How can I get my next home???

[ben10]

Hi

I am in a similar situation to many people across the country who bought their first home in the boom times & are now looking to move to somewhere more suitable to my current situation

I bought an apartment in 2008 for 415,000.The apartment is not worth much more that half that now but with a new family, I would like to move on in the next couple of years. Ideally, buy a house in the same area at a a current valuation of 500,000 (one can but dream!!)

I have a salary upwards of 60,000
my partner earns upwards of 30,000
between us we have approximately 10,000 in loans but 15,000 in savings

An option would be to move into my partners house in the country, this is not somewhere we would like to live long term but would enable us to save 2,000 per month. If we decided to do this in the short term i could rent my apartment covering the majority of the mortgage & save about 50,000

Am i dreaming or would any bank give us a loan to buy a new house in a couple of years if we showed for 2 years we were saving 2,00 per month & my apartment was being covered by the tenant?

Yours naively,

 

[huskerdu]

No-one knows that the economy of Ireland will be like in 2 years or what bank lending policy will be, but your plan sounds like a good plan as it helps you save money and move to a bigger home.

 

[Brendan Burgess]

Is your loan a tracker? If so, the negative equity is not as serious as the repayments are a lot lower. The bank might at some stage do a deal with you.

You are unlikely to be able to buy another house for the foreseeable future, but that does not stop you renting a house more suited to your needs.

Has your partner a mortgage? Could she not sell that house?

 

[drs]

From my experience, Banks seem to work on evidence.

If you have two years of solid savings at a set rate, and two years of solid renting covering the other property... that looks like strong evidence...

Additionally, that would give you 63k in savings. I assume you will have cleared the 10k loans as well... keep in mind that the loans are evidence of capacity to pay, so the fact that you have cleared them with regular repayments give more evidence that you can make payments...

At this point you'd be saying you have strong evidence that you have capacity to pay €2500/pm and have savings of €63k.

Based on a stress rate of 6% on a 25 year mortgage you'd be able to get a loan of up to approx €390k i.e. about 87% so that will be your limiting factor as opposed to the banks LTV lending (currently AIB=92% max, BOI & KBC=90% max)

If your loans are not going to be cleared, or if interest rates go up (and that is not unlikely, where the ECB is now, the only way is up) then your capacity to pay will be reduced and / or your stress rate will be increased further eroding your ability to borrow... and that is assuming that the banks are on a sounder footing.

So on that basis a purchase of €500k in 2 years is not a runner for you right now... If the financial conditions remain exactly the same in two years as now, you'd be able to purchase a house for €440k-ish (keep in mind stamp duty and solicitors fees etc) and as capacity to pay looks like your limiting factor, you can only save your way to €500k, ie four years saving not two.

Sorry to be the bearer of not good news... of course the property prices could fall to meet your ability to purchase... on the other hand they could go up too!