Mortgage Running Out

Carb

I tried posting this on the finance forum and the DIY forum, but somebody suggested I should try here.

Basically, I borrowed 40K less than my earnings allowed at the start of this year to finance a self build. It's looking like I'm heading over budget by about 20/30K. The problem is that my wife recently had a baby and isn't working now, so this would change dramatically the amount we'd be able to borrow, if I was applying today. What way do banks deal with this, ie do they base your request for a top up on the original application and circumstances, or is it like applying all over again, which means supplying proof of income, half of which isn't there any more. Any advice would be much appreciated.

Victor

Hmmm, stressful times, but not the end of the world.

Do you have anyone advising you?

I suggest you sit down, work out what has been spent, what needs to be spent and what it all adds up to and compare this with your mortgage together with any other money you are putting in.

You can probably mortgage up to what the house is worth. A completed house is worth slightly more than the sum of the inputs.

Separately you need to look at affordability, are you able to meet the current payments? Will you be able to meet them into the future?

PM me if you want.

Carb

Thanks for that Victor. I've only been doing rough calculations to see what its coming up to, so I do need to update my original budget and actual figures. I'm lucky in that it is still early days, ie I still have a third of my mortgage left, and can still pull the figures back. Unfortunately, it may mean standard insulation and soundproofing and oil burner instead of heat pump. These are the things that are annoying me most, as once the house is finished and the ground work is done, you can't really upgrade these items at a later date.

In terms of the mortgage, the house will probably be worth at least 150K more than the mortgage as I'm doing a lot of the work myself and the site was given to me. The affordability is the issue, as I've discovered that my bank has a completely different opinion on this. eg. They once told me that I couldn't afford €650 p/m in loan repayments, when myself and my wife were taking home nearly €4500 p/m and had been paying €750 p/m for the three previous years. (one loan was replacing the other). So There is no way that they would say I could afford extra borrowings now. Personally I think I could, as it would be easier to come up with the liittle extra p/m than 20K to finish the house. I might just have to cash in my SSIA early.

Victor

Family?

Credit union?

You can tell thr bank that as of X date, you won't need to be paying the SSIA anymore.

Carb

Sorry about dragging up an old post, I thought I'd see if anyone could offer any additional advice as there seems to be a lot more people around these days that have experience of mortgages.

Bascially the situation is the same as before. Despite cutting all the corners possible, the house is still going over budget, with materials and labour getting ever more expensive. We are getting closer to the end, (hoping to be in before Christmas). Between a mixture of a personal loan and perhaps parents, we may be able to finance it, but this would not be the preferred option due to the repayments on the personal loan, and it would still be very difficult to complete the house with the money available. In an ideal world, we'd have borrowed the 240/250k that we could have at the time, but hindsight is a wonderful thing. At this stage the extra 40/50k would be perfect, but even an additional 30k would go a long way.

The pros and cons of the cureent situation are:

Cons:
The mortgage is with BOI, who aren't exactly flexible
I only earn 32k a year, and my wife stays at home to look after our 10 month old son.

Pros:
I'm a part qualified accountant with six years experience and sitting my finals in December, so could reasonably expect to be earning 45-55k in the not so distant future.
The expected final valuation of the house would be in the region of 400-450k.
We have SSIA savings of about 18k.
Parents would go guarnator if thats even possible on a joint mortgage.

Whats everyone's opinion on the above. Is the personal loan the only option available to us now.


PS: Victor, I tried to PM you regarding the above, but as your sig says....

jdivision

I don't think you'll have a problem if you approach the bank. Basically, you are entitled to think that you'll experience a significant earnings increase in the near future and therefore will be in a far better financial predicament. In addition, the house will be worth far more than you paid for it so again they'll take that into account - you might need to get an auctioneer to officially value it to confirm that however. Seems a bit strange though that your wife didn't take her maternity leave. She is also entitled to extra unpaid leave after that expires. If she had taken all that then her salary would still have counted now.
Anyhow, that's beside the point. I think your bank manager would be more than willing to lend you the extra money. They'll probably add it on as an additional stage payment.

Victor

You don't need a guarantor, you have plenty of equity. Although be careful of being over-optimistic.

Carb wrote:

PS: Victor, I tried to PM you regarding the above, but as your sig says....

E-mail me from my profile.

Sponge Bob

Remortage with another bank . Try NIB who have good deals.

240k on a 400k house is a 60% mortgage LTV . As long as the main income is around €60k you will have no problem.

Carb

jdivision wrote:

Seems a bit strange though that your wife didn't take her maternity leave. She is also entitled to extra unpaid leave after that expires. If she had taken all that then her salary would still have counted now.
Anyhow, that's beside the point. I think your bank manager would be more than willing to lend you the extra money. They'll probably add it on as an additional stage payment.

We were moving home from Dublin, and she became pregnant just before she had to give up her job. So when we did get home, she was unable to get employment due to been pregnant (the old "do you have any medical conditions" question), so she was unable to avail of the normal maternity leave benefit.

In relation to my bank manager, from dealings with them in the past, I get the impression that the manager in our BOI branch has very little say. We were originally refused a 200k mortgage with them, and even she couldn't tell us why. By their own lending criteria, we should have been approved for another 30/40k,

Victor wrote:

You don't need a guarantor, you have plenty of equity. Although be careful of being over-optimistic.

I don't know whether you mean been optimistic about my salary, the value of the house or my chances of getting more money. The salary expectations are definitely reasonable, if not already achieveable. As for the value of the house, the 500k figure has been thrown about by some people, but even if it was 350k, the equity wouldn't be an issue. Two bed apartments already cost 250k locally, nevermind a 3000sqft hallmark stone two story house on a one acre site. As for my chances of getting more money, I can only try.

Sponge Bob wrote:

Remortage with another bank . Try NIB who have good deals.

240k on a 400k house is a 60% mortgage LTV . As long as the main income is around €60k you will have no problem.

The 60k slary is the problem. If I was earning that, I wouldn't even have to post here.

I'm going to talk to a few brokers to see what they say. There are some that offer interest only packages for a number of years to professionals starting off and who expect big pay increases. As one told me once, there is a certain way to package it.

Thanks for the replies, and if anyone else has any suggestions or been through this, feel free to post on this or PM me.

The_Conductor

To be honest- as you have noted there is a bit of a crackdown on mortgage lending, particularly the "affordability" aspect thereof.

Vis-a-vis BOI- the low mortgage compared to the asset value will entitle you to a better interest rate (60% or lower LTV is currently floating at ECB +1.05% with BOI- this is cleared on a case by case basis with Treasuries though).

As you have probably discovered yourself- the banks will most probably be willing to lend you the money on a fixed term loan, rather than as a mortgage top-up (as their criteria for mortgage top-ups is based on documented historic salary returns, whereas a personal loan with proper collateral is a seperate matter).

If your parents are willing to act as guarantors on the mortgage- this might be the better option for you also (as you would be able to avail of lower rates immediately).

When I originally took out a BOI mortgage my parents also acted as guarantors for me. When my earnings increased sufficiently that I came into their multiplier rules- they were quite happy to remove the guarantee from my parents from the mortgage- if your expectation is that your salary will increase in a similar manner in the near future- it may very well be a satisfactory short term solution for you.

Unfortunately the absolute "value" of the house is not the determining factor when they come to decide whether to give you the mortgage increase or not, the affordability to you of making the repayments is.

Re: your above comment about cashing in your SSIA early- its a non-runner, you would both loose the government top-up and also be charged tax on any gains of the principle incremental investments.

Victor

Carb wrote:

I don't know whether you mean been optimistic about my salary, the value of the house or my chances of getting more money.

Sorry, I meant on the value of the house.

Carb

I just thought I'd update everyone who took the time to reply to my query.

I checked with a couple of brokers/advisers to see what they would say. This was pretty much a waste of time as they only seemed interested if you were buying a house and borrowing four times your salary. All they could say was wait to your earinings increase and not really grasping the idea that'd I'd already spent 200k on a house that's not finished and therefore can't live in yet.

I rang BOI. This was another waste of time. Couldn't do a mortgage top up due to earnings (no surprise there), they don't/won't do bridiging, don't do secured personal loans, and don't do personal loans over a period longer than 5 years. All they could say was go to PTSB (where my current account is), or the Credit Union.

So I rang PTSB - Another waste of time. If my mortgage was with them I could have got a secured personal loan. Otherwise they'd only give a loan over 5 years, even though the website says 10 year terms are available. If my SSIA had been with them, they would give a longer term. So I offered to transfer my SSIA to them, but after a couple of calls all I got was sorry, that won't work, goodbye (must find new current account provider).

All that was left was the credit union. So I give them a call, and surprisingly enough they don't think there would be a problem giving 35k over 10 years at 9.6%APR:eek: ie 457 euro per month. I don't think this is a particularly good option, but at the moment it's the only one.