Can you secure a house you don't own, against a mortgage?

Hi folks,

I appreciate this may seem a silly question on the face of it! However, a friend is in the position and we were talking about it, and I genuinely couldn't come up with an answer.

For the sake of ease, I'm gonna write this in first-person-perspective (i already had it half wrote talking about a friend, and it was getting tough to explain/read).

I'm renting long term. Rent is €800 p/m. A house has come up for sale, and it's in an area close to my mam. I haven't particularly been looking to buy a house, so this isn't something I was specifically working towards. As a result, I've no deposit saved. The house is 165k and I make on average 37k.

In other words, assuming an exception was granted, the house fits within 4.5 time salary requirement.

The real issue is I have outgoings for a car loan and it swallows up 650 per month, and will do for another 18 months. Looking at online calculators, this is the real issue for me.

My mam would like to help me out, but is single and retired. However, she does have her own fully-paid-off house. Can this situation be manipulated, in such a way that the house can be used as security on the new mortgage?

In the next 3 months, I could either pay off the car loan and have no outgoings (but this leaves me with no deposit at all) or I could save a 10% deposit, but still have the outgoings that disqualify me (with a 650p/m car loan, an online calculator says it'll only give me 60k).


Again, it's not my specific situation, but I find it very interesting and I don't know the answer. I do know in the boom times, people secured houses against houses, and that eventually ended in tears. But at the same time, my friend is pretty close to meeting the criteria (assuming an exception is allowed) otherwise.

She's also had many loans in her lifetime, and none have ever went unpaid. She did a credit score check and her score is good.

Would a bank entertain her?

Are you not simply asking if your mother can act as guarantor

harr

[Deleted User] wrote: »

Hi folks,

I appreciate this may seem a silly question on the face of it! However, a friend is in the position and we were talking about it, and I genuinely couldn't come up with an answer.

For the sake of ease, I'm gonna write this in first-person-perspective (i already had it half wrote talking about a friend, and it was getting tough to explain/read).

I'm renting long term. Rent is €800 p/m. A house has come up for sale, and it's in an area close to my mam. I haven't particularly been looking to buy a house, so this isn't something I was specifically working towards. As a result, I've no deposit saved. The house is 165k and I make on average 37k.

In other words, assuming an exception was granted, the house fits within 4.5 time salary requirement.

The real issue is I have outgoings for a car loan and it swallows up 650 per month, and will do for another 18 months. Looking at online calculators, this is the real issue for me.

My mam would like to help me out, but is single and retired. However, she does have her own fully-paid-off house. Can this situation be manipulated, in such a way that the house can be used as security on the new mortgage?

In the next 3 months, I could either pay off the car loan and have no outgoings (but this leaves me with no deposit at all) or I could save a 10% deposit, but still have the outgoings that disqualify me (with a 650p/m car loan, an online calculator says it'll only give me 60k).


Again, it's not my specific situation, but I find it very interesting and I don't know the answer. I do know in the boom times, people secured houses against houses, and that eventually ended in tears. But at the same time, my friend is pretty close to meeting the criteria (assuming an exception is allowed) otherwise.

She's also had many loans in her lifetime, and none have ever went unpaid. She did a credit score check and her score is good.

Would a bank entertain her?

I know things have changed a lot since I got my mortgage over 20 years ago but my parents went
guarantor On my mortgage and as they owed their house outright that was taken into account.
It a big risk to ask anyone to guarantee a mortgage because at end of the day they will be left with the debt if you fall into arrears.
Maybe speak to a good Financial advisor on your options.

The boarder

[Deleted User] wrote: »

Hi folks,

I appreciate this may seem a silly question on the face of it! However, a friend is in the position and we were talking about it, and I genuinely couldn't come up with an answer.

For the sake of ease, I'm gonna write this in first-person-perspective (i already had it half wrote talking about a friend, and it was getting tough to explain/read).

I'm renting long term. Rent is €800 p/m. A house has come up for sale, and it's in an area close to my mam. I haven't particularly been looking to buy a house, so this isn't something I was specifically working towards. As a result, I've no deposit saved. The house is 165k and I make on average 37k.

In other words, assuming an exception was granted, the house fits within 4.5 time salary requirement.

The real issue is I have outgoings for a car loan and it swallows up 650 per month, and will do for another 18 months. Looking at online calculators, this is the real issue for me.

My mam would like to help me out, but is single and retired. However, she does have her own fully-paid-off house. Can this situation be manipulated, in such a way that the house can be used as security on the new mortgage?

In the next 3 months, I could either pay off the car loan and have no outgoings (but this leaves me with no deposit at all) or I could save a 10% deposit, but still have the outgoings that disqualify me (with a 650p/m car loan, an online calculator says it'll only give me 60k).


Again, it's not my specific situation, but I find it very interesting and I don't know the answer. I do know in the boom times, people secured houses against houses, and that eventually ended in tears. But at the same time, my friend is pretty close to meeting the criteria (assuming an exception is allowed) otherwise.

She's also had many loans in her lifetime, and none have ever went unpaid. She did a credit score check and her score is good.

Would a bank entertain her?

Would your friend not leave the rental and move in with their mam for saving a deposit?

imfml

Great opportunity. Worth selling that expensive car and replacing with a banger for a couple years in my opinion.

Deleted User

Deleted User wrote: »

Are you not simply asking if your mother can act as guarantor

That's the gist of it alright, but I genuinely don't know the answer to the question. Years ago, in my local credit union, being a guarantor was an everyday thing.

Haven't heard of it in years, though.

imfml

imfml wrote: »

Great opportunity. Worth selling that expensive car and replacing with a banger for a couple years in my opinion.

She'd still need a car, and selling it wouldn't wipe out the debt for it, so although it'd reduce the amount of time she'd owe on the car, there's only 18months on it left anyway as far as I understand, so it's not likely to make a massive difference.

(besides, i think shifting cars is a bit tricky at the moment?)

dotsman

Ultimately, the car loan is what is killing her.

The best way the mother could help is lend her the money to pay off the car loan and leave enough for a deposit.

However, that would assume that the mother has the funds and trusts the daughter and and will pay her back in full and on time.

P.S. A car loan of 650pm is ridiculous for someone on a salary of 37K. They really should have bought a much cheaper car!

P.P.S. It's not a good thing that someone has had "many" loans in their lifetime. It shows that they are bad with managing their finances and poor at saving.

dubrov

I'm pretty sure it's a dead duck. Banks used to allow guarantors but I believe they struggled to call in any of the guarantees in the last recession.

Your only chance is if your mother remortgages her house and gifts you a link sum for the deposit

Darc19

You won't get exception to 4.5 on a 37k salary.

You possibly won't get 3.5.

These are maximum multiples and banks will look at what expenditure you will have.

Motor expenses, utilities, day to day living expenses, social life etc
Generally these can be the same for someone earning 37k and someone earning 57k, so the 57k person has a lot more spare cash and is a better bet for 4.5 times.

Worth a try, but be prepared for a refusal

Buddy Bubs

Get rid of car, you don't qualify for mortgage with it. Assuming you have equity in the car if you only have 18 months left too....Will help with deposit.
Buy something for a grand until mortgage is done and dusted, buy expensive car again then if you like.

dotsman

dotsman wrote: »

Ultimately, the car loan is what is killing her.

The best way the mother could help is lend her the money to pay off the car loan and leave enough for a deposit.

However, that would assume that the mother has the funds and trusts the daughter and and will pay her back in full and on time.

P.S. A car loan of 650pm is ridiculous for someone on a salary of 37K. They really should have bought a much cheaper car!

P.P.S. It's not a good thing that someone has had "many" loans in their lifetime. It shows that they are bad with managing their finances and poor at saving.

Unfortunately to clear the car loan and have enough for a deposit to get the house "properly" would mean the mother would have to loan her about 30k. Which isn't really plausible.


I kinda feel bad for her. She's not someone that would really have ever been looking at buying, but its very rare that a house on her mams street would come up for sale. Its not a particularly sought after area, but its just unusual to see the houses for sale there. If shed known 6 months ago it was likely to be for sale, its possible she'd have prepared for it but its very much coming out of the blue.

Bigfatmichael

Have a look at rebuilding Ireland home loan. It's your only chance.

I was stupid and had 14K of debt with car loan and other things and wanted a mortgage and had 27K saved. I paid off the debt and sold the car and it brought me up to 21K. I wanted a mortgage as well on on same money as you.

I'll never spend more than 5K on a car ever again.

Bigfatmichael

Bigfatmichael wrote: »

Have a look at rebuilding Ireland home loan. It's your only chance.

I was stupid and had 14K of debt with car loan and other things and wanted a mortgage and had 27K saved. I paid off the debt and sold the car and it brought me up to 21K. I wanted a mortgage as well on on same money as you.

I'll never spend more than 5K on a car ever again.

Does that not take a long time to go through though? I presume this house will be sold by the time that happened.

dubrov

Even with the deposit, your friend will need to demonstrate about 6 mouths of savings.

It just isn't going to happen

billo516

what make of car is it ?

sentient_6

I'm completely baffled by the 650 a month car loan. That is insane for anybody, never mind someone on 37K.

Soilse

Has she any savings at all? Enough to cover the solicitors fees, survey, mortgage insurance? Not sure a bank would look kindly on someone unable to show any history of saving and managing their money. Houses cost and need annual msinenraince to maintain not much but if you don't do maintenance then it will cost in the end. Has she any clothes, shoes that she can sell. 650x18 equals 11, 700 paid off I'd be asking myself just how much do I want yo buy this house because priotising this means sacrificing everything else at least for a few months. Are you sure she can't bus, bike, walk, car share get her mam to drive her for a few months.

jlm29

I’ve a friend whose parents went guarantor when she bought her first house. It’s probably circa 10years ago. Her parents would have been late 50s at the time I’d say, and at least one of them still working, and the other probably due to retire with a decent public sector pension. I assume, though I don’t know, that they owned their house outright at that time. She had to put her mortgage over 10 years so that it wouldn’t go too far beyond her parents retirement age. And I’d say she had a fairly decent deposit too, and was borrowing within her means. And Had no big loans etc.
So, I’d say it won’t happen in your scenario- mother has no income. Nobody has any cash, exemption too large.

Also, I really don’t think any bank will take a house that’s a family home as security for someone else’s house in this day and age. It’s that kind of carry on that got lots of people in lots of bother a few years ago

smellyoldboot

What kinda car have you got that you pay €650 a month for? The bank will rightly laugh at you if you ask them for a mortgage with that. I'm on similar money and my car payments are under €200 a month. You've half your salary tied up every month before you buy a can of beans and that's without a mortgage.

listermint

It's not happening tbh. As above she won't be in the bracket for 4.5 times salary excemption. Not at all.

Also as per everyone elses advice. She should use this event and the feeling of not being able to jump at the opportunity as a push to sort out her flagrant finances.

Ditch the car asap. She can get a run around for a grand or two that will do for her needs . She then needs to stick that 650 or more into savings account and work at it properly. She will then be in a proper position to jump at an opportunity as it arises and feel really good about it.

dubrov

dubrov wrote: »

Even with the deposit, your friend will need to demonstrate about 6 mouths of savings.

It just isn't going to happen

Well as far as my own personal experience with Bank of Ireland, repaying a loan, or paying rent, is used as a demonstrator of ability to repay your mortgage. So that would work in her favour, surely? The mortgage would (if my online calculators are correct) be only €60 p/m higher than her rent.

Soilse wrote: »

Has she any savings at all

I think she does, but it's about 1k. Nothing worth getting excited about or that makes a material difference to her situation.

sentient_6 wrote: »

I'm completely baffled by the 650 a month car loan. That is insane for anybody, never mind someone on 37K.

billo516 wrote: »

what make of car is it ?

I appreciate €650 sounds expensive (although if I'm honest, I wasn't as startled by it as many of ye seem to be - I make around the same as her and my car loan is about 330p/m, albeit mine is 6 years old). It was a new Clio that she got, and I think her payments are so high because her term is short.

I think it's a 191, so a quick google online would tell me she paid about 20-21k for it, and seen as she only has 18months left, that would tally up with a 3 year repayment plan.


I wonder could she ring and renegotiate the loan over a longer period to reduce the monthly repayments? Or would renegotiating a loan give her a black mark that would result in the bank frowning upon her anyway?

GingerLily

She won't qualify for an exemption above 3.5 even if she clears the loan and gathers enough the deposit and solicitor fees/stamp duty.

She's not in a position to buy a house currently

What's the story with qualifying for exemptions, out of curiousity? What informs a bank's opinion on whether they'd grant one or not?

I was reading yer man Eoin McGee's book recently (how to be good with money) and he reckons the banks are more likely to give exemptions to those who aren't spending as much, as exemptions can only be a % of the amount of money they lend out (ie; because her house is half the price of your average new build, she'd be more likely to get one as she takes up less, as a percentage of their total loan base)?

mickdw

Forget about the house for now.
I would do something about the car loan.
Its just too much to be paying for what is a cheap car.
The sad thing is that even after paying it off at such a quick rate, she is barely keeping up with the depreciation on the car - bad deal full stop.

Lia_lia

€650 a month car loan...and it’s a Clio. Christ! Sorry I’ve no advice but wow.

Wesser

How on earth would she service a car loan of 650 a month plus repayments on 4.5 times value of a house on a salary of 37k??!!

This is a recipe for financial disaster

lll i can say is
..


I understand now how the celtic tiger happened and am grateful for more prudent lending laws now to stop things like this happening

mickdw

mickdw wrote: »

Its just too much to be paying for what is a cheap car.

It's a €20,000 car. No matter whether she pays €1,000 a month, or €100 a month, the car is still a €20,000 car. Paying less per month doesn't make it any cheaper (the opposite, if anything).

JPup

As far as I know parental guarantees are totally out now. That’s what I was told when I asked fairly recently anyway.

Could your friend move in with her mother for a while to build a deposit? Ideally get the car loan down to a more reasonable level and then build up a consistent record of two years savings. By 2023 your friend will be in a good position to buy.

The only real way I can think of to speed things up would be inheritance or a partner who can add a second income.

runawaybishop

[Deleted User] wrote: »

It's a €20,000 car. No matter whether she pays €1,000 a month, or €100 a month, the car is still a €20,000 car. Paying less per month doesn't make it any cheaper (the opposite, if anything).

She's your mate, you want to defend her. That's all fine. A new car with a loan that costs 650 a month on 37k is nuts. It's a massive cost and severely impacts her ability to borrow. Everyone is saying the same thing, sell the car.

mickdw

[Deleted User] wrote: »

It's a €20,000 car. No matter whether she pays €1,000 a month, or €100 a month, the car is still a €20,000 car. Paying less per month doesn't make it any cheaper (the opposite, if anything).

Hold on there now. There are more angles that just stating thst a 20k car is a 20k car.
A 20k vw as an example would likely be worth more than half its value after 3 years. This clio going by donedeal appears to have lost half its value in 18 months - its just eating money and paying it off slower in this case would only be putting off the inevitable debt that it was building up. A different car costing 20k could be reasonably serviced payments wise at about half that monthly while still keeping up with its depreciation. A bad deal the clio.
A slightly used clio could also have been got and financed at about half that monthly also.
It just screams - bad with money anyone who would agree to pay 650 per month for a clio.