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Your Questions: We need more space so will the bank lend to us to build an extension?



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Question: We are a family of five and had been considering moving from our family home to a bigger property over the next 12 months. However, having spent so much time at home recently we have decided we actually love our home and all we need is a bit more space, so we are considering an extension. I think it could cost between €60,000 and €70,000. Are banks lending for this type of thing? We are both in secure jobs. We took out our mortgage three years ago for €360,000 on a variable rate of 4pc and our house is currently worth about €500,000.

Answer: Rather than take a personal loan to fund an expensive project like this, what you are suggesting could be better served by releasing some equity from your current property, maintains chairperson of the Association of Irish Mortgage Advisers Trevor Grant. Essentially you would be "topping up" your current mortgage with the amount needed for the work on your property, Mr Grant says. This is a big decision, since it would mean you would be adding to your monthly repayments.

He adds that a mortgage rate of 4pc is much too high and if you were to do this, you could move to a lower rate, which would negate, in part, the increase in your mortgage repayments. Your current loan to value is 72pc and if you were to switch your mortgage with a further €60,000 equity release on top, you would have a new mortgage of €420,000. If the works you carry out increase the value to a minimum of €525,000, the loan to value would be 80pc or less, he said. If you have a term of 25 years, you are currently repaying €1,900 per month. If you topped up by €60,000, but moved to a lower rate of 2.3pc on a two-year fixed rate, then your repayments would be €1,842. As you are both in secure jobs and can afford the current repayment you could look to reduce the term, thus saving thousands in interest over the life of the mortgage.

Question: I have my health insurance through a company-paid group scheme. I understood that all insurers were giving refunds but I haven't received anything from my insurer. Is this correct?

Answer: All insurers are issuing some level of refund to all members, according to broker Dermot Goode, of TotalHealthCover.ie. The way the premium is collected by the insurer will normally determine how the refunds will be paid, eg if you pay by direct debit, they may pay the refund directly to your bank account or alternatively they may just reduce your current direct debit.

As you are currently through a company-paid scheme, it is likely that the refund will be payable directly to your employer who pays the premium, Mr Goode said. Your employer in turn will then adjust your benefit-in-kind charges to reflect the lower premium, he added.

Question: We have a new baby on the way at the end of July, and I want to take out a loan with my credit union to get a more reliable car. My employer has placed me on the Temporary Wage Subsidy Scheme and so my income is reduced. I can still afford the repayments but I'm wondering if my application will be accepted now. Should I wait until after the summer when I will hopefully be back on full pay?

Answer: Do not write yourself off just yet, advises Kevin Johnson, CEO of the Credit Union Development Association (CUDA).

If you can afford the repayments and you can demonstrate this to your credit union, then it is likely you will be granted your loan application, he said. A good credit history and the ability to repay are the two primary considerations for each credit union when deciding whether they can offer a loan to a member. Credit unions take a balanced approach, understanding that people's financial circumstances change from time to time and there can be reasons for a reduced income that are beyond someone's control, Mr Johnson said.

They will act in your best interest, factoring in many things, for example whether your employer's business is likely to return to some degree of normality after this pandemic, to ensure the loan is affordable for you and not place you in an unmanageable situation. You will need to provide certain documentation. In general you will need proof of income in the form of recent payslips, proof of identification and a utility bill.

You may also need an invoice for the car you want to purchase, particularly if car loans in your credit union are subject to a lower rate.

A mortgage rate of 4pc is much too high. You could move to a two-year fixed rate of 2.3pc and save thousands of euro in interest.

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A good credit history and an ability to repay are the two primary considerations for a credit union when deciding whether it can offer a loan.

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