Minimum mortgage borrowings?

Dabko

Just off the phone from bank of ireland about a mortgage.
Applyed a week back and they said it shouldnt be an issue bla bla bla.

I plan on buying a small 1 or 2 bed cottage on acre of land in mayo for approx 80k. Im putting up approx 10k of this. (this will leave me with approx monthly repayments of just under 300 a month - hows that for a recession busting rent bill!)

However today on the phone, the lady who called said that the bank of irelands policy was not to lend money on property worth anything less than 150k.

Is this true with all banks or was it a typical banking-bull5hit way of telling me NO!

Cheers

stepbar

Never heard of that, how in ever I'm not fully au fait with mortgage lending criteria. The general rule of thumb is 5 times your salary so to buy a house of 150k you would need to be earning circa 30k (assuming you had no other debt that would effect your repayment capacity).

I'm a bit confused as to how much you actually want to borrow? Are you kicking in 10k to bring down the mortgage to 70k or do you want a 100% mortgage and are using the 10k to renovate the house?

BTW a 70k mortgage on a property worth 80k is an LTV of 87.5% which would be acceptable.

Toots

I work in BOI and we had a similar situation very recently. I'm not sure of the exact ins and outs of it, but what I heard sounds like what has happened to you. Our mortgage advisor in the branch had met with this girl who was buying a house and it was around €100k, we sent up the application to the mortgage centre and they came back with pretty much the same response. We were all shocked, didn't think there was such a thing as too small a mortgage Our mortgage advisor is trying to appeal it for the customer at the moment. Maybe get back on to your branch and see if they're prepared to do the same, and see if you can get more info on the reason why they won't do the mortgage?

If house prices continue the way they've been going, sub 100k mortgages are going to become common once more!

Toots

Lol! That's what we were so confused about, we thought it'd be easier to get a smaller mortgage. The girl earned more than enough to qualify and she had a good deposit too. It's a pity I'm off sick at the moment, cos I'm eager to see how the case turned out.

DJDC

AIB and BOI will struggle to make a sufficient profit margin on mortgages less than 100k. Theres a high chance the loan will be paid off through early payments, with the loan accruing little interest. Also their credit rating is one of the worst in the EU so its unlikely they can access credit facilities at EURIBOR but instead have to an extra 50 or so bps. The Irish banks are a business, now on the ropes, you can't blame them for not taking on profitable mortgages.

whizzbang

I wonder is there a market for a company who only does small mortgages? Under 200k or something? The ryanair of mortages?

Toots

DJDC wrote: »

AIB and BOI will struggle to make a sufficient profit margin on mortgages less than 100k. Theres a high chance the loan will be paid off through early payments, with the loan accruing little interest.

Ah that explains it so!! Mystery solved.

BendiBus

DJDC wrote: »

AIB and BOI will struggle to make a sufficient profit margin on mortgages less than 100k. Theres a high chance the loan will be paid off through early payments, with the loan accruing little interest.

Then why not just charge a slightly higher interest rate? Smaller mortgages would be a safer bet with a better margin so surely a winner in the current environment?

Dabko

Hi all,

Thank you all for posting on this. I have gone to AIB and they say no problem with 80k.

Toots85 wrote: »

Maybe get back on to your branch and see if they're prepared to do the same, and see if you can get more info on the reason why they won't do the mortgage?

Im seriously considering now closing 3 active business accounts and 2 personal accounts with BOI and transfering to AIB.

Toots

Dabko wrote: »

Im seriously considering now closing 3 active business accounts and 2 personal accounts with BOI and transfering to AIB.

Tell your branch this! You may find that they are able to negotiate something with the powers that be if it means that they'll be losing your business.