Question on investment and mortgage

Henwin

Hi I am wondering if anyone has any advice on the following. We are a married couple with 1 child. I work in a preschool earning 165 a week while my husband is a farmer where income varies from year to year. He has an aib loan where there is 14000 left to pay finishing in 2021. He has an investment type thing that he needed as collateral for this loan which is 23000 at the moment. He has about 7000 in farm bills left over from 2018 to pay to contractors/merchants etc. He is wondering if he cashes in his investment to pay off the aib loan and pay his bills. But as we are hoping to build our own house in the next year we would like to have this as a deposit. Which would the bank prefer to see. He also has 451 a month to pay on a tractor, 153 a month on a diet feeder, 608 for 8 months bank of Ireland loan and 1013 for 6 months on another bank of Ireland loan. But they are finishing in 2019 and 2020 respectively. So he is paying about 22000 a year on loans which is barely manageable but with the 2 bank of Ireland loans paid off we wit g open to get a mortgage of 120000 to do up an old house. My question is will we cash in the investment now and pay off the aib loan which is 391 a month or get an overdraft from bank of Ireland to pay the current bills and use the investment as a deposit. Sorry for the long post.

AlmightyCushion

You're paying over 2.5k a month on loans right now. I think the last thing you need to worry about is the deposit. I can't see a bank giving you a mortgage with all these loan repayments left. If I was you, I'd forget about the mortgage for now and start paying down debt. It actually shouldn't take you long to get rid of it, then save like crazy.

Cash in the investment and pay off the loan it is linked to as collateral and the bills. Keep the remaining 2k as a rainy day fund. Then use the 391 you have extra per month to pay down the rest of your debt. Start with the loan with the highest interest rate. In about 9 months most of you will have gotten rid of a huge chunk of debt and your monthly debt repayments will be a lot lower. You will be at least 2k a month better off. Then save this 2k a month and you will have a good savings history and a decent deposit in no time.

Trish56

Very hard to answer your question without knowing what your husbands farm income was for the last 3 years and as the majority of the loans you mentioned are farm related they should be incorporated into the farm accounts before net profit.

You need to check with his Accountant what his net profit was for the past 3 years. A lender will take the average of the last 3 years income when calculating how much you qualify for a mortgage and you will also need to submit Income Tax self Assessment form chapter 4 from Revenue Commissioners for past 3 years.

Are you employed on a permanent basis and your gross basic income will be taken into consideration for a mortgage.

Henwin

Thanks for the replies, I'm working in childcare partime 15 hours a week on 165 euro.
As for my husband's income, as it's dairy farming it changes year to year, his accountant said he earned 36000 last year but we paid over 22000 on loans with the remainder running the house etc.

Trish56

The figures you need from the Accountant is net profit. If his gross income before expenses was 36k and you paid 22k in loans then your net profit would only be 14k. If his net profit was 36k after paying 22k in loans that is a different story and you should qualify for a mortgage.

Henwin wrote: »

Thanks for the replies, I'm working in childcare partime 15 hours a week on 165 euro.
As for my husband's income, as it's dairy farming it changes year to year, his accountant said he earned 36000 last year but we paid over 22000 on loans with the remainder running the house etc.

Henwin

Trish56 wrote: »

The figures you need from the Accountant is net profit. If his gross income before expenses was 36k and you paid 22k in loans then your net profit would only be 14k. If his net profit was 36k after paying 22k in loans that is a different story and you should qualify for a mortgage.

Loans aren't taken into account as expenses on a farm so net profit wud be 14000. As of November we will have paid off one boi loan which is 4868 and if we pay of the aib loan with our investment tat will be a saving of 391 a month. That will be a welcome relief but as dairy farmers there is always an investment needed ( I never got the idea tat all farmers are loaded). We are told we need a bigger milk tank- 12000, more slurry storage-20000 euro. If we can get a mortgage of 700 a month and farm loans of 700 a month I think we can get by ok..hopefully.

Trish56

Look up the Low Cost Loan Scheme introduced by Minister for Agriculture for farmers introduced in 2017. Maybe you can apply to bank to refinance all these loans into one and reduce your monthly repayments. I know Bank of Ireland do these loans and I think rates are around 2%/3%.