How to downgrade a mortgage?

Irishcrx

Hi guys,

I have recently been thinking about moving home a bit away from Dublin. It's not so much the fact that I want to 'Downgrade' more that my fanily is growing and I like the peace away from Dublin, locations I have looked at are fine to commute to work etc...

But I'm not sure how the process works with the bank in terms of moving house, say my house is worth €260,000 and the house I want to buy is €185,000 do I sell my house first and then use the money to buy another house? or do I clear my current mortgage amount when sold and then have to apply for a new mortgage? How do I know that when I have sold my house I'll get another mortgage etc?

Sorry , I'm just a bit clueless with Mortgages!' Cue I don't know what a tracker mortgage is'.

It depends - there are a lot of variables.

Classical you would sell your house, repay the mortgage and then take out a new mortgage on the new house.

Do you have positive or negative equity in the current house?
Do you have a deposit saved for the new house?
Would you qualify for a mortgage on the new house now?

Irishcrx

Well , house is valaued and around 260,000 similar in my area are going for 280,000, mine might even be closer to that figure.

House's I've browsed at where I'd want to live are around 185,000 - 200,000.

So say I got 270,000 and bought for 185,000 that leaves me with 85,000 after I've paid the bank which I could use for a deposit.

The problem is I got moy mortgage in 2007 , I'm not sure if I'd qualify now even though I've never missed a payment and will be taking a lower amount?

sKeith

For your calculations, it does not matter how much you bought house for, but how much you owe the bank.
If you had a 10% deposit in 2007, then you owed them 166.5k in 2007 and you have been eating into that with every mortgage payment since.

Irishcrx

OK, I owned half of the house when I bought it, it was valued at 320,000 back in 2008. I borrowed 180,000 to do some repairs on top of the purchase cost and currently owe them 165,000...House is now valued at 260,000.

Do you still only own half the house?
Who owns the other half and do they owe money too?

pwurple

Completely confused...

You bought half a house (with an ex-wife or something?) .. So paid half of 320,000 in 2008. 160,000. Then spent another 180k on it, which you borrowed. So the house ended up costing 500k.

And on that you ou owe 160k plus... 165k. 325k owed?
With an asset worth 260, of which you only own half?

So you owe 325k, and have an asset worth 130k. Is that it?

I was guessing 180k borrowed (160k to buy half + 20k on repairs)

OP if you still only own half the house ( value 260/2 = 130 your share) and still owe 165 you are in negative equity.

Archaeoliz

My calculations are €260k minus the €165k owed leaves €95k as your equity (without accounting for EA fees and conveyancing or any other costs)

Prospective property is €185k, so €185k minus €95k deposit means you need a mortgage of €90k and will have a Loan-to-Value (LTV) of approx 51% (ish). As you are not a first time buyer you would need a minimum of a 20% deposit, but you have more than this at 51%.

In order to qualify for the mortgage you need to have a Loan-to-Income (LTI) in which the mortgage must be equal or less than 3.5 times your salary. So for €90k you will need a minimum salary of €90k/3.5 = €25.7k p.a.

There are all sorts of fees you will need to factor in. The ones that come to mind are solicitors, stamp duty, estate agents and surveyors.

(I'm not a banker/mortgage advisor, I'm an archaeologist so the best people to talk to are your bank....)

Irishcrx

Wow, sorry I didn't mean to confuse everyone, let me clarify.

I own the full house right now , half of it was left to me by my Grandfather when he died as I lived with him in the house up until his death when I was 12, when I was 21 I bought my Aunt out of her share of the house by taking out half a mortgage valued at 180k , 160k purchase cost and 20k for repairs.

So I own and live in the house at the moment , I owe the bank 167k on the mortgage and the house is valued at around 260k. I want to sell the house and move out of Dublin, not financial it's a personal choice I like being away from the city when I'm not working and want a larger home for my family.

Houses I have been looking at are costing between 180 - 190k purchase cost.

sKeith

Archaeoliz's post is acurate info for you then.

pwurple

That's better... alright then, yes, you have about 90 - 95k equity and will be looking for a new mortgage.

You should approach bank and get approval for 90-100k mortgage (which is 65-75k smaller than currently) assuming sale of current property. A good record of repaying your current mortgage, salary statements etc and you should be ok.

Then for buying, you can either get in a chain... go sale agreed on your own, and sale agreed on the other one, and all three solicitors involved line up to close on the same dates.

Or, you can do the sell one, rent for a while with the dosh in the bank while you buy the next one.

Pros and cons to both approaches, depends on your own situation.