Joint Mortgage - One resident in Ireland and one in the USA

Robert Wilson

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Hi guys,

Looking for advice.

I own a house in Dublin with my wife In Rathfarnham. The adjoining house is coming up for sale. Probably be around 600k. My younger brother, in his 20s, is living and working in Silicon Valley. He earns 165k a year (dollars). We earn about 130k euro joint and have 470k mortgage on our PPR. He intends to move back to Ireland eventually. We would like to buy the house adjoining to me together.

1) Do banks provide BTL type mortgages when One applicant (me) is resident in Ireland and the other (My bro) lives in the USA (single)
2) If so what kind of LTV would be on offer. I know typical BTL is 75% for Irish resident, but seen as he’s in the USA, does this make it a non resent BTL, limiting it to 65%?
3) In terms of the deposit. I would have 100k. He wouldn’t. Though he’s earning $165k a year gross. Could he borrow money short term to make up the difference? He obviously has the capacity to repay it. How do the banks view that though.

Thanks, all help welcome.
 
It'll be treated as a non resident BTL.
You'll need a minimum 30% deposit.
As far as I'm aware, AIB are the only mainstream bank that will look at this. The rate will be high; expect 4.8% to 5.5%.
 
It'll be treated as a non resident BTL.
You'll need a minimum 30% deposit.
As far as I'm aware, AIB are the only mainstream bank that will look at this. The rate will be high; expect 4.8% to 5.5%.

Thanks for this.

Just on the deposit. I would have half of it. 100k. But he would need to borrow his half via a personal loan. Do banks allow this? I mean, he has the means to support such a loan, as well as half the mortgage. Given his high salary. But just wondering if, in your experience, borrowing short term (unsecured) for a deposit is 'a thing'.

Thanks again.
 
This seems really messy.

1) You would get a better return on your money by paying down your mortgage. A €470k mortgage on a salary of €130k is high. Even €370k is high.

2) Your credit rating would be damaged if either you or your brother could not meet the repayments and the tenant just stopped paying.

3) The tax complications of being a partner with a non-resident probably means that you would need to spend money on tax advice every year.

4) The interest rate would be punitive

Why not just pay the capital sum off your mortgage?

When your brother is definitely planning to return to Ireland, there will probably be a house for sale in your estate and you might be both in a more comfortable position to afford it.

Brendan
 
Thanks Brendan.

Agreed. Does seem very messy.

My mortgage is cost me close to nothing. I think the rate average 1% over last 4 years. With regular switching and cashbacks. So I'm probably making money on it when you consider inflation. Current rate 2.25. So I have little interest in paying it off.

The reason we feel the punitive BTL rate might be worth it is the homes are adjoined. Offering economies of scale for future development and/or allowing development that wouldn't be possible with a single property.

The Tennant (while my brother remains in the USA) will be my sister. I know, very incestuous. So, little chance of a rent strike. His salary is high and share options are worth a couple hundred grand (when he does leave and come home). Silicon valley is crazy like that. So little problem there.

Myself and my wife have very secure employment. And income protection.

He will return in a couple of years. So non-resident tax advice messiness won't last too long.

So, when you dig a bit, it's not as crazy as it seems. Though granted, still a bit crazy.

Anyway, know of any success with this kind of thing?
Especially borrowing short term to finance a deposit. As I said, I have my part, 100k. He would need to borrow 70k short term. If we need 30% of 600k price. He can afford it. But is it 'a thing'. Will banks allow part of the deposit to be borrowed unsecured?

Thanks for your time
 
I have seen people plan on the basis of share options, which turned out to be greatly reduced in value when they were needed.

If he can cash any of the options now, he should do so.

Brendan

Ok. Don't think that's an option. But thanks for your reply.

I suppose the nub of the issue is whether anyone has seen banks approve a mortgage, when half of the deposit has been raised with a personal loan? One the borrow can easily afford (in conjunction with his future mortgage obligations)?

Can deposits ever be raised from anything other than gifts and/or savings?

Thanks
 
Whether the borrower can afford the personal loan or not is decided by the bank as they will take into account the repayments on that as well as the ones on the mortgage stress tested. Your brother I imagine would need to be able to prove he was saving an amount in excess of those personal loan repayments for a while plus has spare capacity to fund the mortgage repayments should he need to and enough left to live on where he is.
 
Hi Robert,

Any chance your brother has a 401(k) fund with $100,000 in it? If so, his fund can lend him up to 50% of the fund to a max of $50000. He has to pay interest to his fund and will have to repay the loan within a time period of 5 years (possibly extendable to 15 for property purchase.)

And if he has an IRA, he can take $10,000 from it for a property purchase but that would be regarded as income by the IRS and would be taxable.

That would get him a fair bit of the way to his share of the deposit.
 
What stands out is that your brother does not have savings to contribute towards the deposit despite being on a high salary of $165k. This may be a function of his age or it may be that in relative terms $165k is not that large when considering the cost of living / lifestyle. So if he borrows $70k in the US can he service that debt on current salary?

I would reach out to a broker and AIB to see if it is a starter and then work out the costs from there.

Not really what you are asking for but this does seem risky given there isn't a set date your brother will return from the U.S, a lot of things could change.
 
Hi Robert,

Any chance your brother has a 401(k) fund with $100,000 in it? If so, his fund can lend him up to 50% of the fund to a max of $50000. He has to pay interest to his fund and will have to repay the loan within a time period of 5 years (possibly extendable to 15 for property purchase.)

And if he has an IRA, he can take $10,000 from it for a property purchase but that would be regarded as income by the IRS and would be taxable.

That would get him a fair bit of the way to his share of the deposit.

Thanks a lot of this. He wasn't aware. Will look at pursuing this further. Great tip. Much appreciated.
 
What stands out is that your brother does not have savings to contribute towards the deposit despite being on a high salary of $165k. This may be a function of his age or it may be that in relative terms $165k is not that large when considering the cost of living / lifestyle. So if he borrows $70k in the US can he service that debt on current salary?

I would reach out to a broker and AIB to see if it is a starter and then work out the costs from there.

Not really what you are asking for but this does seem risky given there isn't a set date your brother will return from the U.S, a lot of things could change.

You're right. It does stand out. There's a reason for this. And it's not a lavish lifestyle. Though 'the valley' isn't cheap to live in. He's been earning that money for 18months. Problem was, the first 12 months he was paying down debt from a failed startup. All cleared now though. Think he's saving 4k a month. On average. Perhaps a bit more. So he could cover, 75k over 7 year term @5%. Would be 1,000 on top of half of mortgage commitment. Though there would be rent minus taxes to help a bit. Before he returns.

How the world of Irish Banking will view that history. I don't know.

You're right, does seem risky. Just exploring what's feasible really, cost/benefit analysis I suppose. We will require a long long list of 'if this, then that' if we proceed with it together.

Thanks for your help.
 
For anyone interested, we decided not to proceed with this. Too messy.

FYI. AIB do ‘returning to Ireland mortgages’ but you need at least one months salary from Irish employer in Euro, paid in to a euro account. Alternatively, they would give him a BTL on his US salary but you need 35% deposit. Upon return you can sign a document stating its now your PPR and they’ll switch you back to PPR rates.
 
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