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Mortgage query / releasing equity / negative equity

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  • 27-07-2011 4:05am
    #1
    DrPhilG
    Registered Users Posts: 12,224 ✭✭✭✭


    OK, complicated title, maybe complicated query.

    Friend owns 2 houses, 1 without any mortgage at all (inherited) and 1 with a €130k mortgage and probably €30k negative equity due to the slump...

    Her plan is to take a mortgage on the fully owned property for €60k (worth about €150), pay about €40k lump sum off the mortgaged property to level the equity before trying to sell, and use the other €20k for improvements on the owned property.

    I know mortgage companies are tight these days but anyone have any clues about whether they'd be happy with this? The owned property would only be mortgaged for about 40% of it's value, and the negative equity in the other house would be cleared by the lump sum payment.

    The way I'd see it there isn't much risk for the mortgage companies, they would have a total loan out of €150k combined on 2 houses worth roughly €250k combined?

    I've told her to call the mortgage company and ask but in the meantime I thought I'd try to find out more by asking here. :)


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    #2
    phormium
    Registered Users Posts: 3,302 ✭✭✭phormium


    Hard to know without income details, banks first criteria for lending is repayment capacity, security only come in second.


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    #3
    DrPhilG
    Registered Users Posts: 12,224 ✭✭✭✭DrPhilG


    phormium wrote: »
    Hard to know without income details, banks first criteria for lending is repayment capacity, security only come in second.

    Primary combined income is about €40k (ish) a year, has a second income of about €15k. Current mortgage is around €500 pm.


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    #4
    OfflerCrocGod
    Registered Users Posts: 6,306 ✭✭✭OfflerCrocGod


    Terrible idea.

    She will hand over the keys to two houses while at the moment they only have the keys to one house. Negative equity isn't only her problem it's also her banks, no need to solve their problem for them!


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    #5
    ZYX
    Registered Users Posts: 882 ✭✭✭ZYX


    DrPhilG wrote: »
    Primary combined income is about €40k (ish) a year, has a second income of about €15k. Current mortgage is around €500 pm.

    Getting the mortgage to pay off her other property should be no problem especially if she is trying to sell. Basically the bank will exchange a mortgage for 130k secured on a property worth 100k with a 60K mortgage on a house worth 150k. Seems like a no brainer for the bank.


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