chances of getting a second mortgage.

Little Bubbles

I currently own a 3 bed house worth 110000. Mortgage left 122000. We want to get a second mortgage to buy a bigger house for 190000 and rent out our 3 bed. Can anyone work out a calculation to see if we can afford it.

Conbined salarys is 64000.
Mortgage payment are 480 pm
Child minder for 2 kids is 650 pm
Savings are 40000.
rent from house estimated 550 to 650 pm
No other loans
age of both of us 33.


Can we afford a second house

Little Bubbles

Any helpers

bmwguy

Little Bubbles wrote: »

Any helpers

Depends on the risk each individual bank wants to take on, you'll have to ask them. But a friend of mine desperately wanted to keep his 2 bed apartment and also buy a bigger house as he now has 2 sons and he got nowhere with the banks. Similar enough money you are talking about and their combined salarys would be higher I'd say. Was told he would have to sell, but he has a year or 2 left to get into positive equity

joop

In my experience the bank will consider you if you have permanent long term low risk jobs, an excellent credit history- as in zero missed payments in your whole banking record, no other large loans like a car loan, and no risky behaviour.

They will multiply your salaries by up to 4.5 times depending on your circumstances- i.e. based on the best above criteria and the size of your deposit.

They will then deduct your existing mortgage from this. This will mean you will have (64000 by 4.5 - best case scenario) minus 122000 existing mortgage =~ 150000 for a new mortgage.

The fact that you can rent your house will make little difference to the amount they will loan you as they will be of the opinion that this may not always be the case. I.e. there will be months where you will have to pay both mortgages.

As for your deposit this will primarily impact the rate they will lend to you at, and the degree to which the bank will feel confident in lending to you. The higher the deposit the less risk for them if the property falls in value. So if you have a 5 percent deposit you may get no additional momey for a mortgage but if you have 50percent deposit you may get 4.5 times your salaries.

In my view the banks also want people that have done their homework- approach them like you are looking for a business loan, have a proposal ready for them to view.

Little Bubbles

Thanks.
What is a good credit history.
Mine is dodgy

joop

Banks can request a credit history check on you. Credit checks look at loan repayments, any court action against you, credit cards etc. Banks will also likely request statements for your first mortgage to see that you have always paid it on time and that the payment includes interest and capital.

Trish56

Firstly you need to apply to the Irish Credit Bureau for a credit check for both of you as if you have a bad credit history you have very little chance of getting a mortgage. www.icb.ie . It costs €6.

You also need to confirm how much you save on a monthly basis and confirm individual earnings and if 64k includes overtime, bonus, commission etc.

Little Bubbles wrote: »

Thanks.
What is a good credit history.
Mine is dodgy

Little Bubbles

joop wrote: »

In my experience the bank will consider you if you have permanent long term low risk jobs, an excellent credit history- as in zero missed payments in your whole banking record, no other large loans like a car loan, and no risky behaviour.

They will multiply your salaries by up to 4.5 times depending on your circumstances- i.e. based on the best above criteria and the size of your deposit.

They will then deduct your existing mortgage from this. This will mean you will have (64000 by 4.5 - best case scenario) minus 122000 existing mortgage =~ 150000 for a new mortgage.

The fact that you can rent your house will make little difference to the amount they will loan you as they will be of the opinion that this may not always be the case. I.e. there will be months where you will have to pay both mortgages.

As for your deposit this will primarily impact the rate they will lend to you at, and the degree to which the bank will feel confident in lending to you. The higher the deposit the less risk for them if the property falls in value. So if you have a 5 percent deposit you may get no additional momey for a mortgage but if you have 50percent deposit you may get 4.5 times your salaries.

In my view the banks also want people that have done their homework- approach them like you are looking for a business loan, have a proposal ready for them to view.

Good points.
so in your opinion would we need more than 40000 deposit.
I had house valued for rent. Can expect 600 they say.
I got that credit history and it only has my mortgage and old credit cards account. I had a credit union account but that was not mentioned which I thought would be on it.
Would a mortgage broker be a better option than a bank.

Trish56

Unfortunately Joop this information is not 100% correct. All the lenders now have a calculator and the amount you can borrow depends on your earnings, borrowings, proof of repayment capacity and of course credit history. Also all of the lenders will take rental income into consideration. The most important element is that can you show repayment capacity for the stress tested repayments on the new mortgage over the last 6 months. Little Bubbles I can check how much you qualify for however you need to confirm how much you save every month for the past 6 months and answer the other questions regarding income.

joop wrote: »

In my experience the bank will consider you if you have permanent long term low risk jobs, an excellent credit history- as in zero missed payments in your whole banking record, no other large loans like a car loan, and no risky behaviour.

They will multiply your salaries by up to 4.5 times depending on your circumstances- i.e. based on the best above criteria and the size of your deposit.

They will then deduct your existing mortgage from this. This will mean you will have (64000 by 4.5 - best case scenario) minus 122000 existing mortgage =~ 150000 for a new mortgage.

The fact that you can rent your house will make little difference to the amount they will loan you as they will be of the opinion that this may not always be the case. I.e. there will be months where you will have to pay both mortgages.

As for your deposit this will primarily impact the rate they will lend to you at, and the degree to which the bank will feel confident in lending to you. The higher the deposit the less risk for them if the property falls in value. So if you have a 5 percent deposit you may get no additional momey for a mortgage but if you have 50percent deposit you may get 4.5 times your salaries.

In my view the banks also want people that have done their homework- approach them like you are looking for a business loan, have a proposal ready for them to view.

Little Bubbles

Trish56 wrote: »

Unfortunately Joop this information is not 100% correct. All the lenders now have a calculator and the amount you can borrow depends on your earnings, borrowings, proof of repayment capacity and of course credit history. Also all of the lenders will take rental income into consideration. The most important element is that can you show repayment capacity for the stress tested repayments on the new mortgage over the last 6 months. Little Bubbles I can check how much you qualify for however you need to confirm how much you save every month for the past 6 months and answer the other questions regarding income.

Hi trish. Yes if you could please pm me with whatever details you need.
Thanks

Trish56

PM sent

Little Bubbles wrote: »

Hi trish. Yes if you could please pm me with whatever details you need.
Thanks

joop

Hi trish, as I said this was my experience, so I'm not sure how this is incorrect? Anyway in my experience again I got a better deal going to the bank directly than going through a broker. They say rental income is taken into account but in practise this isn't really the case. At least in my experience before someone else says this isn't so...

Trish56

Joop, the banks no longer lend based on multiples of salary, they lend on affordability and proof of repayment capacity. This is based on net disposable income and a married couple are expected to have €2050 monthly income left over after stress tested mortgage repayments and they add €250 for each dependent so it's unfair to advise someone they can borrow 4.5 times their income. You can also have a car loan and still qualify for a mortgage. Yes they will take into consideration rental income and the calculation you done for the OP was out by over 70k. You are probably basing your experience when you took out a mortgage back before the financial crisis.

joop wrote: »

Hi trish, as I said this was my experience, so I'm not sure how this is incorrect? Anyway in my experience again I got a better deal going to the bank directly than going through a broker. They say rental income is taken into account but in practise this isn't really the case. At least in my experience before someone else says this isn't so...

joop

Hi trish, are you a broker by any chance. We went through two banks and a broker and the broker came back with the least amount. In fact we got double what the broker offered us by negotiating ourselves with the bank, which they confirmed was a multiple of our salaries minus our other mitigating factors. Not trying to argue with you just relaying my experience of being in a similar recent position as this person.

Trish56

Hi Joop,
Yes I am a broker for past 12 years and also worked as an Underwriter for one of the bigger lenders and a Manager for one of the main banks. I am not doubting you however I have two customers in Dublin who could not get a mortgage from any of the banks they approached and also visited a broker and I was able to get a mortgage for both of them no bother.

Perhaps the broker you went to did not represent all the lenders. The only lender I do not deal with is Ulster Bank so cannot speak for them. Also every case is different and as a broker I must say it is important how the case is packaged and presented to the lender.

No mortgage is approved at branch level, all cases including broker cases are dealt with by underwriters in Dublin so the same criteria and policy applies whether the case originated from a branch or a broker.
The amount you can borrow depends on your salary, the more you earn the more you can borrow and is also based on your net disposable income, age, how many dependents you have, any other loans etc.

I am glad that you got approved without difficulty and great to share your experience however I did send a pm as requested to the OP confirming how much he could borrow which was checked with all borrowers that I deal with. I'm sorry if I offended you as it was not my intention however I thought it was important to point out that all lenders are different regarding criteria and policy.

joop wrote: »

Hi trish, are you a broker by any chance. We went through two banks and a broker and the broker came back with the least amount. In fact we got double what the broker offered us by negotiating ourselves with the bank, which they confirmed was a multiple of our salaries minus our other mitigating factors. Not trying to argue with you just relaying my experience of being in a similar recent position as this person.