requested is 600 pm.

godtabh

Additional borrowing is €600 pm.

Loan to value is about 66%

Markcheese

The interest rate is gonna be low, but you're going to be still paying off that car in 20 years time...

godtabh

Markcheese wrote: »

The interest rate is gonna be low, but you're going to be still paying off that car in 20 years time...

How? A loan through the CC over 5 years will pay of a €20k loan with repayments of €450 per month approx.

SmartinMartin

How about first finding out what's wrong with the car and what it'll cost to fix it? Could be something simple.

godtabh

Thats been done at the moment. We have our meeting with the bank on Thursday. Just looking at options

punisher5112

Use credit union for car loan.

SmartinMartin

Grand. I just mean it would be mad to take on extra long term debt if the car could be fixed for a few hundred. What are the symptoms?

godtabh

SmartinMartin wrote: »

Grand. I just mean it would be mad to take on extra long term debt if the car could be fixed for a few hundred. What are the symptoms?

Old age. Lots of stuff going on it. One quote to fix is 1/4 of the value of the car

Deub

It is just my opinion: If your disposable income increases lets say by 10% (salary increase + childcare saving), I would consider an increase of mortgage/loan of 10% (which would mean a smaller extension or no extension at all).
It looks like all your new income will only serve to increase your debt and you are even considering taking a car loan on top of this.

ted1

godtabh wrote: »

Old age. Lots of stuff going on it. One quote to fix is 1/4 of the value of the car

Still cheaper than replacing.

jlm29

You should be able to sit down and do the affordability calculations yourself. Getting a mortgage, or remortgage while you have a loan won’t be an issue if you can afford it on paper.
I don’t know how kbc work it out. AIB, for example will require you to have around €1050 per adult and €250 per child to live on after you pay off your mortgage, childcare and other loans paid off. It doesn’t matter if you think you can afford the extra debt, what matters is the bank thinking so.

ELM327

Putting a car loan onto your mortgage is about as nonsensical as ... well... I cant actually think of anything that silly.

Amirani

ELM327 wrote: »

Putting a car loan onto your mortgage is about as nonsensical as ... well... I cant actually think of anything that silly.

Is it really though if you're disciplined enough to overpay that amount over the equivalent term of a car loan? That will be cheaper than taking out a car loan at higher rates of interest.

pwurple

godtabh wrote: »

Additional borrowing is €600 pm.

Loan to value is about 66%

It's quite tight to be honest.

By borrowing 150k, you're bringing your LTV up to 89% temporarily. You'll be able to bring that down to 73% after the extension is completed, all remaining equal in the market (and assuming you are dublin direction, apparently there is a dip going on at the moment, which could strip away some of that value).


Having done some extensions, there's always a bit of overrun, where it suddenly makes sense to do a little bit of extra work at the time while a wall is open or something, so I'd want to have some backup savings in the pocket too.

To be honest, you may want to hold on the extension a year or two, until the car is sorted and you've a bit of savings comfort built up with the childcare cost dip. Maybe make up a five year plan.
2019 - Car replacement
2020 - planning permission and costs
2021 - extend
2022 - other car replacement
etc...

Markcheese

godtabh wrote: »

How? A loan through the CC over 5 years will pay of a €20k loan with repayments of €450 per month approx.

My bad, I though the OP wanted to use some of the mortgage top to pay for a new car...

spaceHopper

Buy some thing for less then 5 grand get the extension done then see where you are and if it makes sense to but a better car.

alan partridge aha

Extension must be very large for that price.

is_that_so

godtabh wrote: »

Additional borrowing is €600 pm.

Loan to value is about 66%

Have you looked at a PCP loan?

ELM327

Amirani wrote: »

Is it really though if you're disciplined enough to overpay that amount over the equivalent term of a car loan? That will be cheaper than taking out a car loan at higher rates of interest.

I'd suggest that taking a 0% PCP is better value again.
Putting a car on the mortgage is nonsense, I thought it went out with the boom

Amirani

ELM327 wrote: »

I'd suggest that taking a 0% PCP is better value again.
Putting a car on the mortgage is nonsense, I thought it went out with the boom

Taking a 0% PCP involves buying a new car and dropping probably €20k or more. Not sure that's better value than taking a €10k loan at 3% interest for 5 years.

The second option would involve a cost of credit of €781 for the 5 years. Seems a more sensible option than buying a new car because of some glossy finance offer, which to me sounds more like boom time behaviour.

pwurple

Taking out a PCP when it comes to being assessed for a change in mortgage isn't a good idea, because they increase your monthly financial commitments.

To maximise the amount you borrow for mortgage lending purposes, you want to minimise all your other financial commitments, like loans, maintenance orders, phone contracts etc.

handlemaster

Why spend 20k on a car? You can get a very good secondhand one for half the price

pwurple

handlemaster wrote: »

Why spend 20k on a car? You can get a very good secondhand one for half the price

Absolutely, or get an electric second hand for about 10K and remove all your petrol and servicing costs as well.

elperello

You might consider going over to the Motors section and look for some advice about the car.
Tell them the make, model, year and what is wrong with it.
You may find it is not so bad as you think.

jimmycrackcorm

ELM327 wrote: »

Putting a car loan onto your mortgage is about as nonsensical as ... well... I cant actually think of anything that silly.

Not necessarily. E.g. if you were prepared to overpay the mortgage by the monthly amount you would be paying back to the CU then you have the cheapest form of borrowing.

ELM327

Amirani wrote: »

Taking a 0% PCP involves buying a new car and dropping probably €20k or more. Not sure that's better value than taking a €10k loan at 3% interest for 5 years.

The second option would involve a cost of credit of €781 for the 5 years. Seems a more sensible option than buying a new car because of some glossy finance offer, which to me sounds more like boom time behaviour.

jimmycrackcorm wrote: »

Not necessarily. E.g. if you were prepared to overpay the mortgage by the monthly amount you would be paying back to the CU then you have the cheapest form of borrowing.

Most people are not that disciplined though.
Credit cards are another cheap form of credit. If used correctly. 56 days interest free purchases so if you clear the statement every month there's no interest. Most do not do this, myself included

terrydel

godtabh wrote: »

Thats been done at the moment. We have our meeting with the bank on Thursday. Just looking at options

Why do you 'need' to spend that kind of money on a car?
You could easily buy a perfectly good car for very small money and not even need to borrow.

terrydel

godtabh wrote: »

Old age. Lots of stuff going on it. One quote to fix is 1/4 of the value of the car

Thats perfectly viable so. Must be feck all as if the car is very old its not worth much anyway, so a 1/4 must be peanuts.

terrydel

pwurple wrote: »

Absolutely, or get an electric second hand for about 10K and remove all your petrol and servicing costs as well.

Not many decent electrics available at that price, if any. Car needs to fit someones needs, an earlier leaf isnt much use if youve kids and buggies for example.

handlemaster

handlemaster wrote: »

Why spend 20k on a car? You can get a very good secondhand one for half the price

There are many reasons people want to spend 20k or more on a car and don’t want to drive sub 10k cars.

terrydel

Ethan Shallow Vigilance wrote: »

There are many reasons people want to spend 20k or more on a car and don’t want to drive sub 10k cars.

Such as?
The key word is 'want' rather than 'need', if already borrowing 150k to fund a large extension, the 'wants' might need to be put on hold.

terrydel

terrydel wrote: »

Such as?
The key word is 'want' rather than 'need', if already borrowing 150k to fund a large extension, the 'wants' might need to be put on hold.

Reliability, mileage on car, condition of car, comfort and features, economy and running costs (servicing, nct etc), type of car you need etc. These are more the “need” reasons there are plenty of want reasons too.

terrydel

Ethan Shallow Vigilance wrote: »

Reliability, mileage on car, condition of car, comfort and features, economy and running costs (servicing, nct etc), type of car you want etc. These are more the “need” reasons there are plenty of want reasons too.

Easy enough to get most of those under 10k.

jlm29

terrydel wrote: »

Easy enough to get most of those under 10k.

It might not make much difference to the OP though. If they buy a new car for 20k over 5 yrs, the repayments might not be too far removed to the second hand car over 3 years. Probably best not to finance a 10k car over 5 years, the loan might outlive the car, and the interest would be ridiculous

terrydel

jlm29 wrote: »

It might not make much difference to the OP though. If they buy a new car for 20k over 5 yrs, the repayments might not be too far removed to the second hand car over 3 years. Probably best not to finance a 10k car over 5 years, the loan might outlive the car, and the interest would be ridiculous

Agree that financing a 10k car over 5 years isnt a great idea, but I'd say that any car around that price, if its looked after even half way well, will easily outlive 5 years. People are conditioned into believing cars have a much shorter lifespan than they do, its great marketing and manipulation by those with an interest in selling them, but its nonsense. Any well known brand car should last many, many years with regular basic servicing, and replacing wear and tear items, which isnt overly onerous.
My point is that the op does not need to borrow that much and shell it out on a car at this point, while borrowing a large amount for something else. I believe he can easily get a car to do exactly what he needs for a fraction of that amount.

jlm29

terrydel wrote: »

My point is that the op does not need to borrow that much and shell it out on a car at this point, while borrowing a large amount for something else. I believe he can easily get a car to do exactly what he needs for a fraction of that amount.

But my point is that if the OP hasn’t actually got the cash to walk in and buy a second hand car, they still have to borrow. And it might not make that much difference to their monthly outgoings which car they buy. In my experience, the bank will look harder on their monthly expenses than at their total borrowings!

terrydel

jlm29 wrote: »

But my point is that if the OP hasn’t actually got the cash to walk in and buy a second hand car, they still have to borrow. And it might not make that much difference to their monthly outgoings which car they buy. In my experience, the bank will look harder on their monthly expenses than at their total borrowings!

Fair enough, I get what youre saying.
Im a firm believer tho that theres huge value in older cars, and I honestly think for 5k he can get something very nice that will offer all or nearly all he needs. Obviously it might mean some compromises like higher tax and shorter nct period (to new /nearly new cars), but really very little else. But obviously he'd need that cash. Theres huge value in the private market, yes its a bit of a gamble but can be mitigated against with research and diligence. 10k cars in the private market are very, very difficult to shift, so if you are willing to go that road, you could get a serious discount and a lot of car for your money..

pwurple

terrydel wrote: »

Not many decent electrics available at that price, if any. Car needs to fit someones needs, an earlier leaf isnt much use if youve kids and buggies for example.

Is that so? I've kids, buggies, bikes and an electric car worth about that.

Tell me how I can't live my life again? That's always my favourite. :pac::pac::pac: