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Mortgage LTV query

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  • 17-02-2016 11:24pm
    #1
    kaisersose77
    Registered Users Posts: 2,710 ✭✭✭


    I was mortgage approved for the amount i requested e.g. i applied for 90k and i was planning to put up 100k from my own savings. I had said i was looking for a property around 190k when applying. If i were to decide to go for a more expensive property, for example 220k, and put the extra 30k up from my own savings would that affect my mortgage application in that the ltv would change? And if so in what way? would I have to resubmit my application or is that something they can address before i drawn down a mortgage?


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    #2
    MarkAnthony
    Closed Accounts Posts: 6,934 ✭✭✭MarkAnthony


    You're LTV would be reduced and you can expect a lower interest rate, assuming you move a band and you're not already at the lowest band. E.g. you move for 60% LTV to 50% LTV.

    I doubt you'd need to resubmit but you'd need to speak to your lender.


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    #3
    slowjoe17
    Registered Users Posts: 110 ✭✭slowjoe17


    kaisersose77 wrote: »
    I was mortgage approved for the amount i requested e.g. i applied for 90k and i was planning to put up 100k from my own savings. I had said i was looking for a property around 190k when applying. If i were to decide to go for a more expensive property, for example 220k, and put the extra 30k up from my own savings would that affect my mortgage application in that the ltv would change? And if so in what way? would I have to resubmit my application or is that something they can address before i drawn down a mortgage?

    The most important limitation on the bank are the central bank rules.

    There are two parameters going into the mortgage calculation:
    income = 40k (to make the math easy)
    deposit = 100k

    There are two rules you need to pass for the bank to be compliant with central bank rules (they have the right to make an exception, but I ignore this)

    The deposit aka Loan to Value aka LTV rule says:
    1. For first time buyers, you need 10% of the value up to 220k, and 20% of the value over 220k.
    Examples:
    100k house -> 10k min deposit
    220k house -> 22k min deposit
    320k house -> 42k min deposit (22k for 10% of 220k + 20k for 20% of 100k)

    2. For non-first time buyers, 20% of cost of house.

    The income rule. You can only borrow 3.5 times income.

    In your example (assuming 100k deposit, 40k income).

    Max borrowing as first time buyer based on deposit:
    22k x 10 + 78k x 5 = 220k + 390k = 610k - 100k = 510k max loan

    Max borrowing as non-first time buyer based on deposit:
    100k x 5 = 500k -100k = 400k max loan

    Max borrowing based on income:
    40k x 3.5 = 140k max loan.

    Hope this helps.


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