Brendan Burgess
Founder
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3. Residual debt from negative equity mortgages: Credit granted for the purpose of discharging residual debt under a negative equity mortgage is excluded from the calculation of the LTV. The LTV limit will only apply to the loan secured on the new property, before the residual debt is applied. The residual debt which can be exempted only applies if the property sold is a primary dwelling.
'Loan’ means an amount advanced or a total sum of amounts advanced to a borrower secured on an individual residential property. For the purposes of calculating loan to value only, the definition excludes any residual debt under a negative equity mortgage.
From your calc - does it follow that House Price 400k is funded 370k debt (new + residual) and 30k cash ?
Secondly, people should be clear that negative equity mortgages are not listed under the exemptions in relation to earnings multiple caps.
5. These Regulations shall not apply to:
... a housing loan which replaces another housing loan, and under which the amount advanced under the replacement housing loan does not exceed the monetary amount outstanding to the lender...
Residual debt from negative equity mortgages: Credit granted for the purpose of discharging residual debt under a negative equity mortgage is excluded from the calculation of the LTV.
Homeowners in negative equity will not be bound by the Central Bank's new mortgage rules
Hi Brendan,
I think I needed coffee too as was getting confused here, even though the calcs are pretty straight-forward ! Matbe I could just lay our my understanding so that we are all straight.
1. Sell Existing House -
Residual Debt 50k
2. Buy New House:
Purchase Price 400k
20% Cash Deposit Required 80k
Mortgage on New House 320k
Total New Mortgage = 370k, of which 50k is used to discharge Residual Debt.
So, in effect there is 450k to be funded, which is done through 80k cash & 370k debt ?
Now at the next stage the 3.5x eanrings multiple is relevant . . so above in order to have 370k total debt, the borrower / s would have to be earning >105k p.a ?
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