Buying a house, but loan approval subject to selling existing house

kingvagabond said:
es it would be great to have an asset as I suppose a house with mortgage (your home) isn't really an asset. I might explore the idea again with the bank.
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Before you do, it might help if you build up a few months of hard savings & frugal spending to show you have capacity to service both mortgages. In cases a little outside the norm, a mortgage broker might know the lenders that would be more amenable.
 
As a rough guide to keeping house as rental, banks will stress the mortgage repayments at +2% interest (so about 7% interest). They'll only allow c.75% of rental income in their calcs.
 
Thanks Leo and RedOnion. If I was to get a second mortgage and keep this property to rent out and then decided that I wanted to sell it after a year - would I have this option? Would there be issues with a. tenants (some EA's tell me that it difficult to get them out even with contracts) and b. would the bank object or would it affect my new mortgage in any way? This idea is great as it allows us to stay in our home until we secure a new one but I don't know if I could take the pain of being a landlord for too long. It's just a bit of a headache. What is the costs of being a landlord? I'm sure there have been many a post on askaboutmoney in respect of this.
 
Ah, you don't actually have to keep the house and become a landlord...

You come up with a business plan that you're going to do that. Buy your new house, move out of old, and immediately put it on the market. It just gives you the option of keeping it and becoming a landlord.

Your new mortgage will be secured only on the new property.
 
As RedOnion says, you're under no obligation to keep the existing property, so long as you keep paying the mortgage, they'll leave you alone.

I'm still looking, but the approval I now have in place assumes I will rent out my existing house, and I've been approved for more than I was based on the option of selling it with a percentage of the expected rental counting towards income calculations.

If and whenever I do finally buy somewhere, I'll keep my current place to give me time to move without the need to arrange storage. I'll decide then whether to rent it or sell, the decision likely being driven by whether I need to free up money for any renovation work required on the new place. Note it will be very important that I keep sufficient cash reserves to allow me cover the new mortgage and several months of the remaining mortgage on my existing house. If you're going down the same path, be sure you do likewise, and don't lose track of spend kitting out the new place.
 
Fantastic advice.

On top of the normal costs of moving house, which are often underestimated, you need to service both mortgages for a period.
 
Thanks so much Leo and RedOnion for your views and helpful information on this. I rang the mortgage broker yesterday and they're happy to help but I need to show consistent savings each month. I have to say it's great to have options. It's such a relief.
I spend a lot for 3 months of the year December, January and February (Christmas, insurances due for renewal, booking summer and Easter holidays and kids summer camps) but apart from that not much spending happens! I can do a spread sheet on excel showing my spending each month for the past year and see where it goes from there. Or do I need to more decisive on how much exactly I claim I can save per month or will they average it out over the year? I'm presuming they're looking for a consistent amount per month like €1,000 to €2,000?
 
kingvagabond said:
Or do I need to more decisive on how much exactly I claim I can save per month or will they average it out over the year? I'm presuming they're looking for a consistent amount per month like €1,000 to €2,000?
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A regular monthly transfer to your savings account can make it quite clear, but they will look at all accounts over the previous few months.
 
kingvagabond said:
but I need to show consistent savings each month.
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I think you said you've 80k in savings?
Once your savings are higher now than they were 12 months ago, you should be able to tell the story that'll keep them happy.
Banks will go through last 6 months in detail, but to be honest if you've been able build up that kind of savings, unless it's from gambling, you should be fine.
 
Thanks RedOnion. We went through the figures yesterday on a spreadsheet and we worked out the mean average per month per annum. It looked good on paper so hopefully they'll (as you discussed above) focus on the overall picture as apposed to nit picking at why there is variation in a few of the months. I'm a bit worried about that part. I'll see how it goes and let you know as I'm going to organize a meeting with the mortgage broker for next week.
 
Just got off the phone from the brokers. They're not offering us what we need. Should I ring around or is it the same everywhere?
 
Yes, try a few of the others. If they all tell you the same story, you may need to spend a few months building the savings record to prove it can work.
 
kingvagabond said:
Thanks Leo, I'll try that and see how it goes.
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As a matter of interest, do your recent account statements show that you are clearly putting aside more than enough to cover the mortgage you're looking to take on?
 
We looked at this option when moving, and AIB guidance was that they would want to see us being able to service both mortgages (assumed vacancy of old property, wouldn't consider rental income) plus the stress limits.
It would have been possible for us, but would have restricted how much we could borrow for the next place, since all existing equity would have been tied up and part of our repayment capacity was assigned to the existing property. Luckily the vendor who came along for our house rented it back to us.
 
Yes Leo, there is a steady increase and growth in our savings every month. Phibblestown, I think that was already suggested by RedOnion earlier on in the post.
 
Hi RedOnion, I asked them but they didn't discuss the names with me. They said that they'd have to meet me first.
 
Hi everyone, just to update you all on events. Well it was worth my while to call a few brokers because I had a much more positive experience with broker number 2. We are now in process of submitting all our paperwork and getting the ball rolling. The banks we have been quoted are as follows:
BOI, KBC, ICS, AIB. The LTV is 80% as it is our second time buying. I have been reading around about the rates and feel that BOI and KBC are in the running. The broker says that BOI will give back (over 5 years) €8140. But the rates seem very high. KBC's rates look good at 2.3% for 3 years. I don't know what to do. I've read around on different forums such as the fair mortgage rate forum on here and i'm still confused!
Having said all of that and to anyone in our situation - its well worth it to ring around and talk to different brokers as it has paid off in our case. So much thanks and gratitude to all the people on this forum without them it would not have happened.
 
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