Would banks allow this?

Heres Johnny

Probably hypothetical but just wondering to myself. However all facts and figures are true

I own a house with a market value of 300k
Mortgage outstanding of 180k so 120k equity

I have seen a house in neighbouring town for 400k which I really like

Could I sell my own, use the 120k as a deposit on the 400k house if the 280k mortgage would exceed 3.5 times my income.

Would the 30% deposit I'm putting in bring any comfort to the banks and allow me to exceed the LTI limits as a 2nd time buyer?

Franz Von Peppercorn

It depends on how much over the 3.5 you are asking for. But it would help.

You can always ask them.

GarIT

I thought the limit was a law, and not something the bank could choose to exceed.

Rew

GarIT wrote: »

I thought the limit was a law, and not something the bank could choose to exceed.

They have criteria they can use to make exemptions

Heres Johnny

Are the criteria for first time buyers though? Or for everyone?
I know they can't just lend recklessly but are 2nd time buyers just taken on individual merits?

Paul_Mc1988

Up to 4.5 times and they are limited to the number of exemptions they can give. A friend was told recently to wait till january as he needed 3.8 times and they were at their limit

Paul_Mc1988

Heres Johnny wrote:

Are the criteria for first time buyers though? Or for everyone? I know they can't just lend recklessly but are 2nd time buyers just taken on individual merits?

Nope everyone as far as i know

Rew

Heres Johnny wrote: »

Are the criteria for first time buyers though? Or for everyone?
I know they can't just lend recklessly but are 2nd time buyers just taken on individual merits?

Anyone can apply to the bank for an exemption

ted1

It’s only up to 3.5 times. If you have kids or a wife with no income they will reduce it

uberwolf

Heres Johnny wrote: »

Probably hypothetical but just wondering to myself. However all facts and figures are true

I own a house with a market value of 300k
Mortgage outstanding of 180k so 120k equity

I have seen a house in neighbouring town for 400k which I really like

Could I sell my own, use the 120k as a deposit on the 400k house if the 280k mortgage would exceed 3.5 times my income.

Would the 30% deposit I'm putting in bring any comfort to the banks and allow me to exceed the LTI limits as a 2nd time buyer?

Ltv and loan serviceability will be separately assessed by the bank. Not looking for two exemptions will help your case, but if you can't afford to service a loan they won't give it to you, even with an ltv of 10%.

What you're suggesting isn't crazy, and well worth bringing to each bank. What works for one might not work for the next one so check each of them.

Frankie19

I was recently looking to do the exact same as you. Use equity to move to a bigger house. I was being given an exemption on 3.5 times salary until credit risk dept found out the new house was a builder finished and not fully completed. They get very few exemptions so weren't willing to use one on what was deemed a risky property to them. Two banks we applied with still have exemptions left so definitely worth looking into.

Frankie19

ted1 wrote: »

It’s only up to 3.5 times. If you have kids or a wife with no income they will reduce it

Incorrect. I am married with one child and could get 4.5 times salary through an exemption.

myshirt

Frankie19 wrote: »

Incorrect. I am married with one child and could get 4.5 times salary through an exemption.

Do you mind sharing what the salary was and if you had 10%, 20%, or larger of a deposit?

evolving_doors

Frankie19 wrote: »

Incorrect. I am married with one child and could get 4.5 times salary through an exemption.

Depends on your occupation too so it could see-saw between criteria.

Heres Johnny

I'm an actuary. But I'm thinking of going back self employed in insurance and financial services like I did before. Once self employed I may forget about it for a good few years.

ted1

Heres Johnny wrote: »

I'm an actuary. But I'm thinking of going back self employed in insurance and financial services like I did before. Once self employed I may forget about it for a good few years.

Known what my actuary Friends are on. I believe that you’ll fall into the exception band. And should have no bother

uli84

ted1 wrote: »

Known what my actuary Friends are on. I believe that you’ll fall into the exception band. And should have no bother

So whats the income that allows to fall into the exception band roughly?

TheShow

Seems like a reasonable proposition to me and as long as you meet the affordability criteria then there shouldn’t be an issue, in theory.
The only real problem now is what banks still have exceptions available to use.

Banks can do exceptions to the CBI rules on 15% of their loan book, open to all, not just first time buyers. The issues with the banks are now that they give out the approvals but then there is no way of knowing how many of those will actually drawdown, so they cap the approvals then to a certain level.
As per my own experience, best time to look for an exception is in January.

MrDerp

uli84 wrote: »

So whats the income that allows to fall into the exception band roughly?

There isn’t magic income bands to my knowledge. They will bring in secondary factors like affordability. The more you earn, the bigger the amount left over after mortgage payments, even if the ratio is similar. The amount they expect each adult and child to require per month stays flat.

They will also show flexibility where future income increase is expected, e.g newly qualified doctors

Frankie19

Heres Johnny wrote: »

I'm an actuary. But I'm thinking of going back self employed in insurance and financial services like I did before. Once self employed I may forget about it for a good few years.

Yeah my husband is self employed past 2.5 years. Some banks will take 2 years form 11 while others take 3. One bank was willing to take 2 and do a projection for year 3.

Frankie19

myshirt wrote: »

Do you mind sharing what the salary was and if you had 10%, 20%, or larger of a deposit?

Salary just under 80 which included a car allowance . No deposit saved but have 150k equity . House was 420k with another 50k to go into it.

What brought down my affordability massively was my pcp on my car. Was told to get rid of it.

Heres Johnny

I qualified as an actuary this year and got a job straight away. It's a good job and there's money to be made but I want to combine my new qualification and my old qualifications as a QFA and certified financial planner and go back down the self employed advisor route as an agent for a life insurance company. Even more money to be made that way but I want to put a few things in place before they are cut off from me.

GingerLily

If you want a mortgage and especially if you want an exemption, keep your PAYE job, you don't have much of a hope getting a mortgage anywhere near where your thinking if you're newly self employed

TheShow

GingerLily wrote: »

If you want a mortgage and especially if you want an exemption, keep your PAYE job, you don't have much of a hope getting a mortgage anywhere near where your thinking if you're newly self employed

I agree, get the mortgage approval first, then look at your career options.