Does having one property go against you if you are applying for a mortgage?

M

moneyhoney

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Here's the scenario. 2 people want to buy a house together but person A has an apartment already. Mortgage is €800/month - rent would cover about that but say €500/month assuming the worst.

Given that the shortfall would be €300/month, would a mortgage lender reduce person A's 'available income' for mortgage purposes by €300, or €800?

Any brokers/lenders out there who can advice? Thanks.
 
Some lenders will take rental income into account and some won't. IF they do take the rental income into account, you will need to prove it i.e. is it paid by standing order into your a/c each month?
 
byrnsey09 said:
Some lenders will take rental income into account and some won't. IF they do take the rental income into account, you will need to prove it i.e. is it paid by standing order into your a/c each month?
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Thanks for that. You don't happen to know which lenders take it into account by any chance?
 
I think that the bank will see that person A has borrowings of €300k already which presumably is a good multiple of their salary.

They will be reluctant to lend them more money which would be an even bigger multiple of their salary.

However, if Person B can justify the borrowing on their own, then they should be happy enough to add person A to the loan.

The more fundamental question to ask A is if she is happy with having two large mortgages. She should probably try to dispose of her apartment before buying half another property.

Brendan
 
Most ( you could safely assume all, but I dont know this for fact) lenders will consider the shortfall as a commitment.
The shortall is not calculated as rent - mortgage = commitment.
The rental income will be discounted by approx 20 to 30% ( depends on the individual lenders policy) to allow for void months, maintenance, wear and tear etc.

Mortgage is €800/month - rent would cover about that but say €500/month assuming the worst.
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In this instance the shortfall would likely be calculated as rent at €500 discounted by 20% is a shortfall of €400 per month which is then considered a monthly commitment thus reducing net available income allowable for mortgage repayments.
 
That's very useful - thanks Molly. In this case the rent covers the mortgage right now but the owner is budgeting for eventuality that rents might go through the floor when all the NAMA stuff comes on stream.
 
AIB will not take any rental income into account on the first investment property owned, Bank Of Ireland will not take rental income into account on the first two investment properties.

You would have to be able to manage the repayments on the investment property mortgage and the new mortgage from salary alone to qualify with AIB and BOI. Both of these mortgage repayments will be stress tested on a capital and interest basis.

The other lenders will take the rental income into account and the shortfall will be seen as a commitment as described by Molly.

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Keep in mind for your own calculations, irrespective of the bank's, that person A will be liable for tax on the rental income (after allowing for 75% of mortgage interest and other costs associated with renting the property), so the shortfall is likely to be more than 300 a month (assuming a rental income of 500 and a mortgage of 800)
 
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