Any advice on how to raise €60k?

DrPhilG

First off, thanks to all who have given advise on various other threads I have started or posted in. Most have resisted the temptation to tell me I'm mad, and just given honest advice. This thread is the sum total of all the other questions.

The situation;
I have a house, outstanding mortgage approximately €125k. Current value approximately €90k. Had no intentions of moving etc and haven't been saving recently simply because we lived very frugally for years.before we got married so in the 2 years since we have been travelling a lot and spoiling ourselves a bit.

A few months ago, my father very generously gave us a lump of money in order to buy a house.

We had a look, saw a few things we liked, then found an absolute diamond. At this stage my father had said that if we needed more, he would lend it to us. Ended up sale agreed on the house, at a price dirt cheap even in this market as it was a repo.

Problem arises when my father realises that the rest of his money is tied into an investment account that he can't break for another few years. Now our cash offer is no longer cash and we need to raise the rest of the money in a hurry because there were other interested buyers.

We are only about €60k short and didn't expect to have any issue getting a mortgage. Happy to sit tight on the current house as it is too deep in negative equity to sell. Shouldn't be hard to rent anyway but we can comfortably cover both mortgages if needed. Problem is, because we have been living it up for the past few years, we have not been saving and without evidence of savings it is looking in increasingly unlikely that we will get a mortgage, even with more than 50% deposit.

In terms of assets, we also own a 50 acre farm that is currently rented out but was recently valued at about €450k.

My father would lend us the money in a heartbeat but can't access it.

Are there by either options? Loans secured against the land? Bank will not accept my father as a guarantor, or give any weight to our net income vs mortgage outgoings.

I know there will be other houses etc but this one is in a very particular rural area and others nearby are far more expensive. If we don't get thus house we will likely end up much further away.

Thanks for listening to my rant!

Victor

Is your father boasting about what he can loan you? Hence the bank's reluctance?

I imagine your best best is a loan / mortgage either on the farm or secured on the farm.

"We also own" - you or your father?

DrPhilG

Victor wrote: »

Is your father boasting about what he can loan you? Hence the bank's reluctance?

Not sure I understand?

He's certainly not boasting. I haven't even mentioned his finances to the bank other than declaring his gift as the source of my sudden bank balance. It was my mortgage broker who said that these days banks don't accept guarantors on mortgage applications.

Victor wrote: »

I imagine your best best is a loan / mortgage either on the farm or secured on the farm

But will banks do this nowadays? When I was planning to borrow the extra money from my father I asked a mortgage advisor about the possibility of releasing the equity from the house in order to repay him in the off chance he needed it and the advisor said that banks will only release equity if it is for home improvements. I thought this would mean they would be the same for releasing equity in farm land.

Victor wrote: »

"We also own" - you or your father?

Sorry, by we I mean my wife and I. Our land completely, not my fathers.

Treehouse72

DrPhilG wrote: »

Now our cash offer is no longer cash and we need to raise the rest of the money in a hurry because there were other interested buyers.

You are getting involved in a property bidding war on a house you are emotionally attached to using family money whilst already owning a property that's in negative equity in the middle of the biggest property crash in the history of the world.

If you think that answer has nothing to do with the question you are asking, I think you're wrong.

ArtSmart

seek mortgage broker advice.

DrPhilG

Treehouse72 wrote: »

You are getting involved in a property bidding war on a house you are emotionally attached to

We are not being emotional about this. Initially I admit that we were so taken by the place that we didn't really look much further. However we have since shopped around a lot in preparation for the seemingly inevitable outcome of not being able to get a mortgage. There simply isn't anything else comparable in the area. If we don't get this house the next best option will be about 25 miles further away. Not the end of the world but far from ideal.

The usual argument is that other houses will come up and we shouldn't get hung up on this one. That simply isn't true in this case because of the very specific nature of the location.

Treehouse72 wrote: »

using family money

This is actually quite offensive, suggesting that I'm risking "family money" to secure the house. The money I have as a deposit is not "family money", it was a gift. Whilst my father would happily fund the rest, he is not in a position to do so meaning that any other money to be used will be raised from our own land and/or income. My father is very financially secure and we are not putting him at any risk!

Treehouse72 wrote: »

already owning a property that's in negative equity in the middle of the biggest property crash in the history of the world.

I am well aware of the financial situation and I am well aware of how lucky I am to be in a secure position both in terms of job security and the land we own. The reason I am not worried about borrowing to buy this house is that even if the farm has halved in value in the last 2 years, it would still be more than enough to clear both mortgages. Recent sales in the area suggest that the land values have not dropped by anywhere near that much though.


From your posts here and in other threads, you seem insistant that I'm emotionally unstable and financially suicidal, so I doubt that anything I say will change your mind but thank you for an honest answer nonetheless.

DrPhilG

Victor wrote: »

I imagine your best best is a loan / mortgage either on the farm or secured on the farm.

Also, won't a loan secured against the farm still need to meet the same "evidence of savings" criteria that the current mortgage applications do?

Treehouse72

DrPhilG wrote: »

but thank you for an honest answer nonetheless.

YW

Zamboni

Why don't you sell the farm to raise the capital?

DrPhilG

Zamboni wrote: »

Why don't you sell the farm to raise the capital?

We inherited the farm a few years ago and qualified for agricultural tax relief, but one of the criteria of that tax relief is that we can't sell the land for 6 years, that and we have rented it out on a 6 year lease.

mari2222

Would you be happy to stay where you are for another year or two? Prices wont go up in the meantime, but you could start saving again, to build up a good history?

Otherwise, if you are really really convinced you must find the 60000, what is your credit limit on your cards? Could it be raised?

D3PO

mari2222 wrote: »

if you are really really convinced you must find the 60000, what is your credit limit on your cards? Could it be raised?

Surely your taking the preverbial ? your seriously suggesting 60 grand put on credit cards at circa 20% APR ?

No wonder this country has so many people on the financial crapheap.

DrPhilG

mari2222 wrote: »

Would you be happy to stay where you are for another year or two? Prices wont go up in the meantime, but you could start saving again, to build up a good history?

I'm not desperate to move, and if we lose out on the house we have bid on we will just start to save €500 a month minimum in order to put ourselves into a better position. We could try again in 6 months and see what the market is like.

But with the prospect of finding a good house in the same area as this one being extremely slim, I think we might actually just end up sitting tight for a few years until we sell the farm and then building.

mari2222 wrote: »

Otherwise, if you are really really convinced you must find the 60000, what is your credit limit on your cards? Could it be raised?

Can't see anyone lending that much on credit cards, and I wouldn't want to borrow like that anyway. Even for reasonably short term, it's no way to borrow money.

Zamboni

Well then, just cross you fingers and hope one of the mortgage applications pulls through.
Maybe it's not meant to be...

MagicMarker

Can your father not apply for the loan himself?

ABEasy

You should be able to raise finance on the farm without too much bother, argi lands are selling well as farming is booming (price of beef, etc) and it is one of the very few sectors banks are lending to ATM. You should be going to business lenders (each bank will have a dedicated business lender) rather than mortgage brokers if you follow this route. You should try all the banks, acc ulster boi & AIB have approved finance for farmers I am aware of in recent times. Alternatively as another poster mentioned your dad could borrow against his investment with the bank the investment is with.

DrPhilG

Zamboni wrote: »

Maybe it's not meant to be...

Maybe so, and we have come to terms with that fact. Not going to give up without exploring all the options either though. I always thought I would want to build my own house at some stage. This place is the only house we've seen (under €400k) that I think would actually overrule that desire to build. I'd happily spend the rest of my days there and the wife feels the same.

MagicMarker wrote: »

Can your father not apply for the loan himself?

I wouldn't want to ask him to really. He's been incredibly generous already and I don't want to be a money grabber! Not sure banks would give a loan to someone his age either, he's no spring chicken!

DrPhilG

ABEasy wrote: »

You should be able to raise finance on the farm without too much bother, argi lands are selling well as farming is booming (price of beef, etc) and it is one of the very few sectors banks are lending to ATM. You should be going to business lenders (each bank will have a dedicated business lender) rather than mortgage brokers if you follow this route.

But wouldn't the issue be what I am raising finance for? According to the mortgage broker, even if I bought the new house outright (if I had the cash) I wouldn't be able to raise any finance on it because the banks are strictly only releasing equity for the purpose of home improvement.

In my case I'd be raising finance on a farm but not actually doing anything to the farm with it. Also, why would a business lender be appropriate, as I'm not a business? Or is that simply because the farm is considered a business even though I'm renting it to someone else?

Thanks for your reply though, certainly gives some other options. I might try to get a meeting with a dedicated financial advisor rather than just mortgage broker to see what options they can suggest.

ABEasy

DrPhilG wrote: »

ABEasy wrote: »

You should be able to raise finance on the farm without too much bother, argi lands are selling well as farming is booming (price of beef, etc) and it is one of the very few sectors banks are lending to ATM. You should be going to business lenders (each bank will have a dedicated business lender) rather than mortgage brokers if you follow this route.

But wouldn't the issue be what I am raising finance for? According to the mortgage broker, even if I bought the new house outright (if I had the cash) I wouldn't be able to raise any finance on it because the banks are strictly only releasing equity for the purpose of home improvement.

In my case I'd be raising finance on a farm but not actually doing anything to the farm with it. Also, why would a business lender be appropriate, as I'm not a business? Or is that simply because the farm is considered a business even though I'm renting it to someone else?

Thanks for your reply though, certainly gives some other options. I might try to get a meeting with a dedicated financial advisor rather than just mortgage broker to see what options they can suggest.

The farm would be considered a business hence the business lender (plus the business lender will have much more scope to lend than an application from the broker and boi/AIB are under pressure to lend to sme's) are you in receipt of subsidies on the lands? In relation to what the funds are for, you could argue they are for land improvements and you intend to farm the land upon the expiry of the lease. You'll probably have to tell a few lies but with a LTV of 15% (assuming 8k per acre) they should comfortably give you the loan but will try rate it at 3%+ over cost of funds.

DrPhilG

ABEasy wrote: »

In relation to what the funds are for, you could argue they are for land improvements and you intend to farm the land upon the expiry of the lease. You'll probably have to tell a few lies but with a LTV of 15% (assuming 8k per acre) they should comfortably give you the loan but will try rate it at 3%+ over cost of funds.

That's where this falls down then.

I'm not prepared to "tell a few lies" to get what I'm after, no matter how much I want the house.

kennyb3

DrPhilG wrote: »

I'm not desperate to move, and if we lose out on the house we have bid on we will just start to save €500 a month minimum in order to put ourselves into a better position. We could try again in 6 months and see what the market is like.

Do this - but make it a year or even two.

DrPhilG wrote: »

But with the prospect of finding a good house in the same area as this one being extremely slim, I think we might actually just end up sitting tight for a few years until we sell the farm and then building.

Again i dont buy this, just because there isnt anything out there now doesnt mean there wont be in time. Be patient. If there genuinely wont be then you ve got to question the actual area if none of the houses are particularly nice?

Chances are the other bidders were thinking the same way and your overpaying in any case.

I would read Treehouses post a few more times.

Also on the bit about the farm covering both mortgages even if the value halved - this assumes that the farm is a liquid asset. Also how can you be sure of what other places actually achieved?

Anyway i think the point is not to be wrapping up properties against the value of other properties - you know where this got us.

martinn123

Hope you don't mind me chippin in OP.

This should be a very Bankable situation if presented correctly to the right Bank.
First not the one who hold the negative equity in your current home.

You will have assets, farm, 450K and the new house, (not sure of the price)
You need to raise 60K which will be the only borrowing against these assets.
Assuming you can show repayment capacity, income from farm, job (s) you should be able to raise an Interest only facility pending your fathers investment becoming available in 2 yrs to repay facility.
In addition if you offer an assignment to the Bank, of the Investment ( assume its a Policy ) your father holds, get an up to date valuation, you are offering security way in excess of the 60K, you need.
When the 2 year period is up, you can look at all the options available, new mortgage, sell existing house, etc.
Forget a Mortgage Broker, go see the Bank Manager, especially the one where your father Banks. Then shop around all the local Banks, one will bite.

Before you go in confirm there are no Gift Tax liabilities from the gift you got, or Inheritance Tax liability from the farm you Inherited.

DrPhilG

Thanks Kenny and Martin.

Just hitting the sack after a 17 hour shift so I'll reply in detail once I'm conscious again!

DrPhilG

kennyb3 wrote: »

Again i dont buy this, just because there isnt anything out there now doesnt mean there wont be in time. Be patient. If there genuinely wont be then you ve got to question the actual area if none of the houses are particularly nice?

We are talking about an area on top of a hill between 2 major towns. The location between the 2 towns is ideally what we are looking for due to work in 1 and family in the other.

Drive up this hill (to get the view) and all the houses on the slope up are €500k plus due to their view of the water. The houses on the slope down the other side don't have much of a view due to the landscape.

The houses on top have a great view of the countryside but not the water, so they are a bit more reasonably priced. This house has 8 or 9 nearby, 2 of which are for sale at €300k+. Because this house was a repo and has been empty for a while, it sold for €135k.

So as far as location goes, we are talking about a very small select area that simply doesn't have that many houses and this one was a steal due to it being a repo and needing a bit of work (which we have budgeted for). I don't doubt that if we bought this house and did the required work it would at least temporarily increase in value rather than decrease.

Saying that if we wait and keep looking is like saying that if we keep shaking down haystacks, sooner or later we'll find a needle.

We have looked at plenty of other houses and come to the same conclusion, that if we wait a year the same house or better will be available for less, but that logic just doesn't apply to this house due to the various circumstances that lead to it's current price and the very select location that it is in.

kennyb3 wrote: »

Also on the bit about the farm covering both mortgages even if the value halved - this assumes that the farm is a liquid asset. Also how can you be sure of what other places actually achieved?

I know that a farm similar in size and type of land was for sale recently, had 2 buyers offering more than €8k an acre but the farmer eventually turned it down because he wanted €10k an acre. So the demand for land is still there, and the values are still good.

martinn123 wrote: »

Hope you don't mind me chippin in OP.

Not at all!

martinn123 wrote: »

This should be a very Bankable situation if presented correctly to the right Bank.
First not the one who hold the negative equity in your current home.

Funnily enough I thought they would be the best bet! Currently they (I) owe €125k on a house worth €90k so if things went horribly wrong they would be looking at a €35k shortfall. If they gave me the mortgage on this house, they would end up with a total loan of €190k but with positive equity of about €30k overall.

martinn123 wrote: »

You will have assets, farm, 450K and the new house, (not sure of the price)

Just to make sure you've not got the wrong figures, you listed the farm AND €450k? The farm is worth roughly €450k but can't be sold for another 4 years. And the price of the new house is €135k, €75k of which I can pay as deposit.

martinn123 wrote: »

You need to raise 60K which will be the only borrowing against these assets.
Assuming you can show repayment capacity, income from farm, job (s) you should be able to raise an Interest only facility pending your fathers investment becoming available in 2 yrs to repay facility.
In addition if you offer an assignment to the Bank, of the Investment ( assume its a Policy ) your father holds, get an up to date valuation, you are offering security way in excess of the 60K, you need.
When the 2 year period is up, you can look at all the options available, new mortgage, sell existing house, etc.

The key part of that is "showing repayment capacity". That is the issue with the mortgage situation at present. I can show capacity in terms of income vs mortgage expenditure, but I have no evidence of recent savings. Won't this have the same negative impact on the loan you are suggesting as it did on the mortgage applications? Or will the "assignment of the policy" solve that problem?

martinn123 wrote: »

Before you go in confirm there are no Gift Tax liabilities from the gift you got, or Inheritance Tax liability from the farm you Inherited.

There are no gift tax issues with the gift, and inheritance tax has already been paid on the farm with the only provision being that we cannot sell for another 4 years in order to comply with the agricultural relief clause.

DrPhilG

martinn123 wrote: »

This should be a very Bankable situation if presented correctly to the right Bank.

That's the other problem, most of the terms you used are alien to me, so would I better to find a financial advisor (rather than mortgage broker) to take the lead on this?

martinn123

DrPhilG wrote: »

Funnily enough I thought they would be the best bet! Currently they (I) owe €125k on a house worth €90k so if things went horribly wrong they would be looking at a €35k shortfall. If they gave me the mortgage on this house, they would end up with a total loan of €190k but with positive equity of about €30k overall.


Just to make sure you've not got the wrong figures, you listed the farm AND €450k? The farm is worth roughly €450k but can't be sold for another 4 years. And the price of the new house is €135k, €75k of which I can pay as deposit.

Assets, Farm 450K
New House 135K
Investment A/C
Father 60K
Total 645K
You offer the Bank that as security for

Loan 60K

Surplus 585K

To be clear, you say the farm cannot be sold for 4 yrs, but thats for Tax reasons, in reality the farm can be sold anytime, and the Tax paid.

In offering the Investment account, you are saying to the Bank, in the event of something going wrong, this can be cashed in and the loan repaid.

I recommended staying away from your existing martgage Bank, as they will take the security offered, and offset it against the negative equity, leave them out of the picture for the minute.

DrPhilG wrote:

The key part of that is "showing repayment capacity". That is the issue with the mortgage situation at present. I can show capacity in terms of income vs mortgage expenditure, but I have no evidence of recent savings. Won't this have the same negative impact on the loan you are suggesting as it did on the mortgage applications? Or will the "assignment of the policy" solve that problem?

In my view a lack of regular savings is not relevant, OK it would be better, but if you apply for a 3/4 yr, Interest Only Loan, and show you can easily repay from current income, that should be acceptable.

Bottom line you will have 600K in assets ( after the negative equity ) and need to raise only 60K for this to work.

DrPhilG wrote:

There are no gift tax issues with the gift, and inheritance tax has already been paid on the farm with the only provision being that we cannot sell for another 4 years in order to comply with the agricultural relief clause.

Good on the Tax front, how did you pay the inheritance tax, from savings perhaps?

DrPhilG wrote:

That's the other problem, most of the terms you used are alien to me, so would I better to find a financial advisor (rather than mortgage broker) to take the lead on this?

Definately, suggest you start with an Accountant, and go from there.
This is not your typical Mortgage Application, so get an expert on board, and expect to pay a decent fee for the right advice/ result, ( my invoice is in the post):D:D

DrPhilG

martinn123 wrote: »

Assets, Farm 450K
New House 135K
Investment A/C
Father 60K
Total 645K
You offer the Bank that as security for

Loan 60K

Surplus 585K

To be clear, you say the farm cannot be sold for 4 yrs, but thats for Tax reasons, in reality the farm can be sold anytime, and the Tax paid.

I recommended staying away from your existing martgage Bank, as they will take the security offered, and offset it against the negative equity, leave them out of the picture for the minute.

But even if going to a different bank than my mortgage is with, I would still need to declare my borrowings on the other house.

martinn123 wrote: »

In offering the Investment account, you are saying to the Bank, in the event of something going wrong, this can be cashed in and the loan repaid.

He has over €200k in the investment account, but would face heavy penalties for cashing in early. But I suppose as it's just an example of how the loan is secured, it would still carry more than enough clout.

martinn123 wrote: »

In my view a lack of regular savings is not relevant, OK it would be better, but if you apply for a 3/4 yr, Interest Only Loan, and show you can easily repay from current income, that should be acceptable.

Good point, the mortgage was based on paying back €300 a month, but at interest only that figure would be even lower and we could then pay the mortgage, the loan and still put money away to strengthen the case for a mortgage in a few years.

martinn123 wrote: »

Bottom line you will have 600K in assets ( after the negative equity ) and need to raise only 60K for this to work.

Don't mean this to be rude, but are you involved in the industry, banking etc? My mortgage advisor said that logic and common sense are irrelevent these days due to the banking crisis. Hence the reason my father cannot simply sign as guarantor on a mortgage application.

While everything you are saying about assets vs loan required makes sense, it makes sense to a mortgage lender too but they're still refusing to play ball. Why do you have reason to believe that a bank will be more willing in this scenario?

martinn123 wrote: »

Good on the Tax front, how did you pay the inheritance tax, from savings perhaps?

Fraid not, it was paid from a small cash amount that came with the farm. The leftover cash we spent on our wedding.

martinn123 wrote: »

Definately, suggest you start with an Accountant, and go from there. This is not your typical Mortgage Application, so get an expert on board, and expect to pay a decent fee for the right advice/ result, ( my invoice is in the post):D:D

Any idea what you mean by a decent fee? I have no issue paying a bit to ensure that this happens.

martinn123

DrPhilG wrote: »

But even if going to a different bank than my mortgage is with, I would still need to declare my borrowings on the other house.

Yes of course, but let's not give them the additional security

He has over €200k in the investment account, but would face heavy penalties for cashing in early. But I suppose as it's just an example of how the loan is secured, it would still carry more than enough clout.

Even better, not being rude, but the Bank should see this as a way out if it goes wrong.

Good point, the mortgage was based on paying back €300 a month, but at interest only that figure would be even lower and we could then pay the mortgage, the loan and still put money away to strengthen the case for a mortgage in a few years.

Exactly, and in 4 yrs the Tax implications of selling the farm is gone, hopefully your existing house has increased in value, and you can look at options for restructuring the loan.

Don't mean this to be rude, but are you involved in the industry, banking etc? My mortgage advisor said that logic and common sense are irrelevent these days due to the banking crisis. Hence the reason my father cannot simply sign as guarantor on a mortgage application.

While everything you are saying about assets vs loan required makes sense, it makes sense to a mortgage lender too but they're still refusing to play ball. Why do you have reason to believe that a bank will be more willing in this scenario?

No I am out of the Banking Industry for a few years now, but the principles do not change

Get away from the attitude you are looking for a 90% Mortgage, over 25 yrs, and from a Mortgage Advisor. The rules in the Mortgage Market have changed, due to the mad lending of the past. You are not in that situation,
Yes its to buy a house, but you have considerable Assets to offer as security, you are looking to raise 60K with 600K backing it up. So your local Mortgage Advisor is not the place to go, statments like '' your father cannot be a Guarantor '' apply in the 90% Mortgage field, not in your case
If you needed to buy a Tractor, or Combine Harvester at 60K I am sure you would succeed.

Any idea what you mean by a decent fee? I have no issue paying a bit to ensure that this happens.

It's a difficult enough case, so you need a Good Professional, with a good relationship with a Banker who can see the strong position you are in. Start by talking to an Accountant.

mapera

Hi OP... just a couple of points.

First, I think Martinn mentioned it, very important point.
1. Stay AWAY from a mortgage broker. Go directly to AIB and BOI, you will get a better rate and greater amount if you go direct, no question. Banks are giving out few enough morgages these days, they certainly dont want to be giving a cut to a broker.

The banks themselves will then have 3 concerns, which you are going to have to do your best to alleviate:
- Repayment capacity
- Your assets / savings
- Your saving/credit history
In relation to all of these it's a question of optimising under every category, applying DIRECTLY to the banks and hopefully you'll get closer to that 60 short.

Things like getting your base salary as high as possible (if you for example have some kind of bonus structure in your wages ask your employer to transfer that to the base), getting a favourable letter from a local estate agent about how much you can rent your property out for, and similarly for your current property in relation to the valuation.

Best of luck

the groutch

why are you even looking at moving?
stop living like it's 2006, stay in the current house paying the mortgage, and when your Dad has access to further assets, and THEN re-evaluate the situation.

DrPhilG

the groutch wrote: »

why are you even looking at moving?
stop living like it's 2006, stay in the current house paying the mortgage, and when your Dad has access to further assets, and THEN re-evaluate the situation.

I have explained that I'm only trying so hard to move because of the unique nature of the house in question. If this house doesn't work out, then we most likely won't move or at least not for 6-12 months.

The question is whether we would rather have a good house in 2 years for €100k that we might stay in for 10 years, or an amazing house now for €135k that we will stay in for life. That is why it makes sense to push harder to make it work now.