chances of getting a mortgage with neg eq "investment" properties

delilah23

Just wondering whether anyone had any thoughts on my chances of getting a mortage. My partner and I own two properties, both bought in 2007 (to get "on the ladder" :eek: )and both are in considerable negative equity. We can't live in either and are renting at the moment - this is something that will not change. The two mortgages total 420K, with about 180K - 220K of negative equity.
We can't continue renting forever and will need to buy a house in the next 2/3 years and it we anticipate that it will cost 400 - 500K. We are both in secure employment and our combined income is 200K per year. We have savings of approx 40 - 50K for a deposit. The amount we are currently spending on rent every month would service an additional mortgage. Apart from the mortgages we have no debt.
What do you think? Would we be laughed out of the room if we tried to get a mortgage? We don't want to be in debt of 800-900K, but we need somewhere to live....

phormium

I'm afraid I think you would, with two mortgages already I seriously doubt whether any bank would even consider giving you a third.

Oral Surgeon

I'm no expert but...
Do the rents on the 2 properties service the mortgages or are you topping both up from your own income??

If they are sorting themselves out then, you have a 10% deposit and have a combined income of 200k for a 500k mortgage.

200k is over 16k per month before tax, about 8-9k per week after tax, repayments would be about 3k per month with no other debt this sounds like a slam dunk to me...

Main thing really is the security of your jobs and if the other properties will start eating into your income...

Good luck
OS

hmmm

delilah23 wrote: »

We can't continue renting forever and will need to buy a house in the next 2/3 years and it we anticipate that it will cost 400 - 500K.

Can I ask why you won't be able to continue renting, and why you need to buy an expensive house?

On combined income of 200k I would expect to see a much bigger deposit.

Rebel1977

Bank will also turn around and say if the properties became vacant have you the ability to keep paying mortgages when they are not occupied, might also ask you to offload one of them but in current climate that would not make financial sense.

delilah23

thanks for your responses guys, much appreciated.
The investments don't fully cover the mortgage repayments, we top these up somewhat. There are valid reasons for our wanting to stop renting in the medium term - security, family reasons, certainty and also the fact that rent payments are effectively a third mortgage...
Thanks again for your input, much appreciated. Its an incredibly frustrating situation.

hmmm

delilah23 wrote: »

The investments don't fully cover the mortgage repayments, we top these up somewhat. There are valid reasons for our wanting to stop renting in the medium term - security, family reasons, certainty and also the fact that rent payments are effectively a third mortgage...

Rent is dead money eh? You're salary rich for now, asset poor and worth -200k. You're not going to get a mortgage for an additional 500k on top of existing 400k in mortgages on combined 200k salary. You would also be taking on huge risk by being massively over-exposed in property with the attendant risks of interest rate increases or vacant rentals. I don't know what your job situation is, but if there is any chance of redundancy or salary decreases you need to consider whether you can service a 900k mortgage on one salary.

You should be able to offload one if not both of the "investments" within the next few years and lower your risk profile. You could also lower your sights somewhat and look to buy a house in an area you can afford. Is moving into one of your existing properties a runner at all?

the groutch

just make major cutbacks everywhere, and I mean EVERYWHERE in your current lifestyle, and within a couple of years you'll have enough money to bridge the negative equity and sell off one of the properties, then go to the bank, see what they say.

okiss

I would look your income and all your outgoings to see where you could save money each month. I have gone through a few lean periods in my life and I learned then how to use my money wisely.
I would get every bill, bank statement and credit card bill to see where your money is going each month.
ie do you need 2 cars - could you sell one or move down to a cheaper one ( own a car rather that pay each month for it)
Get rid of credit cards - get a credit union loan to pay off any balances.
If you go to the website itsyourmoney.ie they have a budget plan where you can enter all your spending which can help you draw up a new budget.
Shop in Aldi or lidi as your money will go further. If your with the esb make sure you are on there new cheaper rate for electricity - you have to ask for this.
I recently got home insurance quotes which started at under €300 to over €840 for almost similar cover so this is area which could save you money - building costs have fallen so adjust insurance to reflect this.
Health insurance - look up the hia.ie website and see can you pay less for the same cover that you have or pay an excess to make your cost's lower. If you have children remember that they will not be treated in the Mater private ect so they don't need the same cover as you.
With the money you save each month set up a regular deposit account which pays good interest and this will leave you in a better position in a few years time to get a new house.

Cyrus

the advice above seems to be based on assumptions rather than any facts, altho there is some good advice there on lower risk profile, that said some people seem to be going a bit far, whats the point in working your ass off for a decent salary and then watching every penny

Anyway,

First off who knows what the situation will be in 3 years, but if it is as it is now you should have a reasonable chance.

I know of two couples who have gotten mortgages recently. in both cases they had an existing property (just one but mortgaged at the 400k mark with the corresponding negative equity).

Once they convinced the bank that they could rent it and that the rent assumptions were in line with the market, it was taken off the table.

The next issue then was the security of their employment, in both cases this was two accountants married together, and that seemed to go in their favour. the one thing they did mention was that they engaged with the bank early, and its a 3-4 month process. but banks will lend to credit worthy buyers.

delilah23

thanks for ye're replies. good to hear.

Some Help Please

What bank did they deal with?