Case study Negative equity apt, looking to trade up

[buttonmoon]

Income details
Net monthly (i.e. after tax) Income self: permanent position, net: 4070 p/m
Income history: 7 years in same place
Net monthly income partner/spouse: currently stay-at-home mam / unemployed for previous 2 years. Recently started looking for work again. she is acca qualified. Permanent Jobs are few but she could take a 12 month contract for €55k. We spoke with some lenders and they said her salary will not be part of the mortgage application as she is not in a permanent job.
Income history:
Amount of child benefit received 260
Amount of Mortgage Interest Supplement received (MIS is the social welfare payment to unemployed people, don't confuse with TRS) none


One adult family or two adult family: 2
Do you need a car for work or do you use public transport? : 2 cars
Number of children 0- 2 years old: 1
Number of 3 years old children: 0
Number of 4 - 11 years old: 1
Number of 12 - 18 years old: 0
Monthly childcare costs: n/a (would maybe be 1500 if she went back to work)
Montly spend on special circumstances:n/a


Home loan
Lender: danske bank
Amount outstanding: 219k
Value of home: 175k
Interest rate: ecb + .6% (tracker)
Monthly repayment : 860
Amount in arrears : none

Other loans and creditors - delete those which don't apply to you
none

Other savings and investments :
80k savings

Do you expect any lump sums in the medium term future?
no


How important is retaining the family home to you?

Which of the following best describes your situation?

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.


Any other relevant information

What is your preferred realistic outcome?
Essentially, a mortgage offer for a trade-up home, looking at ones priced 270k - 300k.

I would like to keep our current apartment if it made financial sense (and I suspect it does). Could rent it out for 950 p/m easily but danske bank told me that any rental income from it would not be factored in when drawing up a mortgage offer for a trade-up home. If it isn't possible to keep the apartment -or doesn't seem like a good idea for any other reason- then would be willing to let it go.

Sincere thanks for any consideration given

 

[Bronte]

That's a great tracker, will you be allowed to move it?

Sell with NE of 44K, leaves you with about 30K after costs of sale etc.

Buy for 270K. 10% deposit is 27K, so you have that. Are banks lending at 90% for owner occupiers.

Will your bank loan you 270K based on your income of 4K per month. You've demonstrated you can afford 860 Euro per month, plus the savings amounts, which I assume is a regular amount.

 

[buttonmoon]

I spoke with Danske bank before Christmas and the guy basically asked had I heard about them in the news, that that they're winding up consumer business and that even internally they didn't really know what was going to happen next.

We'd heard the news alright but, at that point, we'd already filled in the forms so sent them in anyway.

He then told me that the most they'd give us in a separate mortgage was about 140k *possibly*. That wouldn't consider any rental income from the existing property or income from my wife on contract. He also mentioned that if we let the apartment out then technically we'd be breaking the terms of the mortgage and may not be entitled to that tracker any more. He surmised by saying that even if he could recommend our application that he wouldn't be too sure if it would even go through anyway - that things were very much up in the air in there.

I also spoke with boi during the summer and they said they'd give me around 140k, taking into consideration dependants, stress test on existing tracker and no income from my wife taken into account unless it was permanent position.

I was thinking our next move might be to contact a mortgage broker (I've seen LD Ferguson's posts here and also recommendations for him) but first of all wanted to see if someone in the broader community might have advice to offer:- e.g. how attractive would holding onto the apartment be as an investment in this situation? Should we hold out and see what happens with Danske bank trackers (see also: http://www.askaboutmoney.com/showthread.php?t=184173), ... I don't even know what else.. basically, we're a bit lost.

 

[goingforgold]

If it was me I'd definitely sell the apartment and then buy a new place. You will be far to indebted and overly exposed to property otherwise. If you sell, you will clear negative equity and have some equity in your new home...and much less debt (and hassle with tenants etc).

 

[44brendan]

Danske will be doing deals on early payment of tracker mortgages in my opinion. They are currently trotting out the party line that all loans must be paid in full. However, they are under pressure from parent to liquidate their non-core book as quickly as possible and realistically the only option to expedite this strategy is to offer incentives to clients for early payment of loans. Strategy is currently unclear to staff, and it is likely to be another 3/4 months before they will be in a position to address offers from clients such as yourself.