Maximum LTV ratio?

Hello all,

Could you tell me if there are any legal rules in place which limit the maximum loan-to-value ratio that a lender can grant to a borrower for residential property?
I was under the impression that there were no such restrictions for lenders, but recently I read that apparently there is a maximum LTV for residential property of 75%!

Thanks in advance.

That is a bank specific limit.

There is no upper limit.

So, just to confirm, there are no restrictions imposed by legislation whatsoever and banks are free to choose their own LTV ratio limits?

Correct. This is why they were previously able to go to 110% of the value of the property. Some would call it free market economics. But seeing how the Banks are such an integral part of our economy and (apparently) cannot be allowed to fail, that now looks like an absolute absence of appropriate regulation.

Proof that there is no limit on the LTV exists - the new negative equity mortgages. These allow people to sell their existing property for less than their existing mortgage and carry the shortfall over to their new home. So if you leave the bank short €100,000 on your existing property when you sell, you buy a second property and simply add on the €100,000 to your debt. This will usually result in a LTV ratio of 120% or more. And the banks are ok with this. As is the Central Bank.

Are there not Central Bank “guidelines” for various situations though? Hence BOI had to get CB approval for the NE mortgages.

Guidelines are not rules.
I’ve yet to see anything formal for their guidelines or even the NE mortgages. Most are simply back to what was being done in the boom years with 110-120% mortgages.

Most what? Most banks? Who offers beyond 100% aside from BOI with the negative equity mortgages? AIB policy is 75% LTV for one bed dwellings, 92% for anything else up to €400k and 85% for anything over €400k.

Perhaps non entirely on-topic, but the above reminds me of a recent conversation I had with an EA who told me they weren’t accepting bids from anyone relying on getting a 92% mortgage.

The same guy told me that the particular house I was enquiring about had (at that point) six bidders, one of which was for cash. When I pointed out that the cash bidder was surely a considerably more favourable proposition to the vendor than any of the rest, the EA replied that he “…didn’t have confirmation of the bidder’s cash status by email” :unamused:

Oh dear…

How do most EAs approach this? Do they demand to see the sanction in pinciple letter from the bank? Some people have come to me asking to get it ASAP to give to an EA. Personally, I’d loathe to do this as it’s a personal document and reveals exactly how much you can borrow (if you sought the max amount) and could potentially weaken your ability to drive a hard bargain.

Was meant to read most NE mortgages. i.e. that they didn’t need approval for it as they’d already lent at these levels before.

Thanks for the replies, people :slight_smile: