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Yet another mortgage question thread!

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  • 01-09-2014 8:36pm
    #1
    racersedge
    Registered Users Posts: 537 ✭✭✭


    Hi all,

    First time to take advantage of this forum here. As many others here, looking to take advantage of the myriad of opinions that are available here at boards.ie

    So.. a mortgage. I'm considering taking a plunge. (Sorry if this seems a little long. Feel free to put the kettle on).

    For a little background. I'm a 28 year old guy who is slumming away in the childcare sector, probably earning in among 20k a year (which after the taxman takes his cut, leaves me somewhere near the 15k mark. Happy days! :D)

    Despite been in what people (myself included in them) would describe as a low paying job, I've managed to scrim and save during my 28 years on this island. I'd have in or about 27k saved up between my different savings accounts. With the way savings accounts are these days and how little you can make with them after everyone takes their cut, it had me thinking that plumping it into an affordable house might be a better investment.

    My current living situation is that I live with my parents in south Kildare near the Laois border, whom I give 200 euro a month towards household expenses (along with helping with the upkeep). I also bank at least 300 euro a month into savings account to stash away. I also live there with my girlfriend (big house, old B&B and so we occupy what is effectively a granny flat). The idea behind this (and the what may be considered low rent paid to my parents) was to be able to put stuff away towards a house.

    As current standards go, it is perfectly fine. Bit small, but fine. But I also know that one day my parents will want to sell and moving on will be inevitable. Yes, I could wait for that day to come and who knows in what way the market will be then - but I can't help but feel a bit of pressure to get on the ladder while prices remain possible for me with my current income.

    I do have a question, now that I have the personal back-story and sob story over with! I'm likely in the coming weeks to start ringing about to see if I am eligible for a mortgage, and how much I would be able to afford with them.

    The question is this - am I better to go and apply on my own versus a joint application with my girlfriend. Now, I'm sure some might say well if I am thinking of going on my own, I must question our future. Not at all, in fact I am planning to propose in the coming weeks to her so settling down with her. No, the question lies with her financial state.

    Where I have been a tight git throughout my life, scrimping and saving - she has no savings whatsoever. Over the past few years we have been together, I have encouraged her to start scrimping and saving though and she's recently cleared a long-standing overdraft. (Never went beyond her agreed overdraft level, but wonder if even having one has hurt her credit rating).

    Now obviously, two combined wages look better than one on a mortgage application but does that fact that she has no savings whatsoever hinder the application against one of my own, where I can show good saving habits. Or, giving my lowly income level, would a mortgage application be doomed to failure.

    So yeah, that's the long and the not so short of it all. I appreciate the time and consideration by you for reading this and looking forward to any advice or opinions that can be given.

    - RacersEdge


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    #2
    Trish56
    Registered Users Posts: 1,256 ✭✭✭Trish56


    On 20k p.a you are unlikely to qualify for a mortgage on your own. If your girlfriend is working in a permanent position you have a better chance applying for a joint mortgage. You can borrow up to 92% depending on lender so will need 8% deposit plus 1% stamp duty and legal fees approx. 2k.

    Lender will look for regular monthly savings or rent payable by bank transfer. You need to transfer the rent you pay your parents by bank transfer.

    Regarding her credit rating, you can apply to www.icb.ie for a credit report.


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    #3
    Cushie Butterfield
    Registered Users Posts: 1,861 ✭✭✭Cushie Butterfield


    racersedge wrote: »

    Where I have been a tight git throughout my life, scrimping and saving - she has no savings whatsoever. Over the past few years we have been together, I have encouraged her to start scrimping and saving though and she's recently cleared a long-standing overdraft. (Never went beyond her agreed overdraft level, but wonder if even having one has hurt her credit rating).
    Having an authorised overdraft shouldn't in itself go against her. A prospective mortgage lender would be looking to see if she went over her authorised limit & if she did it wouldn't be looked favourably upon.

    As she has cleared it off & is now 'living within her means' her account will look more healthy. It's best if you both have at least six months bank statements that basically show that you both are living well within your means & are saving regularly.

    There's an excellent post HERE with some good tips on what to do in order to prepare for a mortgage application.


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    #4
    SBarrett
    Registered Users Posts: 160 ✭✭SBarrett


    As well as having the deposit, banks are going to look at whether you can afford repayments. Your proof is the rent you pay to your parents and your €300 a month. As Trish said, you need to be able to prove you pay your parents €200 a month and that has to be done through bank transfers.

    Where you are going to fall down is the disposable income aspect of the application. You have to show the bank that you have a certain level of disposable income after tax and mortgage. This is about €1,300 for a single mortgage and €2,000 for a couple (it varies per lender). Your net salary comes in at around this before mortgage repayments so you won't qualify on this aspect of the application. A joint application may get you over the line.

    Get your girlfriend to cancel her overdraft. If an underwriter sees someone can't live within their means when they don't have a mortgage and paying household bills, they won't think they are suitable for a mortgage.

    Steven


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    #5
    racersedge
    Registered Users Posts: 537 ✭✭✭racersedge


    Thank you for the swift input on this. Glad to have a source where I can get stuff explained in plain English without any heavy banking jargon to try to translate.
    Trish56 wrote: »
    Lender will look for regular monthly savings or rent payable by bank transfer. You need to transfer the rent you pay your parents by bank transfer.

    That at least I am covered with. I have been regularly transferring over the money to them via bank transfers via online banking for about two years, if not more now. So at least I have a steady proof that money is going from me to them in this regard.
    Cushie Butterfield wrote: »
    As she has cleared it off & is now 'living within her means' her account will look more healthy. It's best if you both have at least six months bank statements that basically show that you both are living well within your means & are saving regularly.


    Yeah, 'living within her means' might be a bit of stretch when describing her financially! It's been a reality check for her to try to get things in order and I think it scares her somewhat the idea that her poor financial state might preclude her from 'owning' a house. But yeah, she's trying hard, but is pretty much a matter of just been in the black.

    As I said initially, I was just concerned about the joint approach to it where I am seeing as saving money and she has nothing, somehow often to go through the majority of her paycheck when lots of small things just add up to big things. But I'm making her sit down and write down what she spends to try to identify problem areas that can be improved in this so savings are been made.
    SBarrett wrote: »
    Where you are going to fall down is the disposable income aspect of the application. You have to show the bank that you have a certain level of disposable income after tax and mortgage. This is about €1,300 for a single mortgage and €2,000 for a couple (it varies per lender). Your net salary comes in at around this before mortgage repayments so you won't qualify on this aspect of the application. A joint application may get you over the line.

    Get your girlfriend to cancel her overdraft. If an underwriter sees someone can't live within their means when they don't have a mortgage and paying household bills, they won't think they are suitable for a mortgage.

    Steven


    Yeah, I can see where you are coming from here. Monthly, after the taxman has his bit iwth me, I would come in with an average take home pay of 1,336 euro. So that would be even before a mortgage (where payments is likely to be anything from 500 to 700 a month depending on the amount of years on mortages from 100k to 130k off some of those quick mortgage calculators (some very rough ballpark figures based off them and the desire to try to make the mortgage low to give myself some sort of chance.) After that, it does only leave myself about 600-700 as disposable.

    I do have her cancelling that overdraft now she's back in the black. That letter goes in the post tomorrow.

    Thanks to three of you for your input and links to good places for more tips. I can take this all into consideration in the coming weeks and months as I decide what course of action is best to take in this regards.


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