Given too big of a mortgage?

baaaa · 17-11-2009 2:54pm #1

Does anybody know what are the criteria for determining the appropriate size of mortgage to give to someone?
I was kindly given 350k on the back of 4 weeks wages and a letter off my boss.

Scofflaw · 17-11-2009 2:59pm

I'm not sure if this is the right forum if you're personally concerned - this is more likely to provoke a general discussion on mortgage levels and bank lending than answer your specific question. Still, we'll see how it goes.

cordially,
Scofflaw

enda1 · 17-11-2009 3:01pm

Back in the day my parents say it was 2.5 times combined family's annual gross.

So you're earning €140k annual yeah?

seamus · 17-11-2009 3:04pm

enda1 wrote: »

Back in the day my parents say it was 2.5 times combined family's annual gross.

So you're earning €140k annual yeah?

Your interest rate back then was also in excess of 10%

MrMicra · 17-11-2009 3:06pm

You will be unable to repudiate the debt without bankruptcy if that what's you are driving at. The guidelines on lending have no statutory basis rather they form a code of conduct.

jayotala · 17-11-2009 3:06pm

Interesting topic. Some people get too much money and some people don't get any at all.

I guess it depends on your occupation, your earnings, your credit history, your savings (as in your deposit or contribution). If you apply on your own or with a partner.

I on the other hand can't get a mortgage, missed a few credit card payments in 2005.

baaaa · 17-11-2009 3:11pm

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

baaaa · 17-11-2009 3:14pm

MrMicra wrote: »

You will be unable to repudiate the debt without bankruptcy if that what's you are driving at. The guidelines on lending have no statutory basis rather they form a code of conduct.

Yeah it's what I'm getting at,although bankruptcy would be nice at this stage.

kieransulli · 17-11-2009 3:18pm

A true story:

A friend of mine is a carpenter. After returning from the USA a few years ago, he was working in the construction industry and decided he'd find out what, if any, kind of mortgage he could get.

At the time he was being paid €600 per week. He went to his boss and told him he was going to apply for a mortgage. The boss "doctored" his pay slip to make it look like he earned €1,200 a week.

My friend went to a building society (i won't say which one), presented just TWO doctored pay slips and was offered €300,000 less than 24 hours later.

Luckily for him, he didn't take up this kind offer!

enda1 · 17-11-2009 3:31pm

baaaa wrote: »

Yeah it's what I'm getting at,although bankruptcy would be nice at this stage.

You do know this isn't the States?
You don't get to start again with a clean slate!

asdasd · 17-11-2009 3:31pm

Is the bank to blame in the latter case, though?

waffleman · 17-11-2009 3:42pm

baaaa wrote: »

Does anybody know what are the criteria for determining the appropriate size of mortgage to give to someone?
I was kindly given 350k on the back of 4 weeks wages and a letter off my boss.

According to the government it's still over 7 times your salary:

http://www.homechoiceloan.ie/Frequently-Asked-Questions.aspx

Home Choice Loan is a mortgage for First Time Buyers and is provided by a number of local authorities.
First time buyers can apply for a Home Choice Loan to purchase a new property or build their own home.
Home Choice Loan can provide up to 92% of the market value of a property purchased. The maximum loan amount is €285,000.
The loan is a normal Capital and interest bearing mortgage which is repaid on a monthly basis. Home Choice Loan offers one variable interest rate. The rate is currently set at 3.92% variable APR 3.99%
The mortgage term will be for a maximum of 30 years.

Gurgle · 17-11-2009 3:47pm

baaaa wrote: »

Does anybody know what are the criteria for determining the appropriate size of mortgage to give to someone?
I was kindly given 350k on the back of 4 weeks wages and a letter off my boss.

It never crossed your mind to first determine the appropiate size of mortgage for you to take?

You knew you had never earned more than €35k in a year, but you signed for this size of a loan. To put it bluntly - what in hell were you thinking?

murphaph · 17-11-2009 4:32pm

baaaa wrote: »

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

You knew they were giving you a mortgage far in excess of what you would likely be able to repay then. Seems like your fault to me, sorry but people have to take responsibility for their actions.

mikemac · 17-11-2009 5:01pm

baaaa wrote: »

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

You're responsible for sure
But this was sloppy work from a bank offical.
Surely you need to show a track record of consistently earning, not a few months here and there of high wages in construction.

Now I know in construction you can move to different sites so work isn't always a constant 52 week a year deal for many
And this was even more reason for the bank offical to check your P60's. 4 weekly payslips in a row means very little
Though you are responsible here OP

OMD · 17-11-2009 5:16pm

waffleman wrote: »

According to the government it's still over 7 times your salary:

http://www.homechoiceloan.ie/Frequently-Asked-Questions.aspx

Where does it say seven times salary?

jetfiremuck · 17-11-2009 5:20pm

Here we go again. If you go into a resturant that offers all you can eat for 10 euro then get sick as a dog from overeating....is the resturant to blame. FFS.

Diarmuid · 17-11-2009 5:25pm

baaaa wrote: »

My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

So you knew straight away that you couldn't afford the mortgage.
Why did you take the mortgage with that knowledge?

asdasd · 17-11-2009 5:26pm

Here we go again. If you go into a Restaurant that offers all you can eat for 10 euro then get sick as a dog from overeating....is the Restaurant to blame. FFS.

Thats not quite the same - most all you can eat places survive on a natural human tendency to not seem piggish. Unless Homer Simpson turns up.

Banks on the other hand were actively pushing mortgages. I was called into a bank to discuss stuff because I had transferred a sum of money from America where I had worked. In general they talked about setting up a saving account ( much good it earns me now) but also about mortgages and what I could afford with a 20% deposit.

The woman who was talking about the mortgage was shocked when I said stuff was overvalued - she was saying, and this is a near verbatim quote - that the time to get n was then ( 2006) and that prices would never be as low again.

I dont get into arguments in those situations, asdasd is a mild mannered chap off t'internet, so I said I would come back sometime to talk about mortgages.

They all believed the hype, and if experts believe hype the only hope fopr the rest of us is our own native intelligence, or counter experts. Boards and Property Pin were invaluable in that regards, they provided intellectual ammunition for my gut feeling that property was overvalued. But I have an Masters in Engineering . So I can do the math.

The banks are primarily to blame. I would let them go under.

OMD · 17-11-2009 5:29pm

Diarmuid wrote: »

So you knew straight away that you couldn't afford the mortgage.
Why did you take the mortgage with that knowledge?

Interest rates 2 years ago were about 5%, so the yaerly interest was €18,000 a year. How could someone earning 35K gross believe they could afford mortgage interest of 18K

Diarmuid · 17-11-2009 6:11pm

OMD wrote: »

Interest rates 2 years ago were about 5%, so the yaerly interest was €18,000 a year. How could someone earning 35K gross believe they could afford mortgage interest of 18K

eh... I know. That's what I was getting at.

baaaa · 17-11-2009 6:12pm

When I got the mortgage I thought I was on the up in construction and didn't really forsee any of this at all.At the time renting seemed wasteful and the only way seemed to be up,it kept getting boomier.
My broker told me that I could afford it if I rented out a room to a tenant and in hindsight I had too little knowledge of interest rates.
I accept that I have a responsibility and should have known what I was getting myself into but what the feck do I know about sub prime debt or market regulation?I worked on a building site for a reason.
From what I hear if the market had been regulated properly I might still have a job and a gaff.

Diarmuid · 17-11-2009 6:44pm

baaaa wrote: »

I accept that I have a responsibility and should have known what I was getting myself into but what the feck do I know about sub prime debt or market regulation?

Fair play for accepting responsibility but did you not even understand how much you would be paying back if the interest rate was 3%,4%,5%, and 6%? ie this :

	3%	           4%	           5%	           6%
20yrs	&#8364; 1,941.09	&#8364; 2,120.93	&#8364; 2,309.85	&#8364; 2,507.51
25yrs	&#8364; 1,659.74	&#8364; 1,847.43	&#8364; 2,046.07	&#8364; 2,255.05
30yrs	&#8364; 1,475.61	&#8364; 1,670.95	&#8364; 1,878.88	&#8364; 2,098.43
35yrs	&#8364; 1,346.98	&#8364; 1,549.71	&#8364; 1,766.41	&#8364; 1,995.66

waffleman · 17-11-2009 8:13pm

OMD wrote: »

Where does it say seven times salary?

http://www.homechoiceloan.ie/Frequently-Asked-Questions.aspx

FAQ 1 Answer

The maximum loan amount is €285,000.

FAQ 4 Answer

earn over €40,000 as a single applicant

285,000 / 40,000 = over 7 times salary. That's how i read it anyway?

McTigs · 17-11-2009 8:32pm

The maximum loan is 285,000

The minimum salary is 40,000

Nowhere does it say that the people on minimum salary can obtain maximum mortgage

waffleman · 17-11-2009 9:03pm

McTigs wrote: »

The maximum loan is 285,000

The minimum salary is 40,000

Nowhere does it say that the people on minimum salary can obtain maximum mortgage

I'll agree on that however it doesnt say you cant obtain the maximum.

But come on this is subprime lendiing whatever way you look at it. So you get told by the bank to get lost but you have this nice scheme from Fianna Fail only for newly built homes to bail out developers backed up by guess who? that's right the taxpayer. Look at the list of "authorised brokers". Some heavily associated with hawking subprime loans in recent years e.g. IFG. If I was a betting man I'd say you'd get the maximum if you wanted it. I just hope people arnt that stupid.

baaaa · 17-11-2009 9:18pm

Diarmuid wrote: »

Fair play for accepting responsibility but did you not even understand how much you would be paying back if the interest rate was 3%,4%,5%, and 6%? ie this :

    3%               4%               5%               6%
20yrs    &#8364; 1,941.09    &#8364; 2,120.93    &#8364; 2,309.85    &#8364; 2,507.51
25yrs    &#8364; 1,659.74    &#8364; 1,847.43    &#8364; 2,046.07    &#8364; 2,255.05
30yrs    &#8364; 1,475.61    &#8364; 1,670.95    &#8364; 1,878.88    &#8364; 2,098.43
35yrs    &#8364; 1,346.98    &#8364; 1,549.71    &#8364; 1,766.41    &#8364; 1,995.66

Yeah I knew those figures when I got it alright,I just didn't really understand how and why rates rise and fall.

Royal Rover · 17-11-2009 9:43pm

There are hundreds of stories like this - one of my mates is/was a broker attached to one multinationals - he often laughed what some of his clients were doing - ie a factory worker on 35k and he's missus on 30k getting a mortage for 350k - madness - but he didn't care once he got paid and why should he - if the regulators were to come in a prosecute all these individuals now they couldn't - bosses forged p60's etc for employees to secure loans etc, i don't have any sypathy for anyone who went along this route - people got n way over there heads without sparing a moments thought to what life would be like in 2010 - the housing market in ireland will take a number years to bottom out, the government is still helping thousands - and once interest rates rise people will be powerless to prevent repossession - it will happen to thousands trust me- don't blame the brokers who gave out the mortages

asdasd · 17-11-2009 9:45pm

ie a factory worker on 35k and he's missus on 30k getting a mortage for 350k

with a combined salary of 65K that is far from the worst story from the boom.

PaulieD · 18-11-2009 12:54am

asdasd wrote: »

with a combined salary of 65K that is far from the worst story from the boom.

Ah, but what if one of them becomes unemployed.

18-11-2009 1:05am

baaaa wrote: »

Ok sound.
I wish I was earning that.Got the mortgage 2 years ago,got into construction near the end and was grossing 1500 a week fairly sporadically.
When I applied for the mortgage none of my p60's were over 35k gross so the bank said 4 consecutive weekly payslips would be better.My payslips said 1,500 per week gross so the bank said 1,500 x 52weeks=salary of 75k.
I never earned over 35k gross.

If you never earned over 35K / gross per annum and you actually decided to take out a mortgage of 350K you can't really blame the bank. There has to be a certain level of personal accountability in life. We all make mistakes, nowadays it seems folk look to blame someone else for them.

In saying that the bank should have been more stringent in this particular case. Did you get a 100% mortgage ? I am presuming that you didn't have a substantial deposit (rightly or wrongly but I reckon rightly somehow)

baaaa wrote: »

From what I hear if the market had been regulated properly I might still have a job and a gaff.

The market was regulated by supplu and demand, folk on 35K a year applying for 350K mortgages did f it up a bit though. In 2004 I borrowed €209,000 when I was on €50K year and gave it serious thought before I actually went through with it. I remember working out the repayments and my bills along with petrol and other must spends and seeing how much would be left at the end of the month. I think the bank were willing to lend me another €15K or so but I didn't want to borrow that much.

nesf · 18-11-2009 1:30am

waffleman wrote: »

I'll agree on that however it doesnt say you cant obtain the maximum.

But come on this is subprime lendiing whatever way you look at it. So you get told by the bank to get lost but you have this nice scheme from Fianna Fail only for newly built homes to bail out developers backed up by guess who? that's right the taxpayer. Look at the list of "authorised brokers". Some heavily associated with hawking subprime loans in recent years e.g. IFG. If I was a betting man I'd say you'd get the maximum if you wanted it. I just hope people arnt that stupid.

It depends, if a young doctor takes out a mortgage a bank might well offer them a 7x multiple knowing that their salary will increase drastically over the coming years. Conversely someone who is towards the top end of their potential salary might see 4-5x. It's not just about how much someone is earning right now but how much they'll probably earn 5-10 years down the line.

Diarmuid · 18-11-2009 7:14am

when the ECB starts jacking up the interest rates, lots of Irish people are going to be in a world of (self-inflicted) pain.

EDIT: for instance if the OP has a 30 year mortgage and if his rate hits 5% he will have €490/month left after paying his mortgage. Crazy and unsustainable

Dickerty · 18-11-2009 8:23am

Diarmuid wrote: »

when the ECB starts jacking up the interest rates, lots of Irish people are going to be in a world of (self-inflicted) pain.

That is my fear too - a lot of people are surviving because their tracker mortgage has come down by 300 or 400, so any pay cut/levy can be absorbed. But in the next two years, at least have that gap will be closed...

dny123456 · 18-11-2009 9:04am

Diarmuid wrote: »

when the ECB starts jacking up the interest rates, lots of Irish people are going to be in a world of (self-inflicted) pain.

Unless the government change the bankruptcy laws.

Duckjob · 18-11-2009 9:14am

Gurgle wrote: »

It never crossed your mind to first determine the appropiate size of mortgage for you to take?

You knew you had never earned more than €35k in a year, but you signed for this size of a loan. To put it bluntly - what in hell were you thinking?

Couldn't agree more.

Just because the banks decided to behave recklessly that didn't absolve people of the need to exercise some prudence and access their own situations adequately.

People who presented doctored wage/salary info to take out huge mortgages are largely to blame for much of the sorry mess we are in now IMO.

Diarmuid · 18-11-2009 9:40am

dny123456 wrote: »

Unless the government change the bankruptcy laws.

Imagine the drop in house prices if jingle mail would get your out of your debt in Ireland :eek: (not that I'm saying that they should implement such a scheme)

akaredtop · 18-11-2009 11:21am

Personal responsibility?

Max Power1 · 18-11-2009 11:21am

baaaa wrote: »

Yeah it's what I'm getting at,although bankruptcy would be nice at this stage.

Just send your mortgage to NAMA

:P

18-11-2009 12:00pm

Diarmuid wrote: »

when the ECB starts jacking up the interest rates, lots of Irish people are going to be in a world of (self-inflicted) pain.

Bit of a paradox that to be honest, ECB increase the rates and the mortgage owners are in self inflicted pain :rolleyes:

waffleman · 18-11-2009 2:01pm

nesf wrote: »

It depends, if a young doctor takes out a mortgage a bank might well offer them a 7x multiple knowing that their salary will increase drastically over the coming years. Conversely someone who is towards the top end of their potential salary might see 4-5x. It's not just about how much someone is earning right now but how much they'll probably earn 5-10 years down the line.

I agree they might well - they shouldnt but they might (in the current market anyway). Personally I'll stick inside 2.5x (which I'm paying at the moment) no matter what the future holds.

Anyway what annoys me more about the web site is it's so obviously geared towards keeping the whole gravy train on the rails that got us all into this mess. I suspect the government aren't seeing much uptake but it doesnt stop them trying everything they can to keep house prices grossly inflated.

Scofflaw · 18-11-2009 2:20pm

RoverJames wrote: »

Bit of a paradox that to be honest, ECB increase the rates and the mortgage owners are in self inflicted pain :rolleyes:

Not really - it's a bit like saying that on a winter's day the people who've gone out in shorts and t-shirts are suffering self-inflicted discomfort.

cordially,
Scofflaw

asdasd · 18-11-2009 2:25pm

Unless the government change the bankruptcy laws.

That ship has sailed. The taxpayer is paying for NAMA, so we cant allow the taxpayer to default. Because it would screw up NAMA for the taxpayer.

The above scenario applies to taxpayers in the middle to low income brackets only. Developers can default as private companies.

Nate--IRL-- · 18-11-2009 3:24pm

Indeed, this is why nutty ideas like the 60-year and multi-generational mortgages are being muted in papers and even in the Seanad, to deal with people drowning in mortgage debt..

eg http://www.independent.ie/opinion/analysis/wheres-my-bailout-how-to-break-chains-of-negative-equity-1943913.html

Very Japanese.

Nate

nesf · 18-11-2009 4:08pm

asdasd wrote: »

That ship has sailed. The taxpayer is paying for NAMA, so we cant allow the taxpayer to default. Because it would screw up NAMA for the taxpayer.

The above scenario applies to taxpayers in the middle to low income brackets only. Developers can default as private companies.

NAMA doesn't really have much to do with residential mortgages. So people defaulting on them wouldn't really screw over NAMA that much. It'd screw over the banks hugely which we'd probably have to inject cash into to recapitalise so the tax payer is still being screwed over by mass defaults but it wouldn't be due to NAMA.

asdasd · 18-11-2009 4:27pm

Indeed, this is why nutty ideas like the 60-year and multi-generational mortgages are being muted in papers and even in the Seanad, to deal with people drowning in mortgage debt..

eg http://www.independent.ie/opinion/an...y-1943913.html

Very Japanese.

Marc Coleman is a joke. All of his arguments there would push house prices up ( and no benefit to FTB'ers there), and lock people in mortgage equity for years. The banks would benefit.

The nonsense about stamp duty is such claptrap. What drives housing prices including the cost of stamp duty, is credit and wages. If the real cost of a house during a boom is 330K including 20K stamp duty thats because enough people can afford to pay that to keep the price up (or think they can if they get a 40 year 100% mortgage at historically low interest rates).

If the stamp duty is removed they can still afford 330K and they have to , because they have to compete with others who can afford 330K. So the nomical price of the property increases immediately by the stamp duty rate.

This is trivial stuff, but economists are continously ideological rather than scientific.

Diarmuid · 18-11-2009 4:34pm

asdasd wrote: »

MThis is trivial stuff, but economists are continously ideological rather than scientific.

I'd say you'll find precious few economists agreeing with Coleman! The guys is clearly clueless regardless of qualification

asdasd · 18-11-2009 4:45pm

Economists need to get their sh*t together. If he is wrong, but is arguing from a position of authority ( a Masters in Economics) then some peer group of economists should reply to the independent and ridicule his arguments.

nesf · 18-11-2009 4:51pm

asdasd wrote: »

This is trivial stuff, but economists are continously ideological rather than scientific.

Not really if you exclude commercial economists. If you look towards academics you'll find ideologues all right but most tend towards pragmatism rather than ideology as a guiding principle in my experience.

Commercial economists then aren't really ideological, they're just putting forward the view that best supports their paymasters which isn't really unexpected.

baaaa · 19-11-2009 5:14am

RoverJames wrote: »

If you never earned over 35K / gross per annum and you actually decided to take out a mortgage of 350K you can't really blame the bank. There has to be a certain level of personal accountability in life. We all make mistakes, nowadays it seems folk look to blame someone else for them.

In saying that the bank should have been more stringent in this particular case. Did you get a 100% mortgage ? I am presuming that you didn't have a substantial deposit (rightly or wrongly but I reckon rightly somehow)

The market was regulated by supplu and demand, folk on 35K a year applying for 350K mortgages did f it up a bit though. In 2004 I borrowed €209,000 when I was on €50K year and gave it serious thought before I actually went through with it. I remember working out the repayments and my bills along with petrol and other must spends and seeing how much would be left at the end of the month. I think the bank were willing to lend me another €15K or so but I didn't want to borrow that much.

Ok,I'm sorry I didn't explain myself properly vis a vis how much I was actually earning,hence people thinking I drew down 70k salary mortgage on a 35k salary.
I had never earned more than 35k up to the point of drawdown,but when I did actually drawdown I had 6 months done and 2 months left in the job I was in and then had 2 years work lined up on the next job(ie was very confident that I had 70k p.a. for 2years 2 months at least and had been earning it also for the 6 months prior)before the whole thing collapsed.
When you say I am looking for someone to blame if I'm honest you're right.I had a job and a gaff and a future,now I have a debt that's going to end up around 600k in real terms and no job and soon no gaff.I never falsified any information nor did I buy extravagantly or beyond what I thought were my means.
What pisses me off the most is that they gave me the mortgage when they knew right well that construction was in freefall and that I'd never be able to pay it back,and all they wanted was a letter from my construction employer stating that I had 2 years guaranteed work,when they knew this would be virtually impossible.
Personal responsibility is a valid point,shouldn't it apply to both partys though,ie me and the bank?

OMD · 19-11-2009 10:13am

baaaa wrote: »

What pisses me off the most is that they gave me the mortgage when they knew right well that construction was in freefall and that I'd never be able to pay it back,and all they wanted was a letter from my construction employer stating that I had 2 years guaranteed work,when they knew this would be virtually impossible.
Personal responsibility is a valid point,shouldn't it apply to both partys though,ie me and the bank?

I have a lot of sympathy for the situation you are in but you say you had work for 2 years and were looking like earning 70K a year. You work in construction and you felt the situation was pretty rosy. Why do you think someone working in the bank with no experience of construction should have known more about it than you? You had a letter from your employer guarenteeing 2 years and 2 months pay. Obviously that guarentee was rubbish. Again if you did not know it was rubbish how could someone working in the bank?

Given too big of a mortgage?

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