2 Homes in Neg Equity - Will Banks even entertain us?

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Marooner

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My wife and I own 2 houses (both in Neg Equity) in the same midlands town

House 1 (solely in Wife's name, bought in 2006)

Lender: PTSB
Amount outstanding: €150k
Value of home: 90 - 100k - at best
Interest rate: specify whether tracker or SVR or fixed rate. Tracker
Monthly repayment 640 ( incl life insurance )
Amount in arrears 0
Original term 300 months. Remaining term 198 months

House 2 (solely in my name, bought in 2008)

Lender: UB (originally First Active)
Amount outstanding: €230k
Value of home: 80 - 90k - at best
Interest rate: specify whether tracker or SVR or fixed rate. Tracker
Monthly repayment 740 ( incl life insurance )
Amount in arrears 0
Original term 480 months. Remaining term 402 months

One adult family or two adult family 2
Do you need a car for work or do you use public transport? 2 cars required
Number of children 0- 2 years old: 1 (with another due at Xmas)
Number of 3 years old children: 0
Number of 4 - 11 years old:0
Number of 12 - 18 years old:0
Monthly childcare costs: 950
Montly spend on special circumstances: e.g. exceptional healthcare costs 0

Income details
Net monthly (i.e. after tax) Income: 5700 (combined for both of us)
Income history: I've been in current job since January 2014, and have been in Permanent employment for the last 16 years
Income history: Wife has been in current job since January 2013, and has been in Permanent employment for the last 13 years
Amount of child benefit received (Should be €130 per child): 130
Amount of Mortgage Interest Supplement received (MIS is the social welfare payment to unemployed people, don’t confuse with TRS) 0

Other savings and investments
We currently have 35k in low interest PTSB savings account. We also have 22k in Credit Union, and are saving €250 per month into this.

Both of the above houses are currently rented out and we are renting a property in Dublin paying 1000 per month as we both work in Dublin.

Rental Income on House 1 - 480 pm
Rental Income on House 2 - 530 pm

This decision was made for both Life and Financial reasons (eg, we were driving 2 cars up the motorway every day due to creche hours, and were spending 800 per month on fuel. Wife would leave at 6am to get to work early so that she could get home in time to collect child. I would drop at creche, get to work late and be home late every evening, so would not see child and wife would be knackered due to to early start and be off to bed!!

We are now looking to move closer to my family in the country (for reasons of family support etc). We would be back to commuting but due to that support from them would only need to have one car (so half the fuel costs). We are looking initially at something in the region of 150k or else a fixer-upper (however for that we would like to keep some of or savings in order to invest). We would also be willing to rent in this area and wait for the right property to come up, but our worry is that housing market would pick up and drive us out of the market.

The plan would be to sell House 1 and see if the bank would give us a Mortgage allowing us to carry the NE out of that (in order to keep our savings or some portion of it). Then leave House 2 sitting as a Long-Term rental property (and there are currently long term tenants there) until the LTV % comes down

I know the above situation is very muddled due to the 2 houses/rents etc, however has anyone got any experience of anything close to this, and does anyone think the banks would even entertain us?

Any advice would be greatly appreciated. Thanks
 
Hi Marooner

A difficult one.

ptsb does allow borrowers to port their tracker to a new home at an increased rate of 1%. They will allow you port the full tracker, and not just the negative equity .

So let's say you sell your wife's house for €100k and buy another house for €200k.

|Now|after
House value|€100k| €200k
Tracker|€ 150k|€150k
Cash|-|€50k
Additional loan|-|€50k
Negative equity|€50k| 0

With an income of €5,700 between you, they should approve you for an additional loan of €50k .

A few problems
1) The loan on the other may be a problem as your total indebtedness would be €430k
2) The loan is in your wife's name - I presume they will allow the porting into your joint names.
3) This product only applies to family homes and not to investment properties. I don't know how flexible they would be.

Could your wife apply in her own name which reduces your joint income, but solves problem 1) and 2)? I would try this first.

We would also be willing to rent in this area and wait for the right property to come up, but our worry is that housing market would pick up and drive us out of the market.
Click to expand...

I don't think that a rise in housing prices would drive you out of the market if you rent.

You have two houses worth around €180k so you have a stake in the market.

You have two very profitable investments in that the rental income exceeds the interest, so you are quickly repaying the capital and reducing the negative equity.

Do the numbers, but if house prices rise by x% over the next 5 years, and you continue saving, and you continue paying down your mortgage, you will be in a position to buy.

Brendan
 
Hi Brendan

thanks for the advice.

This is the route we wanted to go down, and my wife approached PTSB about this early this week. However the first question they asked was "Are you now married now?". As the answer was yes, she was told that as the new property was going to be our new Principal Private residence, it has to be a joint application as we are a married couple and they needed my financial details to process the application.

TBH, this surprised me slightly - is this a normal process even though we own the properties seperately as stated above? In a Key Post in which you have addressed this before, the bank cannot force us to add each others names to the mortgages - is that not the same in this case in that she is entitled to apply for the new mortgage as a sole applicant?

Will update further once we hear back from them
 
To answer one question for you, it is normal practice with practically every bank that family home mortgages must be in joint names. Investment property mortgages can be in sole names whether married or not.
 
Just to update, PTSB came back to us yesterday.

Based on the figures we gave them (which were rough, and the same ones I quoted above), they would offer us a mortgage of 90k and will allow us to carry up to 60k of negative equity on top of that. As Brendan correctly pointed out, we get to keep the tracker +1% for the remaining mortgage term. At current ECB Rates, this ups our monthly repayment to 730.

This is obviously on the provision that we get to sell House 1.

So whatever the Purchase Price of the new property is, we have 90k from PTSB and will need to stump up remainder ourselves from savings.

So thats the next step - put House 1 on the market and see what happens.

I'll update this thread as we go through the process.
 
Good response from PTSB. Given your savings record, this mortgage should not be a problem for you. Best of luck in seliing the property at a reasonable price!!
 
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