Help re mortgage enquiry

hi guys,

Have searched around on the site but i think it is one of those situations that seperate advice is needed.

My brother has saved a deposit for a house of €24,800 based on buying a house at €310,000 (getting a 92% mortgage for €285,200)

now his salary is not great €23,400 per annum plus overtime €5,200 per annum. (net monthly basic - €1,702 if included o/t net - €2,023) Over 40 years at a standard trakcer his payment would be €1,062. He is going to rent a room for €400 per month threfore his payment comes down to €662 before mortgage interest relief.

does anybody know if he would get approval for this mortgage. My parents are willing to act as guarantors as there house is worth circa €380,000 (mortgage o/s €100,000).

My brother is a first time buyer also so just wondering would the 100% mortgage be possible.

thanks for any help.

johnnybegood

I douth if he would get 100% , but could he try get an interest only for say 3 yrs and by then he might be on a better wage,

well getting the 100% isn't that important as i said he has the 8% deposit and would get the mortgage over 40 years and also avail of the rent a room scheme and parents going guarantor.

DOES THIS NOT AFFECT THE ELIGIBILTY FOR THE MORTGAGE AT ALL?

it actually brings the payment per month based on a 92% mortgage after taking account for the rent a room and single person FTB interest relief to 34.96% of his basic income and 29.41% of his basic plus overtime.

But im not sure if they take rent a room, overtime and interest relief into the calculation.

its a difficult situation as its my grandfathers house. He passed away recently. My brother is buying the house at market value 9ie the family don't know its him we want it to be done through the proper channels).

My dad was going to buy it as an investment property but with stamp duty, income tax etc we thought it would make more sense for my brother to get on the ladder as he is FTB

The maximum mortgage he'd qualify for would only be €170,000 even with room rental - lenders take a max. of 50% of overtime. Perhaps your dad could go as a joint borrower (two on mortgage, one on title to avoid Stamp Duty and CGT complications) - what does your dad do for a living and how much does he earn? Does he have a mortgage or any other loans?

Sarah

www.rea.ie

Hi Sarah,

Thanks for the info. My dad would be willing to do anything whether it be guarantor or joint borrower. I would be a little worried about only my brother going on the deeds i was under the impression solicitors don't like doing this and also i hear the revenue are clamping down on this type of behaviour... is it allowed in other words to do this?
is it tax avoidance or tax evasion big difference obviously!

my dad earns circa 50k probably basic 35k plus overtime. he has 100,000 mortgage outstanding on his house (worth approx. 380k plus).

Finally my dad does have a car loan but planning to pay this off when his ssia comes through. If needs be he can clearly now.

It depends on which bank you go to. National Irish Bank are good to take everything into consideration such as your brother's ability to save the deposit etc and might consider the mortgage on his own rather than getting your parents involved.
My brother recently was approved for a mortgage with them and he relies on over time to boost his salary but they took his great track record of saving as a big consideration when he was approved.

Hi Johnny. The "two on mortgage and one on title" scenario has been OK'd by the Revenue when it is specifically set up to assist a child to purchase a property so you don't need to worry about that. However your dad's income is pretty much taken up with his own mortgage and living expenses so he really wouldn't add much to your brother's borrowing capacity - perhaps €50,000 or so. Your brother is looking for 10 times his income including his overtime and I'm afraid there is no lender rash enough to advance this. The only possible option I can see is if the executors agreed to sell the house at a reduced price with some mechanism to pay the balance at a future date.

Sarah

www.rea.ie

Understand. Would it be possible for my dad to buy it as a buy to let property and pay interest onyl for five years and then when my brother is in a better position sell it to him. If my dad borrowed €300k added to his €100k it would be less than 75% of the market values (as per ebs thats who he banks with)

My brother would pay the rent together with his lodger. Interest only is circa €800 - €850 depending on the rate i think.

is this possible?

Not possible I'm afraid. Whilst lenders do take equity into account the main criteria is affordability based on income. With total borrowings of €400,000 your father would be horribly over-exposed if the property wasn't let for a period of time and/or rates went up. It would be very irresponsible lending. Could you, or other siblings, join the mortgage?

Sarah

www.rea.ie

Hi Sarah, thanks thus far for your help... any good news would be great though!! Only kidding. I totally understand the issue of irresponsible lending. Now i had a talk to my father and got a bit more info his basic is 35k plus 15k overtime. My mother also works part time and gets €10,400 per annum. This gives them current net pay excluding the overtime of approx. €3,336 per month.

There current mortgage payment is €520 per month (16% of net income) now if they got an interst only for five years for the investment property the interest would be €850 approx per month (based on borrowing €300k)

This gives total mortgage payment before any rent received or trs on the ppr of €1,370 (41% of net income) I dont see how this leaves them horribly exposed to debt.

My dad also has a maximum ssia coming next year, is getting an inheritance of €30k as a result of my grandfather passing away, and has a good savings record etc with the bank.

So is it possible at all without the help of any other family members (except maybe my brother) to get the mortgage?

Thanks sarah