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Mortgage Top for Extension but need new car

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  • 12-08-2019 10:06am
    #1
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,204 Mod ✭✭✭✭


    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?


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Comments

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    #2
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭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.


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    #3
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,204 Mod ✭✭✭✭godtabh


    Additional borrowing is €600 pm.

    Loan to value is about 66%


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    #4
    Markcheese
    Registered Users Posts: 8,428 ✭✭✭Markcheese


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

    Slava ukraini 🇺🇦



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    #5
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,204 Mod ✭✭✭✭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.


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    #6
    SmartinMartin
    Registered Users Posts: 2,937 ✭✭✭SmartinMartin


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


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    #7
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,204 Mod ✭✭✭✭godtabh


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


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    #8
    punisher5112
    Registered Users Posts: 24,647 ✭✭✭✭punisher5112


    Use credit union for car loan.


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    #9
    SmartinMartin
    Registered Users Posts: 2,937 ✭✭✭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?


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    #10
    godtabh
    Moderators, Science, Health & Environment Moderators Posts: 23,204 Mod ✭✭✭✭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


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    #11
    Deub
    Registered Users Posts: 1,281 ✭✭✭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.


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    #12
    ted1
    Registered Users Posts: 23,264 ✭✭✭✭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.


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    #13
    jlm29
    Registered Users Posts: 3,818 ✭✭✭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.


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    #14
    ELM327
    Registered Users Posts: 21,367 ✭✭✭✭ELM327


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


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    #15
    Amirani
    Moderators, Society & Culture Moderators Posts: 12,521 Mod ✭✭✭✭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.


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    #16
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭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...


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    #17
    Markcheese
    Registered Users Posts: 8,428 ✭✭✭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...

    Slava ukraini 🇺🇦



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    #18
    spaceHopper
    Registered Users Posts: 3,966 ✭✭✭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.


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    #19
    alan partridge aha
    Registered Users Posts: 3,199 ✭✭✭alan partridge aha


    Extension must be very large for that price.


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    #20
    is_that_so
    Registered Users Posts: 32,136 ✭✭✭✭is_that_so


    godtabh wrote: »
    Additional borrowing is €600 pm.

    Loan to value is about 66%
    Have you looked at a PCP loan?


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    #21
    ELM327
    Registered Users Posts: 21,367 ✭✭✭✭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


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    #22
    Amirani
    Moderators, Society & Culture Moderators Posts: 12,521 Mod ✭✭✭✭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.


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    #23
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭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.


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    #24
    handlemaster
    Registered Users Posts: 6,003 ✭✭✭handlemaster


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


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    #25
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭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.


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    #26
    elperello
    Registered Users Posts: 14,258 ✭✭✭✭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.


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    #27
    jimmycrackcorm
    Registered Users Posts: 14,329 ✭✭✭✭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.


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    #28
    ELM327
    Registered Users Posts: 21,367 ✭✭✭✭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 :o


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    #29
    terrydel
    Closed Accounts Posts: 3,881 ✭✭✭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.


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    #30
    terrydel
    Closed Accounts Posts: 3,881 ✭✭✭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.


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      #31
      terrydel
      Closed Accounts Posts: 3,881 ✭✭✭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.


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