Mortgage for Second Home

Macers

Hi guys,

Married, 2 kids both on mortgage for current property. Currently in an apartment and looking to go up in house.

Have a mortgage and current account with a well known financial institution.

Had a chat with an advisor at a mortgage open day just to see what we could afford when we decide to move.

If we keep our apartment (which we want to do) the mortgage will go up about €500 as it is a buy to let.

If I went to another institution and never advised the apartment mortgage holder of our purchase - what would be the remifications.

I presume they could call the loan if they found out but what would be the chance of that?

Just a general query of something that was mentioned to me in passing...

athtrasna

Fraud is never a good idea. You would be signing legal documents and not telling the truth.

Also renting out an apartment can sound like an attractive option. With tax and restrictions on rent increases and the risk of problem tenants, this is something you need to do a LOT of research on

handlemaster

While I agree with the last point fraud is not an option. But is it fraud ? How many times have heard that banks dont pass on the best deals to their customers as in a dont ask dont tell policy. The customer is in debted to the bank under terms we can assume change of situation etc must be notified. But in law how strong is this onus. .. is the bank also informing the customer of actions it takes equally. . Like selling that debt on, using that debt.. customer info etc to make further gains for themselves.

athtrasna

If you sign a mortgage agreement that says you have disclosed all loans, assets and liabilities but haven't. That is fraud

What does your current mortgage contract say about not living in the house or taking on a second mortgage?

handlemaster

athtrasna wrote: »

If you sign a mortgage agreement that says you have disclosed all loans, assets and liabilities but haven't. That is fraud

I was refering to the original mortgage provider. Anyhow banks do a credit check the loan would show.

JP 1800

I don't understand the need or want to keep the apartment if upgrading to a house. The bank would rightly need to know as you will now have 2 debt liabilities instead of one. What happens if the rental market collapses? which is becoming more likely with the measure being taken. You would have 2 properties which become a liability. This is why we have so many "accidental" landlords cribbing about the unfairness of the market.

catrionanic

I am in a similar position and would love to know the answer!

We are in a small house which we will soon outgrow. Neither of us have a pension and we were hoping to hold onto our house, rent it out until we retire (not in the interest of making profit, just enough rent to cover the mortgage so we don't have to worry about it), and then sell the house on and use that as our pension pot in approx 25 years time.

4ensic15

Once the repayments are coming in on the original property, the mortgage provider won't find out or be bothered. Mortgage providers do not go around looking in windows to see if the occupier has changed. The new provider won't want to tell the first one as the lower your original repayments the better you can afford the new mortgage.

Samuel T. Cogley

Macers wrote: »

If we keep our apartment (which we want to do) the mortgage will go up about €500 as it is a buy to let.

It won't work quite like that as you'll be able to claim relief on 80% of the mortgage interest. You'll need to do the maths, ideally with the advice of an accountant on how it will all pan out with tax.

As for becoming a Landlord, the market isn't going to collapse anytime soon. However heed the warnings re bad tenants. You could easily be looking at a year or longer to get someone out who won't pay rent, not to mention legal fees and potential damage. Again from a purely business point of view those losses can be offset but as has been said, do your research.

Toastytoes

Christ it's 2005 again....

Samuel T. Cogley

Toastytoes wrote: »

Christ it's 2005 again....

Worth noting that the rental market never collapsed, it had a soft landing (see what I did there!) and although prices to buy never recovered rents are now around the same price as the height of rental prices in 2008. Those who did buy in 2005, as a PPR, probably availed of a tracker so now ( a little dishonestly perhaps) have a chance to 'invest' with the lowest rate loan any generation is ever going to get!

All this is being paid for by the current variable rate tax mortgage holders and arguably the taxpayer. So you might want to hold off on calling out exactly who the fools are for just a little while longer! :pac:

Toastytoes

Libertarian Kant wrote: »

Worth noting that the rental market never collapsed, it had a soft landing (see what I did there!) and although prices to buy never recovered rents are now around the same price as the height of rental prices in 2008. Those who did buy in 2005, as a PPR, probably availed of a tracker so now ( a little dishonestly perhaps) have a chance to 'invest' with the lowest rate loan any generation is ever going to get!

All this is being paid for by the current variable rate tax mortgage holders and arguably the taxpayer. So you might want to hold off on calling out exactly who the fools are for just a little while longer! :pac:

A second property and misleading (lying to) the bank, sounds a lot like 2005 to me.

My post was very short and clearly did not include the word fool. That was your word.

Millem

Ok I don't see how you would get away with it. If you go to another bank for new mortgage the new bank will know about your other mortgage from your icb report. So then they will know you can't live in 2 places at one time so you would be an investor for new property and be on a higher interest rate.

Loadedscream

Absolute nonsense being talked about here. If you go to a new provider for the house you will fully disclose the other mortgage/apartment and they will decide on what they can offer you.

On the original mortgage It's likely that you signed commitments that it was to be your principal family home. If you move and rent it out they could in theory raise the rates to buy to let rates if they were to find out. In practice this rarely happens provided the mortgage continues to be paid on time and you don't alert them to it (letters being returned to the bank etc). An Post forwarding services etc. Can deal with that.

There is no fraud! Everything you sign with the new provider is 100% accurate, your circumstances are simply changing in respect of the original mortgage, this happens all the time.

Worst case, the original bank find out that you moved and increase the rates. Then the increased interest payments will be 75%+ deductible from the rental income anyway.

Lumen

I don't see fraud but I do see breach of contract on the original mortgage. The recourse depends presumably on exactly what was written into the terms.

I was sort of in this position myself recently, buying a new house before selling the old one which was on a tracker of a little over 1%. My intent (as disclosed to the new bank) was to sell the old one after moving, which I did, but it wasn't written into any terms so I could have changed my mind and rented the old house out.

My aggregate LTV across both properties was 60% and LTI was under 3x so I guess the new bank didn't really care.

I had no communication with the old bank until the house was sold and the mortgage paid off.

Landlording is so unattractive that I couldn't make the numbers work even on a 1% ish interest rate, although that's changed a little low with the increase in mortgage interest relief.

ThisRegard

I was in a similar position to Lumen, moving home but contemplated keeping the other which was on a low tracker rate, bank wasn't too enthusiastic about it. And like he said renting, despite potential for around 1,500/1,600 a month, just seemed like too much hassle for us.

Samuel T. Cogley

Toastytoes wrote: »

A second property and misleading (lying to) the bank, sounds a lot like 2005 to me.

My post was very short and clearly did not include the word fool. That was your word.

It was a glib reply, apologies if it caused offence. It was meant to be tongue in cheek as I thought you were being. The danger perhaps with very short posts.

I certainly don't countenance lying to the bank, however I think many will have found it acceptable (it's not of course) when faced with a need to trade up, of letting the new lender know - which is unavoidable - but not telling their current lender the use has changed. My point here is that this is not a new issue.

There does seem to be a resurgence of carefully 'putting the best foot forward', for want of a better term. I'm not sure that's healthy for anyone and it does seem to me that people are willing to engage brokers who actively do this.