Can i get another mortgage by using equity of first mortgage as a deposit

SSeanSS

Wondering if people can help me out here please? I've asked a few different people and nobody is certain. I have a mortgage of 45K left on a house that is now valued at 215k. It's a pretty small house that I purchased alone but since then I married and family is growing so we need a bigger house. Ideally I would like to purchase a second property to live in and use the equity from my current house as a deposit. Otherwise I would have to save for a deposit which would probably take a couple of years. Any idea if this is possible? TIA

Buddy Bubs

Yes. You're selling 1st property aren't you?

Or keep your first house? Then it's a no

SSeanSS

I was hoping to keep my first house. Had a plan to use the rent from first house to help pay for the repayments on second house. Thanks for clearing that up. Was getting mixed advice on it

https://www.boards.ie/discussion/comment/121432361#Comment_121432361

You'd have to get a different mortgage for non residential too, I think

XsApollo

No you can’t use the equity in the first house as a deposit for a second house.

but PTSB did take into account some of the rental income on the first house I had as an income which helped with repayment capacity, borrowing amount I could get on a second house.

SSeanSS

I wonder am i better off saving a deposit over the next couple of years instead of overpaying the mortgage. Can someone have two mortgages at same time or is this a red flag to banks?

Kaybaykwah

https://www.boards.ie/discussion/comment/121433140#Comment_121433140

No red flags.

The banks are only focused on your ability to reimburse their mortgage deal.

Just make sure you have a decent renter lined up that pays their rent on time and doesn’t make things difficult for you. You must think long term and anticipate that you will care for two properties, not just one in terms of upkeep. You will need to raise the rent incrementally to afford this, etc…

XsApollo

You can have as many mortgages as you like if you can afford to pay for them,

The same means test will be applied to the second mortgage as it was to the first. The difference being that you have the first mortgage to pay which will reduce your ability to repay the second one , which in turn reduces repayment capacity which reduces how much you can borrow.

which is what I was saying in my other post with regards to PTSB , they took some of the potential rental income from the first property already owned into account when they were calculating what I could borrow for the second house.

so it all depends on your income and outgoings really.

you need a cash deposit ,there is no way around that really.

if you earn enough to get a second mortgage from a bank then save the deposit.

Buddy Bubs

https://www.boards.ie/discussion/comment/121432361#Comment_121432361

Just be aware you have to pay 50% of rental income in tax so after you pay the mortgage on 1st property there is unlikely to be any cash left over to pay mortgage on 2nd property. You'll be doing well if it just covers itself while there's a mortgage.

Can you get twice the mortgage payment monthly from renting it out? If not, there won't be any income coming in. Unless you evade tax.

1percent

Thinking aloud here, could you remortgage the first prop for say an extra 100k, and use that as a deposit? You are still limited in your borrowing capaty and repayment capacity

SSeanSS

https://www.boards.ie/discussion/comment/121433429#Comment_121433429

Would that be similar to an equity release? From the comments earlier it seems that's not possible.

SSeanSS

https://www.boards.ie/discussion/comment/121433403#Comment_121433403

The mortgage was initially for 25 years and i have 21 years left of in. The repayment at the moment is 300 euro but i overpay it every month to an even €2k. Property would probably rent for 1200-1500 but i'd want to rent it out for €1k as i think the rental market is crazy and that is more than enough. so probably get 500-550 back after tax.

Full details -

Combined salary 130K Gross

Potential rental income : 12k Gross

Current Mortgage : 45k over 21 years (300 a month)

Potentially looking for a new mortgage of €300k - €380K

Would need to save 30-40k over next two years so would stop overpaying mortgage and start saving instead?

Do these numbers add up do ye think?

BTW thanks for ye're advice so far, much appreciated

iniscealtra

I did this. Slightly different situation. My other half had house when we met with mortgage. I wanted to live elsewhere, i used my savings for deposit for second mortgage. Does your other half have savings that they can contribute or can you wait until you accrue a deposit?

Otherwise i would just sell the house and use that as the deposit.

phormium

https://www.boards.ie/discussion/comment/121433544#Comment_121433544

Equity release/remortgage/borrow money basically all mean the same thing, you just want to borrow more against the property unless by 'remortgage' you mean move to another lender.

Some banks do extra borrowing against a property but it can be restricted to renovations to that property. To get what you want you would need to take out a new mortgage/remortgage/get a top up (whatever term you like to call it) to basically increase the mortgage on the first house to give you the spare money as deposit on second house. I'd ask a mortgage broker if I was you as if your income is high enough for both lots of borrowing then a broker should know which if any lender is likely to allow the increased borrowing on first property for this purpose.

Common back in the Tiger years obviously as was cross securing on both properties but obviously even though prices are back there again lending practices are not and are more restrictive.

SteM

https://www.boards.ie/discussion/comment/121433591#Comment_121433591

Rent it for the market value, you'll get no thanks for renting below market value. Remember, if you're in an rpz this is the base value that you or other future owner will be able to rent for.

It might not mean much to you now but it can limit who you can sell the property to in the future. Investors are reluctant to purchase a property with a lower monthly yield.