Brother turned down by 3 banks for mortgage - Options?

My brother bought a tiny mid terrace ex council house in Grange in Cork back in 2008 just before they stopped issuing 10% mortgages.

They’ve two kids now and house is way too small. Wife had cancer and happily is now cancer free. One good thing to come out of it was she had Serious Illness cover which paid off the mortgage in full, 220K or so.

Reckon they’d get c. 200K for it now. They hoped to borrow 100K off a bank to get a decent sized 300K house. They struggle to save on his 35K salary. She no longer works as still has treatments.

They’ve been turned down by 3 banks now due to 1 salary and outgoings for kids, etc.

Wasn’t there a Government/Council mortgage scheme whereby if you were rejected by 3+ banks you could apply for a mortgage with them? Was it only for FTBs?

They’re talking of an extension out the back if they can’t move. Realistically, it’d just be a bigger kitchen and I can’t see that adding much to their comfort and set them back 20-30K.

A pity about their circumstances. It seems a shame as they would have a very low LTV.

There is a local authority mortgage scheme but it seems you have to be a FTB.

Your brother should go to his local authority to apply for a council mortgagee. He would qualify on his income and interest rates are way below those currently being charged by the banks. Basic details are available here:

housing.gov.ie/housing/grant … rity-loans

Yes, I checked that one and Home Choice Loan also a No Go.

I thought there was one specifically where you needed to have been turned down by 3+ banks first before you could apply?

I’ve heard of that for a business loan review, and for insurance, but never for mortgages.

What about going subprime like pepper? I would have thought they’d lap up a riskier income group with low LTV.

The problem your brother has is that his take home pay is likely in and around what the main banks expect him to have to support his family. From memory AIB is 1500 for a couple +250 per child after bills and mortgage. The only way around them might be to save (proposed mortgage payment at prevailing rate + 2%) per month, for six months, to demonstrate ability to repay.

Another reason why they should be building decent quality council houses…

I have no experience and am not advocating it but have they looked at peer to peer lending?

Given that affordability does look tight anyway, is going for a high rates subprime lender really a great idea?

I would also not go for the subprime. €35k with 2 kids is going to be tight. Even if the mortgage is ‘only’ 500 a month that’s a fair chunk of that.
There is college to think of, etc, funding the car(s), health insurance etc etc. Not to mention it might be nice to have a holiday now and then.
We have a single income of 43k. In 2013 we were only allowed borrow 80k from BOI (we had no other debts). Aged 45.
If it were me I would think of doing the extension instead. With small kids, yes there are loads of plastic toys everywhere, but as they get older they have less ‘stuff’ like plastic kitchens etc. Is it a 2 bed or a 3 bed?

could they rent out their current house and rent a larger one in a cheaper suburb? They’d have to pay tax on the rental income but only at standard rate probably.

No it’s a poor idea. I wouldn’t entertain the risk of a regular mortgage at those numbers, let alone subprime, if owned my own home already.

Sadly, these are the likely options. And options were sought not advice.

If asked for advice I wouldn’t even build an extension on those finances. If a hole of 400/month is affordable, I would invest the time and money in retraining or upskilling that I might earn 400/month more net thereafter and afford the mortgage.

They could propose to rent a room. Neighbour did it and appears to have lined up a mortgage based on that income stream.

It might be worth investigating the extension a bit more. They may be able to extend at 1st floor level as well – maybe 10m2 on 1st floor (extra bedroom) and 20m2 on ground floor. Possible attic conversion for storage. Add in a decent amount of sound insulation and the house might not seem as small anymore. All at a cost as you mentioned.