Joint Mortgage Advice (please)

One_Of_Shanks

Hi,

These are probably going to sound like fairly basic questions, but having trawled through all sorts of forums and sites I'm still slightly confused so I figured best to join and just ask straight out (thanks in advance to anyone who replies)

Basically, Myself and my fiancé are looking to take out a joint mortgage to buy a property for 190k (approx.) and I rang the bank about it today and a very polite and helpful chap asked me to call in and discuss it but he asked me some questions and I'm afraid I might have put my foot in.
He asked me about the deposit (50k) and I said 25k of it will be a gift (herself's Dad). However, I also told him we have 25k in savings and will probably have circa 50k left over from sale of current property (which is only in my name).
He then kind of implied why we wouldn't be putting all our savings towards it instead.

In fact, I don't mind how the deposit is made up. I'm cool with making it up 100% from sale of current property OR 25k savings and 25k from sale of property.
Should I not have mentioned the gift at all? Is that frowned upon when making up the deposit?

When I meet him in person should I tell him to forget I even mentioned the gift at all and we'll structure the deposit with the savings & house sale? Or does it even matter?

Also, two other worries... During the world cup I stuck on a fair few bets on a gambling site on my credit card. I hardly ever gamble but every 4 years when the world cup is on I do.
Will that now go against me considering it was recent?
And other issue, my OH had a very small O-Draft on her current account a few months back.
Will that raise a flag too?

Basically, everything else is in order. Joint savings account has 200 euro per week going into it for past 8 months and I've always met my current mortgage repayments on time.
(current mortgage outstanding is 50k less than I expect to sell current place for)

Am I worrying too much, or should we sit tight and wait 6 months before applying so that the world cup bets and OH's over-draft wont matter so much?

Just to clarify, this is NOT an additional property we're buying, we just want to check we can get the new mortgage before we fire ahead and sell current place.

Thanks

on_my_oe

I'm sure there are bigger and better experts here, but I'll share what I believe / understand.

1) the gambling is a big red flag - hindsight and everything but a flurry of bets is going to look like you have a problem. This isn't a judgement as I have a PP account which I use three or four times a year on horses, but I top it up in cash in branch.

2) the overdraft is a problem if a) it was unauthorised or b) she goes into overdraft every month

3) the gift isn't generally a problem if you have a letter confirming it's a gift but if you have significant amounts of savings which you are not putting into the property, they may question why not eg it would impact the LTV thereby reducing the banks risk and impacting the interest rate. Again not judging you as I hold cash outside the EU as a 'the world is imploding we need a fast getaway' fund - could you potentially place some of the money outside Ireland if you want to retain some cash?

You need six months of squeaky clean bank statements

One_Of_Shanks

Thanks for the reply mate!

On the Over-draft, no it wasn't a regular thing, only a small amount at the time too.

On the deposit/gift. Silly of me to even mention it on the phone, but hopefully it won't be held against me if I inform them we'll use savings instead.

On the world cup bets... That's bad news so.
I was afraid of that after doing some research this evening.
If they went through my past 24 months they'd find no history of gambling at all, but during the world cup it never occurred to me that I could be landing myself in it.

Bit of thinking to do so... Maybe better to not apply now at all then?

Frustrating to think that regular saving and 3.5 years of paying a larger mortgage than I'm currently looking to apply for will be blown out of the water by some bets in a 3 week period.
Oh well.

Eldarion

I wouldn't say you put your foot in it saying you weren't committing savings, he was wondering because you'll get a better deal on the interest rate the lower the Loan-to-Value(LTV) ratio is. The gift is fine as long as the father provides written proof of no claim on the asset.

Yes gambling charges will be viewed as a negative. Yes recent overdraft charges will be viewed as a negative, even more so considering you two have 25k in a savings account. How did you allow that one to happen?

Being in a chain is also viewed kinda negatively.

I have a bit of a bugbear with this so sorry if this comes off ranty. I can understand keeping an emergency fund liquid, but 25k is well beyond emergency funds. So now you have 25k sitting in an savings account earning a paltry ~1%(not counting DIRT) while you have an outstanding mortgage amount slamming you for a nice 4.5%+.

In a chain your "deposit" becomes kind of meaningless. Saving a deposit would make sense if you were purchasing an additional property and really leveraging yourself on the property market, as is the Irish way, but in this case the proceeds of the previous house sale should more than bring your new mortgage out of required LTV % so really it can only be viewed as bad allocation of capital.

You have some minor red flags showing but without knowing more key details like income, expenditure, dependents, new proposed LTV, credit history etc it's hard to make a call on whether or not your application would be successful.

One_Of_Shanks

Eldarion wrote: »

You have some minor red flags showing but without knowing more key details like income, expenditure, dependents, new proposed LTV, credit history etc it's hard to make a call on whether or not your application would be successful.

Thanks for the reply mate.

Yes bad allocation of capital is a fair point. And agreed again that it was silly to allow her current account to briefly become over-drawn while we were still both putting money into the savings account regularly.
But sadly, it's done now.

In terms of your questions there....

Income: 55k per year and 25k per year respectively.
Expenditure: I'm not sure how to detail this but fairly low outgoings, modest social expenses (roughly 60 quid each per week), car expenses paid by company apart from diesel at weekends, 60 quid per week groceries, then just standard bills for lecky, etc) we live very frugally in general.
Credit History: Mortgage repayments of 1k paid by direct debit for past 3.5 years, Only other loan I ever had was 1k for a computer as a student, paid back by direct debit.
Everything always on time.
New proposed LTV: Loan 140k for Property value of 190k
Dependents: None

PS - what does "being in a chain mean"?

Any advice appreciated

Mrs OBumble

One_Of_Shanks wrote: »

New proposed LTV: Loan 140k for Property value of 190k

To me, this LTV is a green flag. Plus, you expect to have 50k left from the sale, and you also have a deposit of 50k, so could improve it even more (once capital gains tax is paid - have you allowed for that?) Plus you're paying a mortgage and saving heaps.

So I wouldn't get too stressed about the negative factors.

Eldarion

Chain just means when you go to buy the next property it's contingent on the sale of your previous property. Just makes things a little complicated compared to a straight first time buyers.

It's looks pretty solid given the figures. Last big question outstanding is your ages and the term of the mortgage.

You've said young so I can't imagine your new mortgage repayments will even be what your current repayments are and you've proven you can afford those repayments for the last 3.5 years so I really couldn't see this getting rejected. I've been surprised before though!

If you're at all still concerned about it, just remember the lower the loan required the more attractive you look to the bank. If you can go down to 120k against value of 190k it will be easier for them to say yes.

One_Of_Shanks

Cheers Mrs O B, and thanks again Eldarion.

@ Eldarion, we're 30 and 34 respectively. The existing mortgage is over 35 years (monthly repayments of 1,030) on a fixed rate which expires next month, switching back to variable.

The new loan (hopefully anyway!) would be over 30 years, or perhaps 25 depending on what the bank say.

Current loan was 215k with 200k left outstanding. New one would be 140k so definitely lower repayments.

On the face of it i know it probably looks promising, but we didn't do ourselves any favours with that silly few bets by me and the brief ODraft by her.

Should I go ahead and apply, or if you were in my shoes would you sit tight for 6 months til the 2 red flags blow over?

And thanks again by the way, its hugely appreciated

on_my_oe

Worse case scenario, they say no, but if that happens, you can tidy up your statements for six months and apply again. Alternatively, apply by yourself and if you get declined, reach out to a broker.

It's certainly far from a lost cause and if you don't ask, you don't get.

Eldarion

on_my_oe wrote: »

Worse case scenario, they say no, but if that happens, you can tidy up your statements for six months and apply again. Alternatively, apply by yourself and if you get declined, reach out to a broker.

It's certainly far from a lost cause and if you don't ask, you don't get.

Except his credit rating takes a bit of a hit for each declined loan application.

Honestly though, from what I'm hearing anecdotally, whoever you deal with at the bank won't even put through your application unless they're confident it will get approved. They're all about their high approval stats these days.

"We approve 90%+ of all mortgages. Aren't we great? See we are lending!"

No mention of the amount of people they strongly advised not to submit the applications in the first place.

One_Of_Shanks

aye, that's my worry. Getting refused and it ending up on our record. (I've heard stories of them not making it formal alright, but still...)

All a bit frustrating. She's fully on for applying. I'm a glass half empty fella.

on_my_oe

I'm not suggesting you do a full merry go round - test the waters with one, and if it's a no, go away, tidy yourself up for six months then make a call whether to apply again by yourself or engage with a broker.

We got a no from PTSB (ironically because we were too frugal) and engaged with a broker to make sure we were squeaky clean and to save avoid multiple searches on our record if we didn't have a hope of being approved by that bank. we've been approved since Christmas but had to wade through a negative equity nightmare which recently fell over. We've just signed contracts on a second property, got our second approval for a higher amount and are waiting in a closing date (we put a deposit down on the second place towards the end of the first nightmare). We are hoping the end is in sight.

One_Of_Shanks

Yep, sounds sensible On_My_Oe - Cheers pal.

Oh and congrats by the way
Sounds like you're nearly there! Good to hear! Good luck to you both!

alan partridge aha

If you went through a broker for your original mortgage it might be worth your while to ask their advice first. It is true that if you apply for a mortgage and are turned down it will go against you.

GavMan

You could always closed your credit card account...

Bigcheeze

I think people are overplaying the importance of the gambling. A couple of 20 euro bets over a 4 week period is not a problem. What they're afraid of is significant, regular gambling which would be an indication of a problem.

I mean does having a pub or off-license charge on the credit card mean the borrower has a drink problem and won't be able to keep his job??

Your income to loan and LTV numbers are very conservative. I can't see how you'll have a problem getting a mortgage on the basis of the info provided.

One_Of_Shanks

Thanks Cheeze! Fingers crossed you're right mate!

Just one final question... Somebody mentioned capital gains tax earlier. Am i right in thinking that i won't have to pay this as I'm selling my only property and i have lived there throughout the mortgage term so far?

Bigcheeze

One_Of_Shanks wrote: »

Thanks Cheeze! Fingers crossed you're right mate!

Just one final question... Somebody mentioned capital gains tax earlier. Am i right in thinking that i won't have to pay this as I'm selling my only property and i have lived there throughout the mortgage term so far?

Correct, there's no CGT.

jlm29

Bigcheeze wrote: »

Correct, there's no CGT.

Will you be liable for CGT on the gift from your partners dad?

Eldarion

jlm29 wrote: »

Will you be liable for CGT on the gift from your partners dad?

That would be subject to Gift Tax aka Capital Acquisitions Tax(CAT). Under that law the threshold for tax is something very high like 200k+ if the relationship is between a parent and child.

jlm29

Eldarion wrote: »

That would be subject to Gift Tax aka Capital Acquisitions Tax(CAT). Under that law the threshold for tax is something very high like 200k+ if the relationship is between a parent and child.

Yes, but I thought there was some issue if a second person- who is not a child (I.e. The op) was also benefitting from such a gift? Though I probably have that totally wrong!

jlm29

jlm29 wrote: »

Yes, but I thought there was some issue if a second person- who is not a child (I.e. The op) was also benefitting from such a gift? Though I probably have that totally wrong!

Actually, now I think of if, the case I knew, was a parent gifting a house to a child. That's why that was different. Obviously in this case the dad can just gift it to his child, and she can just use it for deposit. The money doesn't actually need to ever be in the ops name! Silly me!

whatawaster

jlm29 wrote: »

Yes, but I thought there was some issue if a second person- who is not a child (I.e. The op) was also benefitting from such a gift? Though I probably have that totally wrong!

If the parent gifts to the child and it is below the CAT threshold, there is no tax payable.

If the child then uses that money as a deposit towards a house with their partner, I don't see how the partner is liable to any tax.

Is it any different to a case where a couple are contributing a 100K deposit and one person contributes 80K in savings and the other contributes 20K.

jlm29

whatawaster wrote: »

If the parent gifts to the child and it is below the CAT threshold, there is no tax payable.

If the child then uses that money as a deposit towards a house with their partner, I don't see how the partner is liable to any tax.

Is it any different to a case where a couple are contributing a 100K deposit and one person contributes 80K in savings and the other contributes 20K.

Yes. I corrected myself after I made that original post