Be careful not to use your savings to pay down your mortgage if you want to trade up!

Brendan Burgess

Brendan Burgess

Founder
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|Johnny|Mary
Existing mortgage| € 300k|€300k
Existing house worth| € 250k|€300k
Existing negative equity |€50k|0
Savings |€80k|€30k

Following the good advice on Askaboutmoney, Mary has used her savings to pay down her mortgage and negative equity.

They want to buy a house for €400k

Johnny has the deposit and so can buy the house. Mary can't.
 
But does the 20% deposit have to be in savings? Would Mary not technically have the deposit when she sells her current house?
 
Just a thought, could a deposit of 10%, plus an insurance bond to cover the cost of any negative equity of a further 10% paid monthly be substituted for the 20% deposit?

This would allow the bank to lend 90%, but also have insurance in place to cover an additional 10% of negative equity if prices fell and a forced sale was required. Life insurance is already required so its nothing new. Perhaps require a 3rd party to underwrite to spread the risk.

The monthly premium would be factored into affordability on the LTI side so it would also take a bit of heat out of the market.

Buyers should have an alternative to saving for ages or borrowing the 20% from CU, mum & dad, Wonga etc.
 
Mary wants to buy a property worth €400,000.

She requires a deposit of €80,000.

She has savings of €30,000 + a property worth €300,000.

She only needs a mortgage of €70,000.

My question is would the bank not take account of her €30,000 savings plus the value of her current property to make up the 20% deposit?
 
Sorry Sop - is my example not clear? I have clarified it.

She has a house worth €300k but there is a mortgage attached of €300k, so her deposit is only €30k.

She doesn't need a mortgage of €70k, she needs a mortgage of €370k
 
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