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Buying a second property but first time bank mortgage

KateB1996

Hi,
I purchased a home 3 years ago through a bank auction for 50k and got a loan of money from parents and in laws. We are paying them back €500pm, the deads of the house are in our name. We have around 30k left to pay and want to rent out this property now. How would we go about buying a second home ? Could the first property be used as collateral against the 2nd ?

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Dolbhad

KateB1996 wrote: »

Hi,
I purchased a home 3 years ago through a bank auction for 50k and got a loan of money from parents and in laws. We are paying them back €500pm, the deads of the house are in our name. How would we go about buying a second home ? Could the first property be used as collateral against the 2nd ?

Generally not unless your selling that house and uses the equity for the deposit of the new house. Also maybe take proper legal and financial advice on this but I would think it’s best not to tie the two houses together. Say you buy a house now and market crashes and your in negative equity on second house but first house isn’t because of when you bought it - you don’t want them both tied in with bank.

I’d say start chatting with a bank/broker first to see the criteria. You may still be seen as FTB for the second house as you haven’t take out a mortgage before.

Salary Negotiator

Will you be living in the second home?

How much is the first house worth? And what’s your combined annual income and debt?

KateB1996

Salary Negotiator wrote: »

Will you be living in the second home?

How much is the first house worth? And what’s your combined annual income and debt?

Yes we would be living in the 2nd home, first home is worth 130k minimum. Annual income over 75k and I have a loan of 20k for a car/home improvement

DubCount

KateB1996 wrote: »

Could the first property be used as collateral against the 2nd ?

I'm not sure this will work in that way.

It should be possible to get a mortgage on the first property, and use the proceeds to repay the family debt and act as a deposit on the second home. You can then get a mortgage on the second mortgage on the second house. Each mortgage is secured against a single property. In fact, the 2 mortgages don't even need to be with the same bank.

One issue is that whichever house you are renting out is going to be the subject of a Buy2Let mortgage. That means a higher interest rate and lower LTV, but you may also be able to get an interest-only period.

Another issue is the buy2let mortgage may impact on a banks perception of you as a risk, and that may impact on their willingness to extend a buy2own mortgage.

There is enough complexity here to suggest that a trip to a mortgage broker might be worth while.

Dolbhad

And beware of possible GCT in the future when selling first home.

Stopitwillya

Investment wise probably better to rent out the new home as the interest repayments can be used to reduce your new landlord tax bill whereas you won't have this option if you rent out your present home.

April 73

Why do you want to become a landlord? Have you done the sums & worked up a budget looking at total income & expenditure & included upkeep costs on both properties & new mortgage payments & tax bill? Have you considered selling, using the profit to buy a new house with a lower mortgage?

Darith

I was thinking of getting a second property but i would be a first time morgage holder. So the bank informed i would be entitled to have the second property as my personal residence hence a lower deposit. Therefore my current property would become a asset or investment property? Also in the unfortunate event that i defaulted on my second property which i chose to live in as my personal residence could the bank cease my first property to pay of any debt outstanding after ceasing my first property?

Kurooi

Why would you need to use the current home as collateral against the new? The new home the mortgage is for acts as the collateral. Banks don't normally ask you to volunteer more collateral. You won't get more LTI or LTV if that's what you're hoping for.

Donald Trump

https://www.boards.ie/discussion/comment/111918587#Comment_111918587

Is it not the case that a FTB is someone who hasn't owned a house before? Open to correction but I have a feeling that that is the case. I wouldn't be overly certain

i.e. if you inherit a house and then try to buy a house afterwards, you would not be a first-time-buyer?

[Deleted User]

You are still a first time buyer in the eyes of the bank as long as you haven't had a mortgage in the past.

blarb

I did something similar, bought my first house at very low price with a mix of savings and unofficial parents loan. 6 years later I had no loans outstanding and had the house rented out for a while, while I rented in a house share in Dublin myself.

I then went in to the EBS and explained I currently rented in a house share but also had a rental property which I had never had a mortgage on, and they let me take out a first time buyers mortgage for a second property as long as it was going to be my own residence.

Donald Trump

Won't qualify for the help-to-buy though (FTB's grant)

Claw Hammer

https://www.boards.ie/discussion/comment/120303105#Comment_120303105

The banks want a cash deposit so they want the mortgage to be less than the value of the property. There was a time the banks would finance a property above 100% by way of cross-charge on another property. There are now central bank rules about doing that. Given that the parents are the equitable owners of the first property, the o/p is stretching it a lot to try and use the first property at all.

Dolbhad

https://www.boards.ie/discussion/comment/120303171#Comment_120303171

Revenue and banks can treat FTB’s differently. Provided you never got a mortgage to buy a house, bank can consider you a FTB. Whereas you might not then be eligible for HTB.