Getting a mortgage for an apprentice

Hi a friend of mine is looking to get a mortgage and has asked me to enquire for him as has trouble getting the time.

He is an apprentice and wants to buy a property overseas for 260k.

His parents will help him out as guarantors and by putting their land up as collatorel as they are farmers.

His income is circa 35k - he has one left before he qualifies as an electrician.

Are the banks likely to take this kind of case of is it a non runner.

Thanks in advance.

He will need to approach a bank in the country he wishes to buy in rather than Irish lenders. Typically the maximum loan is going to be 70%-80% of the purchase price so he'll need the balance of the deposit plus whatever local taxes and fees are payable. The alternative would be for the parents to remortgage their home to gift him the money however lenders are not keen on mortgaging land when there is an agricultural tie (which may or may not be the case). Either way he'll lose his FTB status and be liable for CGT on any profit made when he comes to sell the property.

Unless there is an overwhelming case for buying abroad he'd be better of applying for affordable housing here or waiting until his income is sufficient to buy privately. As an aside on €35,000 with room rental and no loans he could borrow circa €200,000 as a 92% mortgage.

Sarah

www.rea.ie

Sarah,

Cheers for that.

Are you definitely sure about him losing FTB status?

I came across the below info on the revenue site.


What is the position in the case of a gift of part of the purchase monies? Where a first time buyer receives an unconditional gift of monies which are used to purchase a house, he/she will not be precluded from claiming first time buyer relief.

Also if his income qualifies him for 200k how would this stop him getting a 100% mortgage.

Is 92% the max they would do for him at given his income?

rgds

With regard to the FTB status I'm not sure how the Revenue quote applies to him getting a mortgage and buying a property abroad?

No, he woulndn't be precluded from getting a 100% mortgage in Ireland however the lending criteria is stricter so he'd be limited to €175,000 rather than €200,000 based on his income and room rental.

Sarah

www.rea.ie

Thats great Sarah.

Will have to find out about FTB status for overseas purchase from the revenue.

If his parents, both in their late 40's, remortgage & gift him the money will this work on affordability if his own income can only raise 200k, i.e. will the bank go how is repaying this money & what does he/she earn?

rgds

His borrowing capacity is a function of how much he earns and any ongoing loan commitments. If the parents gift him money - not loan as the loan repayments would then reduce how much he can borrow - it will simply add to the €200k to give him an overall budget of €200k + the gift amount. He would not be able to borrow any more unless there is additional income from a joint applicant or guarantor.

Sarah

www.rea.ie

Cheers Sarah,

Do banks do room rental on overseas properties?

rgds

Irish lenders do not lend on overseas properties. I have no idea if the lenders in the county in question lend on room rental and/on rental income.

Ask me again in a couple of months.........

Sarah

www.rea.ie