Mortgage Top Up to Cover Existing Loans

crazyman

Currently have a two loans (one with bank and one with Credit Union) in addition to credit card debt....about €20k in total.
Is it possible to apply for mortgage top up to cover all debt? or would this reasoning be shot down straight away?

coylemj

This was all the rage during the boom years, the banks even wrote to their customers encouraging them to borrow by extending the mortgage, they called it 'equity release' but in a lot of cases it's not advisable. In many cases it was reckless lending of the highest order. The logic which said that because your house had notionally increased in value, that you should go out and spend that amount of money was ludicrous and has us where we are.

The answer to your question is: 'it depends'. If your mortgage has more than 5 years to run then I would question topping it up with loans that you really should pay off sooner, otherwise you will end up paying off a credit card debt many times over because of the amount of interest that will be charged over the years.

crazyman

coylemj wrote: »

This was all the rage during the boom years, the banks even wrote to their customers encouraging them to borrow by extending the mortgage, they called it 'equity release' but in a lot of cases it's not advisable. In many cases it was reckless lending of the highest order. The logic which said that because your house had notionally increased in value, that you should go out and spend that amount of money was ludicrous and has us where we are.

The answer to your question is: 'it depends'. If your mortgage has more than 5 years to run then I would question topping it up with loans that you really should pay off sooner, otherwise you will end up paying off a credit card debt many times over because of the amount of interest that will be charged over the years.

Thanks for the response.
Where I coming from is that if i was to top up the mortgage to cover the loans, it would leave me with an extra €800 per month disposable which I would use to save for a deposit on a bigger house. With a young family, and another on the way, our 3 bed semi is now inadequate. We already have savings, but with new 20% rule, we now need to save double it, and an extra €800 per month would go along way towards it.

Suppose I'm looking for the quickest option to getting the amount needed, and was wondering was this a possible option. I would wind about pushing out the mortgage debt longer as we hope to trade up in a couple of years anyway (if this all works out)

phormium

This sort of refinancing died with the tiger, might be possible for very compelling reasons but I don't think yours fit the bill. For starters most banks do not want to take on another bank's debt so if all the o/s loans/credit cards were with the same bank and you had tons of equity in the house then there might be a teeny weeny chance. If your loan to value is anyway high there is not a hope, even in the boom you couldn't refinance like this past 80% loan to value.

Then there is the other point already made that you will be paying for these short term loans for a lot longer and paying a lot more in interest.

crazyman

phormium wrote: »

This sort of refinancing died with the tiger, might be possible for very compelling reasons but I don't think yours fit the bill. For starters most banks do not want to take on another bank's debt so if all the o/s loans/credit cards were with the same bank and you had tons of equity in the house then there might be a teeny weeny chance. If your loan to value is anyway high there is not a hope, even in the boom you couldn't refinance like this past 80% loan to value.

Then there is the other point already made that you will be paying for these short term loans for a lot longer and paying a lot more in interest.

Yeah thought it might have been a long shot but just wanted to suss it out here first. Damn 20% rule!!
Thanks for the feedback.

Trish56

If these loans were taken out for home improvements it may be possible to include them however you will need to provide evidence such as receipts.



Regarding trading up all lenders are allowed exceptions to the new Central Bank rules so if trading up it may be possible to borrow up to 90% depending how strong your application is.

Why aren't you paying down some or all of the debts with the savings? What interest are you earning on the savings vs what are you paying on the credit card?

crazyman

Deleted User wrote: »

Why aren't you paying down some or all of the debts with the savings? What interest are you earning on the savings vs what are you paying on the credit card?

We don't have enough savings to cover all the debts as it is. It would probably take another 18 months to do that. If we did do that we'd then have no savings for a deposit. The whole point of a mortgage top up to cover the debts would be that we would keep our savings so far, and then with loans paid off we could add another €700, approximately, per month. This would have been the quickest and easiest way to achieve our goal to trade up. But from comments above the bank(s) wouldn't see it this way.