Negative Equity and a new mortgage, please help

rudidog · 17 October 2010 at 10:17AM

This is my first post. Myself and my wife bought an apartment in Dublin 3 years ago at the height of things for, wait for it, 460000 euro. This was not unusual at the time at all. We could afford the mortgage easily. My wife is a doctor and Im a teacher and we are both in permanent employement.
We have savings of £55000 and 2 outstanding carloans of about 18000 in total.
We have since moved to Northern Ireland where my wife is from and ave rented out the property. I have to back the rent with 650 euro every month which I can afford. We are renting ourselves at the moment but we desperately want to buy another house.
We can afford another mortgage with our salaries but the problem is negative equity with our Dublin property. Last time i Checked, similar properties were for sale but not selling for 200000 euro which would easily leave us over 200000 euro in negaitve equity.
Would banks run a mile from us if we applied for a new mortgage while remaining owners of the other property.
Any help or comments on our situation would be great.

maninthestreet · 17 October 2010 at 11:10AM

You haven't stated what your joint gross income is. The NE itself isnt a problem, but with a mortgage of, presumably, more than €400K, will your income be able to fund any further borrowing?

rudidog · 17 October 2010 at 11:22AM

Thanks for responding.
My wifes income is untouched my our dublin mortgage. I look afetr that. Her income after tax would be £3000 plus overtime if she wanted. We would need a little over £200000 with our deposit for the new house, with repayments of £1100 per month. It looks affordable but we have so much negative eq im not sure. Would it help if we clearde our car loans? That would leave less of a deposit though.

rudidog · 17 October 2010 at 11:24AM

Sorry, our gross joint income would be a little over £100000.

maninthestreet · 17 October 2010 at 12:38PM

It's gross income, not net that is used for mortgage purposes. If your joint income is only £100K, how is your income alone funding a mortage of about £400K? It would help if you used the same currency when quoting both your incomes and mortgage borrowing.

rudidog · 17 October 2010 at 1:32PM

Hi,
We have rented the apartment in Dublin and we get £950 a month for that and I make up the shortfall of about £450 to cver the mortgage and mngt fees etc...So thats what I mean by looking after that mortgage. Her income does not go into that mortgage although we did get it jointly.
Just another point,
Can a UK bank find out if we own that Dublin property since ther is no evidenvce of it from my wifes bank accounts. Would we be better off saying nothing about it and for her to apply for a mortgage on her own. Risky? Probably stupid, I know.

Thrugelmir · 17 October 2010 at 2:44PM

Personally I would continue to rent and use all available money to pay down your debt on the Dublin property.

The risk you face is with a rise in interest rates you'll be heavily exposed to an even worse position than now.

Sort out one issue at a time.

Committing fraud (i.e. lying) would taint your professional records as well.

rudidog · 18 October 2010 at 12:49PM

I didnt mean committing fraud as such. Our outstanding mortgage is in excess of 400000 euro. So paying it down to any realisitic level is just good money after bad since the market is still in freefall. I think I would be better to save everything to add to our 55000 and increase our deposit so we will be less of a risk. Maybe saving 30%. I just wanted to know whether or not they black mark us due to negative equity in the other property or just look at our ability to repay their loan with all the stress test etc...

beecher2 · 18 October 2010 at 2:17PM

Your joint income is £100k and you already have a mortgage of £350,000 and you want a mortgage of £200,000. This would mean 7.5 times salary - just isn't going to happen.

rudidog · 18 October 2010 at 5:42PM

Wouldnt they look at repayament capacity which would be very good on a £200 000 mortgage? Considering occupations etc

beecher2 · 18 October 2010 at 7:15PM

They're going to look at salary multiples - can't see how your occupation would be particularly relevant. My post had a typo as it should say 5.5 times salary - point still stands though. Why don't you go to see an adviser and see what they say about your options. The Dublin flat has to be paid for at some point - what's your long term strategy?