Mortgage with three borrowers

user_name_d

Hi All - Hope you can help and I tried looking for answers around for our situation but I couldnt find a specific answer - there's alot to consider initially with mortgages and its all a bit confusing

So here is our situation and wondering what people think initially?

Me and my partner are FTB's looking to buy in Dublin. We have an eye on a property that is about 15% more than what we'd be comfortable with on a mortgage - and deposit, etc.

The property is in a good location and for us its a 5 yr short term plan but a good investment I think.

So to make up the shortfall in what we think we can afford and the asking price/deposit on the property we have chatted to a family member about investing in the property with us. ie contributing to be a part owner(say 20% ?). older family member with a assets, cash and good investment eye

So in a couple of years we'd probably look to rent the property and this is where I think we'll see some ROI and hopefully with the markets picked back up somewhat it should be good..

Now since we havent fully talked to the bank yet I just wanted to see what others thought:

1. Is getting a 3rd Part owner involved good/bad?
2. Would this help or hinder a mortgage application?
3. How are banks at giving mortgages now? Slow/Fast/Risk Averse?

I think we'd only be looking for 85% of the value of the property as a mortgage so I think we would have a good chance of mortgage approval? What do people think?

Also we are luckily both in full time employment - I'm self employed but with no loans, credit card debt or anything like a black mark on my record. We both have some small insignificant savings but savings none the less.

And lastly and probably the most naive - if we see a property tomorrow that we like can you make an offer without mortgage approval?

I know there is alot of questions there and I have asked around but you do get conflicting answers so maybe if I see things written down I can sit back and digest.

Appreciate all the help.. Thanks

cookie1977

Dont make any offers until you've mortgage approval or you could end up very disappointed

Your self employed status probably wont help your mortgage application I'm afraid and neither will your lack of savings (although you dont specify what small is). Best off speaking to a mortgage broker but these days banks are very risk adverse and your description to me would make you a risky investment. If you want a 30 year mortgage how would that work for the older 3rd party.

user_name_d

Hi Cookie cheers for the reply - I see your point and that's initially how I felt ie being risky. However we would see the 3rd party as making up for our lack of savings perhaps and the risk involved.

We have about 6k saved right now so in the greater scheme of things probably not much but still something.

The initial agreement with the 3rd party would be based on this property alone as in 5-10 years and then we sell and split the difference. This is by no means our longer term home if that makes sense

Do you think if we put in an offer without approval we wont be taken seriously?

StillWaters

An offer without mortgage approval will not be entertained.

I'm sorry, but I think the 3rd party investor is a crazy idea. I can't see any bank going for it, will they apportion part of the loan as a BTL, do you lose part of the TRS, will investor have to pay capital gains tax?

Relook at your plans, you need to wait a while longer, save more, and look for something within the price range of what you and your partner alone can comfortably afford.

athtrasna

Unless you bought before the mid 90s, landlords are not generally making any profit on properties bought as investments. There are a lot of costs involved, buying with a view to renting down the road is not a smart plan.

phormium

Not a realistic plan, no bank is going to go for it.

killers1

user_name_d wrote: »

Hi All - Hope you can help and I tried looking for answers around for our situation but I couldnt find a specific answer - there's alot to consider initially with mortgages and its all a bit confusing

So here is our situation and wondering what people think initially?

Me and my partner are FTB's looking to buy in Dublin. We have an eye on a property that is about 15% more than what we'd be comfortable with on a mortgage - and deposit, etc.

The property is in a good location and for us its a 5 yr short term plan but a good investment I think.

So to make up the shortfall in what we think we can afford and the asking price/deposit on the property we have chatted to a family member about investing in the property with us. ie contributing to be a part owner(say 20% ?). older family member with a assets, cash and good investment eye

So in a couple of years we'd probably look to rent the property and this is where I think we'll see some ROI and hopefully with the markets picked back up somewhat it should be good..

Now since we havent fully talked to the bank yet I just wanted to see what others thought:

1. Is getting a 3rd Part owner involved good/bad?
2. Would this help or hinder a mortgage application?
3. How are banks at giving mortgages now? Slow/Fast/Risk Averse?

I think we'd only be looking for 85% of the value of the property as a mortgage so I think we would have a good chance of mortgage approval? What do people think?

Also we are luckily both in full time employment - I'm self employed but with no loans, credit card debt or anything like a black mark on my record. We both have some small insignificant savings but savings none the less.

And lastly and probably the most naive - if we see a property tomorrow that we like can you make an offer without mortgage approval?

I know there is alot of questions there and I have asked around but you do get conflicting answers so maybe if I see things written down I can sit back and digest.

Appreciate all the help.. Thanks

Lot of things to consider here in relation to purchasing a property with a view to keeping it for 5 yrs etc etc but I'll address the mortgage aspect of your query.

The only way you have a chance of gaining mortgage approval is to apply with your partner solely with the mortgage and title in your names only. The family member can by all means contribute towards your deposit by gifting you the funds. You will need to satisfy the bank that despite your relatively low level of savings you still have a proven ability to repay the mortgage with stress tested repayments. Your combined incomes will also need to qualify you to borrow the amount required. The fact that you are self employed is NOT a negative thing, you will just need to show consistent earnings over a number of years with the bank taking the average of those as being the 'income' figure they'll factor into their calculations. In relation to your question 'how are banks at giving out mortgages now'... I'd say if there are 9 positives and 1 negative the application is declined as opposed to the boom years where 1 positive & 9 negatives would be enough to get you over the line! Banks are still lending once within policy & your incomes qualify you to borrow the amount required and you have proven you can afford over and above the monthly repayments. In relation to the family member who has gifted you funds to assist with the purchase you are free to come up with whatever agreement in the background you like in terms of what will happen the sale proceeds (if any) when the house is sold. It takes about 2 weeks to get mortgage approval. There is nothing wrong with putting offers on a property without mortgage approval but bear in mind the EA will be looking for valuers and surveyors to be making contact pretty soon after the offer is accepted. A huge percentage of people put offers in before having loan approval but they probably have a good idea that their incomes will be sufficient and they have a proven repayment capacity. I'd certainly suggest running the figures to see the chances of obtaining approval before you start making offers. There's certainly no point in putting an offer in if the incomes don't stack up and you can't show affordability...

user_name_d

Killers, Thanks for that reply. Some pretty sound sound advice there and yes we have crunched the numbers and what we are looking for in a mortgage would be comfortable for us.

If we put our salaries in to various mortgage calculators the results are a bit crazy and in most cases they are telling us we can 'afford' nearly 30% more than we want to. The property we have our eye on is well within our budget, in our ideal location and I still believe (despite some comments above) that there is some potential to make something small on investing in a good location at this time.

I think the only way a bank would entertain a 3rd Party was through a 'gifting' suggestion and as I said this would be the injection of funds we need to get the deposit and legal fees covered. The rest - we would look after.

I think one thing is certain - we seek approval first!

Cheers all.

killers1

user_name_d wrote: »

Killers, Thanks for that reply. Some pretty sound sound advice there and yes we have crunched the numbers and what we are looking for in a mortgage would be comfortable for us.

If we put our salaries in to various mortgage calculators the results are a bit crazy and in most cases they are telling us we can 'afford' nearly 30% more than we want to. The property we have our eye on is well within our budget, in our ideal location and I still believe (despite some comments above) that there is some potential to make something small on investing in a good location at this time.

I think the only way a bank would entertain a 3rd Party was through a 'gifting' suggestion and as I said this would be the injection of funds we need to get the deposit and legal fees covered. The rest - we would look after.

I think one thing is certain - we seek approval first!

Cheers all.

No problem at all. At least you have the mechanism now on the best way to approach it should you decide to proceed. The bank's income calculator is just the first part of the underwriting process so don't take that as a given that they'll give you the amount you need. The important part is that you can prove repayment capacity via savings, rent & loans not continuing after drawdown..