Are we mad to be thinking about looking for approval for second mortgage?

M

mdina2106

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  • Married couple
  • One child
  • total gross income per annum €120k (private sector)
  • Both in permanent jobs
  • Outstanding tracker mortgage of €320k (interest + principal, 34yrs left) from €345k purchase price
  • NE if to sell of approx €140-160k
  • no debts outside of mortgage
  • €90k cash saved
  • save approx €1500+ per month depending on the month!
Current house is in a very strong rental area. Location currently suits but we have outgrown the house since baby has arrived & both the house and location would not be suitable for a family. Our options are;



  • Rent house out and rent elsewhere (we would need to supplement monthly mortgage as rent would not cover it)
  • Extend the house although this really is not something we would be keen to do as we've spent in excess of €40k renovating it & do not want to spend one more penney on this house. Also location is not suitable for long-term
  • Apply for second mortgage
Are we naive thinking we may have a chance in getting approval for a second mortgage? or are we mad to be even considering getting ourselves into even more debt?


Any advice would be much appreciated
 
Do you really really want to become landlords. You've a great income. How about selling house and agreeing with bank to pay the negative equity over time, after handing over most of your savings to bank. Then renting for a few years, saving and buying later?

As location is not good, doing an extension is not a good idea. For your next mortgage try not to get a mortgage longer than 20 to 25 years. 35 year mortgages are madness.
 
Bronte said:
35 year mortgages are madness.
Click to expand...

Not at all. I would always look for a mortgage with as long a term as possible, and then try to overpay to the best of my ability (shortening the term and to pay less interest). In the event of a job loss or other unforeseen circumstances, it's a lot easier and cheaper to revert to the "normal" monthly payment than go into arrears.
 
Thanks for advice Bronte & leomahon

As for becoming landlords... It's certainly something we would like to avoid but by renting the house out even for the next five years we can chip away at the mortgage and hopefully lessen the NE if we were to sell up eventually. If we were to sell up now, financially we'd probably be in a worse state given we'd have rent plus loan repayments for balance of NE & no savings.

We have met with UB regarding the NE topic. As we would not have enough savings to clear the NE selling this house & buying a new property is not something they would have an interest in. Of course we'd jump at the chance if we did have the cash as we could carry the tracker.


  • Are we better off holding tough and saving until we have enough to cover NE & then selling & carrying tracker to new mortgage (if this is still available when the time comes)?
  • or alternatively renting elsewhere, saving & purchasing a second property using savings as deposit. The hope would be that in future years the NE figure might improve & we would rent it out until such a day comes
Lastly what would be the thoughts on paying some of the principal off now? I favour hanging onto the cash and not tying up anymore money in this property but it also drives me mad when I look at the mortgage balance.


I appreciate I have lots of topics covered here but any thoughts/ advice would be gladly appreciated
 
Re being a landlord, look up the threads on that on here and on the landlord forum. Lots of pitfalls and hints. Being a landlord is not an easy thing, but people think it is.

You need to do the figures to see what is the best option.

Figure out firstly how much renting a property will costs you as a landlord.

then how much will you have paid off, in capital and interest over a 5 year period (which you mentioned.

How much would pay in rent over 5 years and how much would you save. If you put all those figures on here we can have another look to see what is the best option.
 
in a very similar position to yours both financially and family wise

tracker of 1.15%, owe 255k, 25 yrs left, neg equity of 140k

we've been renting for 9 months and rented out our apartment but we're already sick of renting and the fact is we can't make it a family home, can't paint the walls the colour you like (without permission), some of the furniture isn't your own etc etc. Becoming a landlord isn't ideal and it is a Hassle but we don't like the alternative (using savings to pay off NE) and then start again and rent.

we're actively looking to buy, seeing a place this evening actually. Although we want our own home we won't pay over the odds a second time so we have some criteria this time on what the price of the property should be as well as the type of property and the location
 
Yes we really need to sit down and put pen to paper to see what the costs will be regarding the renting option.

kildon we have not approached the bank about the possibility of a second mortgage. Have the bank approved you for the second mortgage? If so any tips/advice in terms of the application process? I'm sure it's changed considerably since we last purchased.
I completely empathize with you and the renting situation. Out of interest do you think by renting for the 9 months made your mortgage application stronger given you've proof of rental income & outgoing rent?
 
obviously you need records of everything for 12 months, which we have. We have been managing out accounts very closely over the past 12 months and have regular savings as well as rental payments which shows that we can afford to pay a new mortgage as well as pay the mortgage on the property we already own. When we started the process we hadn't our property rented out for that long so they didn't take into consideration the rental income, we've been told that because there is now a history of rental payments it could be taken into consideration if it is needed in the affordability calculation

I think in your case you'll need to be able to show you can afford the new and old mortgage at a stressed interest rate...if you want to work it out yourself, see how much mortgage repayments are with an interest rate of 6.5% for both properties, if that is less that 40% of your net income (not including the rental income you may get) then you should be ok

btw, I have not tried to get a mortgage from my current mortgage provider

it's a pain gathering all the information but if you can afford the mrotgage I'm sure you'll get it
 
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