Mortgage Approval advice needed....

D

dec1892

Registered User
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I would be grateful if a few of the AAM whizs on here could give their opinion on my current predicament!

My wife and I both own a property each in our own names – we are living together in my semi detached (worth €280k approx with still positive equity of about €50k, tracker mortgage). My wifes apartment isn’t doing too well though (now worth about €170k with about 60k negative equity, tracker mortgage). However, the apartment is luckily in a good rental location in Dublin and we’ve never had a month where it has not been rented – rent covers the mortgage repayment with about €100 to spare each month.

We’re both in our early 30’s with no kids (but that will likely change in the near future).I’m currently on a salary of €64k and my wife is on a salary of €53k. Our current lump savings is about €45k. I myself pay the mortgage on my house each month (€950 approx) and in addition I save about €1,000 each month. My wife saves about €500 each month.

We are considering selling my house either this year or in a few years time in order to trade up to bigger sized house and in better location (we hope to have money left after the sale which along with our savings will contribute to our deposit for the new house). The apartment isn’t so simple as my wifes brother also has an investment interest in the apartment (they went 50/50 on the apartment without his name being on the deeds)

Even though the apartment is rented without any issues, my fear is that it will come against us when we approach the bank for a mortgage for our new house as it is in negative equity. How will the bank look at this and what is the best approach for us to take to get the best possible mortgage? Assuming having sold my house but keeping the apartment, we would be looking from the bank for a mortgage of between €350k to €400k. Ideas I’ve had myself are the following:

1) the bank could approve us for a mortgage (based on our joint earnings) with a downwards adjustment made for the mortgage outstanding on the apartment?

2) the bank could approve us for a mortgage (based on our joint earnings) with a downwards adjustment made for the estimated negative equity on the apartment?

3) Approach the bank for mortgage approval based just on my earnings (I earn €64k per annum, saving €1,000 per month and paying a mortgage of €950) My thinking behind this is that I would have no debt to my name having sold the house we are currently in (as mentioned above, the apartment is in my wifes name). How would the bank look upon this?

All comments welcomed. Thanks.
 
We are in a similar situation and in the process of getting mortgage approval although it sounds as though your situtation is better.

After a lot research over the last couple of months we found that some banks treat investment properties better than others. But in the main they are not overly concerned about NE just your ability to pay. As your wife owns half, this will be in your favour also the fact it is already rented out. It has a history.

Our property is not rented out yet (we are living in it), is solely in my name, we earn approxmiatly the same with similar savings, the repayment on the "new" investment property the same too. We will qualify for up to circa 450K on the new mortgage while keeping our current property as an investment.

How do they come up with this figure?
Incomings:
Salary and projected rental income (percentage of)

Less outgoings:
Loans, investment mortgage (in your case half)

Whats left over is what you can afford, which is generally about €3000 less than this sum. Apparently if you earn a combined salary of over 80k you are treated more favourbly and as such with more flexibility.
 
Thanks for the reply Ash21 - thats reassuring to hear, hopefully we get treated similarly.

Do you mind telling me which bank you were dealing with to get your new mortgage approval?
Also, did you deal with any other banks on this and find the same approach by them too?
 
dec,

There are two basic steps to mortgage approval.

Step 1 : Repayment Capacity - can you afford the new mortgage.

You currently pay rent / save a total of €2450 per month.
Stressed tested repayments on a 400k mortgage are €2400 per month so you pass this test (just). When rates increase you will need to show more savings.

Step 2 : Are you incomes strong enough to support your borrowings:

Borrowings = €400k (new mortgage) + €230k (apartment) = €630k

Income = €117k + rental income (?)

Without rental income you are looking at borrowings of over 5 times earnings.

Your chances of success will boil down to the nuts and bolts of your personal circumstances - job stability, location of rental property, savings history etc etc. I would say it is borderline at best.

As you are married and are buying a family home, option 3 as you outlined above is a non runner. Your wife will need to be named on the mortgage.

Hope this helps.

[broken link removed]
 
Thanks NorfBank,your response was very helpful.

Our rental income is 1,000 per month (12,000 per annum) - so our total income is 130k approx. I also tend to qualify for a bonus each year on top of my €64k salary....would this be taken into account by the bank in their calculations?

Can you tell me what the stressed tested repayments on a 350k mortgage are currently?
 

Some lenders will not take rental income into account, some will not take bonuses. It really is a case by cases basis depending on the lender. Sorry for being so vague but that's the way it is these days.

Have a look at this calculator

http://www.itsyourmoney.ie/iym/mortgagecalculator

Use 6% for the rate to get an estimated stress tested repayment.
 
Dec,

Stess tests are different from bank to bank. Commonly, either 6% or 2% added to the current interest rate, check www.jeacle.ie.

We did approach banks directly at first, but got the perception they only wanted to deal with simple FTB mortgages out of pure lazines. I would advise going to one the main brokers for advice and to represent you, as it is a little more complex. They will also work harder for you and generally have more investment property experience.

Everything that Norfbank says is true, he is a good poster here and gives good advice; and a broker too!

Basically you need to deal with a bank that will allow for some of your rental income and not all do, then you are home clear (excuse the pun!). KBC is one, but again I recommend a broker to represent you. Before I would have said go direct to the bank but after the last couple months, not a chance; it wasted my time, a lot of energy and endless stress.
 
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