Where can we get accurate advice before buying a home

October 2013

Question

I am seeking advice on buying a house, as we have come across some conflicting information and we are unsure as to where to get accurate, impartial advice.

My girlfriend and I are hoping to buy a family home in north Dublin. We currently live in a one-bed apartment. My girlfriend owns the apartment. It is in negative equity and on a tracker mortgage with PTSB. As the apartment is in negative equity we are reluctant to sell.

Our concerns relate to the implications of me and my girlfriend buying a house together. We have heard secondhand information and seen newspaper articles indicating we could lose our tracker mortgage with PTSB as it becomes a buy-to-let property. Should we apply solely for a mortgage in my name? (I would be a first-time buyer.) Would this divert any attention from PTSB as there would be only one name on the mortgage if we bought a house? We had joint approval with Bank of Ireland, but then we went solely in my name (Bank of Ireland also).

We have found it difficult to get any clarity on this matter (even from banks), and we are anxious as to the full implications this may have for us.

Answer

This is a common problem. Borrowers are keen to retain their tracker mortgages but cannot indefinitely postpone important decisions about moving home (particularly where families have grown).

There are solutions. Bank of Ireland, for example, will allow negative equity to be carried over to a new property and the tracker balance to be transferred. The balance will stay on the tracker rate plus a surcharge of 1 per cent for five years, and then the balance converts to variable rate. This product is not available for transfer of tracker mortgages from another lender. All this depends, of course, on proving you can afford the total repayment of the existing balance and new loan. You will need to check if PTSB offers anything similar.

Some owners on tracker mortgages retain their tracker rate by letting the property and not telling their bank. We do not advise you to do this as it is almost always in contravention of a covenant in the mortgage deed.

Purchasing the house in your sole name may be the easiest solution. As in all cases of joint purchase, I would recommend that you both get independent legal advice. This is particularly important for you if you are contemplating taking on your girlfriend’s negative-equity burden.

Similarly, your girlfriend will need to get advice on the implications of contributing towards the mortgage repayment on a house bought solely in your name. It is probably unpalatable to consider now what would happen if you parted company in the future, but getting the ownership structure and other legal issues sorted now could save you lots of additional heartache and legal fees down the road.

Simon Stokes is Chairman of the residential property group of the Society of Chartered Surveyors Ireland (MediKids)