New mortgage based off current home equity

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Hi,
We currently have a house with appx €200000 equity.
We have no savings but very good credit rating.
Is it possible for me to get a mortgage for a new investment property linking the mortgage to the equity in our current home?
 
There is nothing from stopping you from borrowing in this way

The loan to value rate and your repayment capacity will be the most important factors

Some people don't believe in putting their own home at "risk" by using it as security

But these people should reaslise that your home is at risk even if you do not have the investment property loan attached to it

Roughly 80% ofthe value of the invesment property can be borrowed against that property meaning you should need in the region of 30% (balacing 20% of house cost and roughly 10% in fees [stamp duty, solicitor,etc]) of the investment property as a top-up on your own mortgage

stuart@buyingtolet.ie
 
stuart said:
Some people don't believe in putting their own home at "risk" by using it as security

But these people should reaslise that your home is at risk even if you do not have the investment property loan attached to it
Click to expand...
Hi Stuart - Could you expand on this point please? Are you saying that even if an investment property loan is not secured on your home, the bank could repossess your home?
 
If you were to make a loss on an investment and you owed the bank e.g. €100k that they would not try to obtain the money

If you owe the money they can pursue it

stuart@buyingtolet.ie
 
Hi Rainyday

In Ireland loans are made to people. They are not non-recourse. In other words, you still owe the money no matter what happens. You still owe the money whether it is secured on a property, on your home or whatever.

So if you have a mortgage of €200k on an investment property and sell it for €150k, you still owe the lender €50k.

The lender can get a judgement from the courts for this money. Then they can secure the judgement on your home. In practice, the bank is unlikely to try to repossess your home, as it may be protected by the Family Home Act.

But you would not be able to sell your home without paying off the judgement to the bank.

So if you take a financial risk, all your assets, even your home, is at risk
 
Brendan,
Thanks for the explanation of probably the worst line I have ever typed
I guess those "few" pints last might had much more of an effect on me this morning than I thought

stuart@buyingtolet.ie
PS Just as well I was only on the bus this morning and not driving it
 
Thanks for the clarification.
Brendan said:
In practice, the bank is unlikely to try to repossess your home, as it may be protected by the Family Home Act.
Click to expand...
Does the Act still protect your home where there is a mortgage on the home?
 
I am not a legal expert, but the family home gets a lot of protection.

There would also be much greater reluctance on the part of the courts to evict a family.

Brendan
 
The Family homes Act kicks in once there are minors involved in the residence , thats why a good deal of these re - finance companies target couples who have no children or couples whose siblings have left the house. Trying to force a compulsory sale with minors involved is not going to happen unless they have other assets or property.
 
I'm left wondering why the lending bank would insist on securing their loan with a mortgage on the home if they know that they have little chance of enforcing the mortgage if the worst happens?
 
they have little chance of enforcing the mortgage if the worst happens?/QUOTE]

Maybe not straight away but they will still have a charge over the house until it is either sold or all minor children have grown up

House repossessions are extremely low in this country and banks are not in the habit of trying to evict people
(AFAIK, there were 11 forced repossessions in 2003, but I can't remember where I heard that quoted)

But they will be charging interest on the amount, and not necessarily at a competitive mortgage rate, as it is decided upon by the lender

Personally I have not had any clients in this situation, unlikely with the housing market in Ireland in the past 10 years

But people should be aware of what they are signing up for

stuart@buyingtolet.ie
Click to expand...
 
Thanks for the clarifications, Stuart - Yes, I agree that the level of repo's is very low, and the risks of ending up in this situation are low. However, having met a couple of people to whom this happened (in the context of Brendan's work on reforming Irish Nationwide), I do think it's important that anyone securing any investment borrowings on their family home do so with their eyes open in relation to the possible risks.
 
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