LTV Mortgage query

[Shano]

Very long time reader, but first post.

Scenario:

Have a house in negative equity (probably over 100k in negative equity) with ulster bank.

I have savings of near enough to 90k. I am going to rent out the house in negative equity and buy a new house. I applied for and received mortgage approval of over 100k with another bank.

Now here is my question. I would have thought my repayment rate re LTV, would have applied to all the details in my new mortgage and new property only?

The bank are taking into account the property,negative equity and loan for the first house that they have no financial interest in when accounting for the LTV rate. As a result the repayments are a bit higher than if they were just taking into account the mortgage and property I would have with them. Is this correct? Sorry if it’s a silly question!!

 

[LDFerguson]

The theory behind LTV rates is that lower rates apply to perceived lower risks. So if your LTV is lower then the risk for the bank is lower and some will charge you less for this.

It does seem a bit opportunistic that a bank should take another property into account when calculating LTV. I'd argue it with them but they're not obliged to agree with you. As Michael Noonan is so fond of reminding us (when it suits him) - the setting of mortgage interest rates is a commercial decision for the banks concerned. Do you think you' be approved by a different lender?

 

[Shano]

Do you think you' be approved by a different lender?

I presumed most banks wouldn’t touch me with the negative equity so I only applied with the one I thought I’d have the best shot! (and the rates seem better than other banks).

I actually passed their stress tests,etc with a bit to spare so might be worth looking into other banks position on LTV

Thanks for your response, I appreciate it! Thought it was a bit opportunistic myself – doesn’t seem right tbh – but looks like they can do what they want!

 

[44brendan]

Negative equity on an existing house is not an issue for a new Bank. What is important is repayment capacity and savings record. Your post indicates that you are strong on both fronts. It's well worth your while shopping around before committing to your existing mortgage provider.

 

[Shano]

It's well worth your while shopping around before committing to your existing mortgage provider.

I think I will, thanks Brendan.

What are your thoughts on the bank taking into account my current mortgage
(With a different bank), property and negative equity for the LTV rate for the mortgage on my (hopefully) new property? Do you know if this is common?