Home Economics: Answering your property questions
Question: We are first time buyers saving hard for a deposit. With house prices rising we think we should make a move now. We are considering getting a credit union loan of around €15,000 to bump up the deposit. Would the bank view this negatively? We are using all the savings we have.
ANSWER: Extra loans reduce your mortgage borrowing capacity, and indeed, the disposable income available to meet repayments, so yes, the bank will be taking a close look at other debts. I sense a slight tone of panic about how you are viewing the current market but you need to balance off one decision against the other.
Karl Deeter of Irish Mortgage Brokers explains: "Mortgages are underwritten based on an affordability model. If you take out a credit union loan for €15,000 at say, 10pc, then it chops down your ability to borrow for a mortgage by about €60,000.
"This will negatively impact your ability to get a mortgage and banks also take a dim view of people borrowing to obtain a down payment.
"You can bid now or later anywhere you like, you don't even need loan approval, but I suggest you get help from family instead if it is available, or just keep saving because the idea of borrowing to make a deposit so that you can borrow even more on the back of it is creating a fly in search of a windscreen."
QUESTION: I am interested in a property for sale but am a little alarmed at being told I need to bid for it in an online auction. Is this kind of transaction common and have you any tips on how to proceed?
ANSWER: The 'modern method' of auction includes online bidding options which, although different from sitting in a hotel room with an auctioneer offers sellers and buyers a very transparent way of managing a house sale without the danger of losing the run of yourself in a fast-bidding auction house. While not common, their use is definitely on the increase and it can be described as a little like buying something on eBay. There is a set timescale so you know when the auction ends - this cuts out the possibility of being 'gazumped' by a late purchaser. The process itself is open to view, so you can see how many bids have been placed and where you are in the pecking order. The timescale for exchanging contracts is generally a little longer (around 28 days for exchange and the same for completion) and the securing deposit due after the auction can be lower at around 5pc instead of 10pc - both good for the buyer.
Have a look at www.iam-sold.ie for an example of how it works and check out the live bids currently online. There's nothing to be wary of, although you should take the same steps legally and financially that you would using the traditional method.
In our column of 4 July, we referred to Dilosk as a foreign fund purchaser of ICS assets. We are happy to clarify that Dilosk is an Irish company which was established as a new mortgage lender and the ICS asset transfer from Bank of Ireland was at full value for these performing residential mortgages.
Although Dilosk is seeking authorisation from the Central Bank of Ireland to act as a Retail Credit Firm to facilitate new mortgage lending, they have committed to adhering to all regulatory codes applicable to mortgage lending in Ireland.