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100% mortgage

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  • 26-05-2016 6:20pm
    #1
    Ipro
    Registered Users Posts: 131 ✭✭


    Hi Guys/ladies,

    Looking for a small bit of advice RE trying to obtain a "100%" mortgage.

    I took the non conventional route of jumping onto the property ladder and purchased a BTL as my first property. I purchased this property cash and took no mortgage out on the property.
    I understand this is a non conventional route but the property offered excellent returns and it was too good of an oppertunity to turn down.

    Since purchase the property (late 2014)has been rented out at 100% occupancy at an 18% yield.

    Everything great ! So Far right ?

    This week I've decided to explore the idea of taking out a mortgage for a PPR. I'm aware of the new central bank rules and normally I would be required to come up with a 20% deposit. Part of the plan was that I would be able to release equity from my mortgage free BTL to finance the 20% deposit for my PPR however after approaching two mortgage brokers this week I've been told that the banks won't entertain this.

    Under new rules bank are still allowed a limited amount of exemptions and can provide 100% mortgages provided a good case has been put forward.

    I feel I have a very good case based on me being able to put up significant collateral , having a pernament job in a sustainable sector and an excellent credit rating.

    Options that have been presented to me are

    1. Sell the BTL and use this towards deposit for a mortgage.

    I want to avoid doing this firstly because I'm making a great ROI and secondly because I'd loose my CGT exemption

    2. Save 20% deposit for a Dublin property

    I want to avoid this as its difficult to save while renting and god knows how long it could take.

    3. Gift from parents - I don't have the option to move home while saving nor would either of my parents gift me/loan me a 20% deposit (nor would I expect them to)

    I'd be very greatful of anyone knows of any lenders who might be willing to look at my application given my circumstances. I essentially used my PPR deposit to buy a cheaper high yielding BTL property outright with the assumption that I could use that property as collateral at a later stage.

    From the brokers I spoke to this week that practice seems to be a thing of the past. Is it the brokers being lazy or do I have any options open to me ?

    All constructive feedback greatly appreciated.


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    #2
    quadrifoglio verde
    Registered Users Posts: 3,670 ✭✭✭quadrifoglio verde


    There'd be something seriously wrong with the system if an asset with no loans secured against it couldn't be used as collateral

    Killers1 on here is a mortgage broker and has an excellent reputation. Might be worth talking to him.

    You'll only be able to borrow 3.5 times you're income though so bare that in mind. It might give you the house you want, but selling the btl might.

    Fair play for having the balls to do so. I wanted to get a 1 bed on the quays back in 2011 but the bank wouldn't give me the 80 K mortgage as I was still a student working part time (I was earning 30K though). I'd have made a killing


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    #3
    Ipro
    Registered Users Posts: 131 ✭✭Ipro


    quadrifoglio verde wrote: »
    There'd be something seriously wrong with the system if an asset with no loans secured against it couldn't be used as collateral

    Killers1 on here is a mortgage broker and has an excellent reputation. Might be worth talking to him.

    You'll only be able to borrow 3.5 times you're income though so bare that in mind. It might give you the house you want, but selling the btl might.

    Fair play for having the balls to do so. I wanted to get a 1 bed on the quays back in 2011 but the bank wouldn't give me the 80 K mortgage as I was still a student working part time (I was earning 30K though). Bastards I'd have made a killing


    Thanks !

    Yeah generally banks have a higher LTV requirement for 1 beds and some don't like lending on them at all. Actually part of the reason I'm looking to buy a two bed.

    I've done the calculations and am happy with 3.5 LTI. Current salary is 36k another 7k in rental income not sure if this is accounted for as a few people have said rental income is not taken into consideration.

    Looking in the price bracket of 100-150K in Dublin and am happy to look at some of the cheaper areas like D24 and clondalkin. Think a loan of that amount should be achievable based on my income etc

    Hopefully killers1 will be along shortly to offer some advice ðŸ˜႒


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    #4
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    You need to PM him, he doesn't post on the forum.


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    #5
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Best of luck Ipro, if you find a way around this I'd be really interested to hear it.


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    #6
    [Deleted User]
    Posts: 5,121 ✭✭✭ [Deleted User]


    quadrifoglio verde wrote: »
    There'd be something seriously wrong with the system if an asset with no loans secured against it couldn't be used as collateral
    We don't know anything about this collateral.
    It might not be mortgageable. It might not be easy to sell and if the properties had to be foreclosed on it is twice as much work to recover the money.


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    #7
    Benevolent Misanthrope
    Banned (with Prison Access) Posts: 284 ✭✭Benevolent Misanthrope


    Because it is almost impossible to repossess a property in this country, offering another property as security for a loan might not carry much weight, unfortunately.

    (Of course it's also a reason why our mortgage interest rates are so high compared to our European peers, but that's another story)


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    #8
    murphaph
    Registered Users Posts: 19,022 ✭✭✭✭murphaph


    Shows how messed up things are in Ireland. Over here the banks would be falling over themselves to lend to the OP. I know because I was offered a better rate (albeit slightly) on our mortgage for our new build if I put up my mortgage free apartment as extra collateral.

    The previous poster alluded to the heart of the matter. It's too difficult to repossess in Ireland.


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    #9
    PhoenixParker
    Registered Users Posts: 2,677 ✭✭✭PhoenixParker


    If you didn't take out a mortgage on the BTL, then for mortgage purposes you are a first time buyer, i.e. you need a deposit of 10% up to E220K, 20% after that. If your broker didn't advise you of that, then I'd find a new broker.


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    #10
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    PhoenixParker wrote: »
    If you didn't take out a mortgage on the BTL, then for mortgage purposes you are a first time buyer

    I'm not sure that is correct. OP has already bought a property.


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    #11
    PhoenixParker
    Registered Users Posts: 2,677 ✭✭✭PhoenixParker


    Graham wrote: »
    I'm not sure that is correct. OP has already bought a property.

    Determination of first time buyer status for mortgage lending rules is based on whether or not you've drawn down a mortgage before, not whether or not you've owned/purchased a property before.

    The governments & tax rules are based on owning a property before, but the central banks rules are based on drawing down a mortgage before. Since the government & revenue doesn't offer any breaks for first time buyers at the moment, the only rules that matter are the central banks rules.

    If this is OP's first time drawing down a mortgage then he is categorised as a first time buyer.

    I'm in a similar situation myself, and have investigated thoroughly. It's not a particularly common situation, so many brokers aren't aware of it.


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    #12
    Ipro
    Registered Users Posts: 131 ✭✭Ipro


    PhoenixParker wrote: »
    Determination of first time buyer status for mortgage lending rules is based on whether or not you've drawn down a mortgage before, not whether or not you've owned/purchased a property before.

    The governments & tax rules are based on owning a property before, but the central banks rules are based on drawing down a mortgage before. Since the government & revenue doesn't offer any breaks for first time buyers at the moment, the only rules that matter are the central banks rules.

    If this is OP's first time drawing down a mortgage then he is categorized as a first time buyer.

    I'm in a similar situation myself, and have investigated thoroughly. It's not a particularly common situation, so many brokers aren't aware of it.


    Absolutely - I agree with this 100% and this was my understanding however every bank and both brookers I have contacted have advised that banks would not conciser me a first time buyer.


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    #13
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    PhoenixParker wrote: »
    Determination of first time buyer status for mortgage lending rules is based on whether or not you've drawn down a mortgage before, not whether or not you've owned/purchased a property before.

    Fantastic news, that's really useful to know. Thanks PP.

    For anyone interested, here's the relevant bit from the Central Bank:
    What is the definition of a first-time buyer (FTB)?
    A first time buyer is defined as a borrower to whom no housing loan has ever before been advanced. Where the borrower under a housing loan is more than one person and one or more of those persons has previously been advanced a housing loan, none of those persons is a first-time buyer.
    This definition of FTB is aligned to the Revenue definition. The flexibility given by the proportionate limits is in place to allow lenders to make decisions based on an individual borrower’s circumstances up to a specific limit.
    https://www.centralbank.ie/press-area/press-releases/Documents/FAQ%20-%20New%20regulations%20on%20residential%20mortgage%20lending.pdf


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    #14
    Ipro
    Registered Users Posts: 131 ✭✭Ipro


    Graham wrote: »
    Fantastic news, that's really useful to know. Thanks PP.

    For anyone interested, here's the relevant bit from the Central Bank:


    https://www.centralbank.ie/press-area/press-releases/Documents/FAQ%20-%20New%20regulations%20on%20residential%20mortgage%20lending.pdf

    Im aware of the above and have argued the legislation with the banks who seem to have no understanding of this. :-(


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    #15
    ted1
    Registered Users Posts: 23,535 ✭✭✭✭ted1


    PhoenixParker wrote: »
    If you didn't take out a mortgage on the BTL, then for mortgage purposes you are a first time buyer, i.e. you need a deposit of 10% up to E220K, 20% after that. If your broker didn't advise you of that, then I'd find a new broker.

    The colteral could count. Banks are allowed make exceptions


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    #16
    Humour Me
    Registered Users Posts: 360 ✭✭Humour Me


    My understanding is that the Central Bank will only allow one exemption to be used, so if you are looking for the loan value exemption (based in your 36k salary) you will have to have evidence of a deposit.

    Considering there are so many applicants for the limited number of exemptions that the banks have, having collateral instead of cash in the bank won't put your application ahead of others. I would start saving to make your application more attractive (ie less risky) to the banks.


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    #17
    Yourmama
    Registered Users Posts: 205 ✭✭Yourmama


    PhoenixParker wrote:
    If you didn't take out a mortgage on the BTL, then for mortgage purposes you are a first time buyer, i.e. you need a deposit of 10% up to E220K, 20% after that. If your broker didn't advise you of that, then I'd find a new broker.


    I have unfinished build in another country, financed from my savings. I wasn't FTB for bank here as I already have a property even though it's inhabitable and not mortgaged. I'd love to know your broker.


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