Mortgage application joint application one income

Jellybean73

Hi there, I have a question that someone may be able to answer. Here it is....

My husband and I are filling in a mortgage application form. We have both permanent jobs. However, I have been off sick for almost a year. I'm on illness benefit. I could try to return to work, however, my husband and I have toying with the idea that I stop work. My salary is quite small and to be honest we could manage without it and it would help my recovery.

We would like to apply for the mortgage application with only one income. My husband's. Technically that's fine and of course we won't get as big of a loan without the second salary. Do we need to tell the bank that I was off sick? Technically I don't see why, when we are only using one income, ie, my husband's for the application?

My illness won't be a drain on resources, etc and we have managed a year already without my salary.

We have applied before my illness and we used both incomes, but now we want to use one income. Do I legally have to tell them why we don't want to use both incomes?

Any advice would be really helpful......Thanks

killers1

Jellybean73 wrote: »

Hi there, I have a question that someone may be able to answer. Here it is....

My husband and I are filling in a mortgage application form. We have both permanent jobs. However, I have been off sick for almost a year. I'm on illness benefit. I could try to return to work, however, my husband and I have toying with the idea that I stop work. My salary is quite small and to be honest we could manage without it and it would help my recovery.

We would like to apply for the mortgage application with only one income. My husband's. Technically that's fine and of course we won't get as big of a loan without the second salary. Do we need to tell the bank that I was off sick? Technically I don't see why, when we are only using one income, ie, my husband's for the application?

My illness won't be a drain on resources, etc and we have managed a year already without my salary.

We have applied before my illness and we used both incomes, but now we want to use one income. Do I legally have to tell them why we don't want to use both incomes?

Any advice would be really helpful......Thanks

There's no problem applying using one income and telling them that you either plan to give up work or are on illness benefit and are unsure if or when you might return. They'll then just assess your application based on your husbands income only.

Jellybean73

Thanks for your reply killers1. I would have thought it was as simple as that too, but we were with a mortgage adviser in one particular bank very recently. To be honest we didn't like the guy, he was very pushy. He wanted to know why we wanted to use one income. We explained that we would like for me to give up work in the near future. He said I'd have to quit now before sending in the application to the underwriters as they would query the application or send in the salary slips for my income and then quit.

He said that the underwriters would find it strange to use one income only when we had two incomes and most people use the two. Therefore they might not take our application.

We don't see why we should justify the reasons by actually going ahead and quitting. It seems preposterous.

Surely our reason is justification enough? We said we'd like to use one income with leaving the second income out of the equation so I could have the flexibility of either leaving work or not.

In addition he didn't estimate the typical 4.5 times salary. The estimated loan figure was less than the 4.5 factor and then said if we use my salary as well, then he might manage to get it up to the higher amount (which is nominal).
We stated that we were surprised of the figure as it states on the banks site that they use 4.5. He bluffed it and said well we could use your wife's income to bring it up to that figure so! He said that your wife could quit as soon as you get the mortgage.

We have really good savings. We are renting. Not first time buyers. No debts at all. No loans. We were taken aback.

Any advice? Is the 4.5 factor for two incomes only? Or is there a different factor for one income?

Many thanks.....

joe316

Killers would be the best person to confirm but the old days of multiplying your salary are gone as far as I know (in a similar situation myself, one income wife at home with baby).

This is only a general rule of thumb but its now down to your ability to repay not how much your net salary is. The bank will look at your accounts and see after all of your deductibles how much you can afford to pay on a mortgage. The guidelines are roughly €2000 per month for a couple, add 250/300 per child on top of this, whatever is left then that is what you should be able to repay. This is of course stress tested to 2% over the current interest rate.

killers1

Jellybean73 wrote: »

Thanks for your reply killers1. I would have thought it was as simple as that too, but we were with a mortgage adviser in one particular bank very recently. To be honest we didn't like the guy, he was very pushy. He wanted to know why we wanted to use one income. We explained that we would like for me to give up work in the near future. He said I'd have to quit now before sending in the application to the underwriters as they would query the application or send in the salary slips for my income and then quit.

He said that the underwriters would find it strange to use one income only when we had two incomes and most people use the two. Therefore they might not take our application.

We don't see why we should justify the reasons by actually going ahead and quitting. It seems preposterous.

Surely our reason is justification enough? We said we'd like to use one income with leaving the second income out of the equation so I could have the flexibility of either leaving work or not.

In addition he didn't estimate the typical 4.5 times salary. The estimated loan figure was less than the 4.5 factor and then said if we use my salary as well, then he might manage to get it up to the higher amount (which is nominal).
We stated that we were surprised of the figure as it states on the banks site that they use 4.5. He bluffed it and said well we could use your wife's income to bring it up to that figure so! He said that your wife could quit as soon as you get the mortgage.

We have really good savings. We are renting. Not first time buyers. No debts at all. No loans. We were taken aback.

Any advice? Is the 4.5 factor for two incomes only? Or is there a different factor for one income?

Many thanks.....

Hi Jellybean,
There's a couple of things he should have explained to you about the Underwriting process. The salary multiple is only a guideline. It indicates the max loan amount applicants on that income might qualify for. In order to be approved at that level you need to be able to prove an ability to service the stressed mortgage repayment at that level for a consistent period of time. If you are applying using your husband's income only he would need to be able to show that repayment capacity level in his own right. Say for example the stressed mortgage repayment was €1,200pm. If you are paying rent of €800pm and half is coming from your a/c and half from your husbands and also if you are saving €300 each then you would be showing a repayment capacity for €1,400 which would be fine and it would be approved. If though you then say your income is not going to continue then the bank will only take the €400 rent your husband is paying and the €300 he is saving so the repayment capacity evident is reduced to €700pm. As this is below the €1200 stressed repayment your application would be declined. Because your salary is not being factored in they won't factor in any repayment capacity that you are showing because if your income stops then you can't continue to contribute. Ultimately, if you have a loan amount in mind that you need let the bank factor in whatever they need to in order to approve you at that level. If you are comfortable with the repayments even with potential rates increases and the possibility of giving up work it doesn't make a huge difference to you if the bank factor in your income or not as it's solely for calculation purposes. I take it that you are dealing with BOI?

killers1

joe316 wrote: »

Killers would be the best person to confirm but the old days of multiplying your salary are gone as far as I know (in a similar situation myself, one income wife at home with baby).

This is only a general rule of thumb but its now down to your ability to repay not how much your net salary is. The bank will look at your accounts and see after all of your deductibles how much you can afford to pay on a mortgage. The guidelines are roughly €2000 per month for a couple, add 250/300 per child on top of this, whatever is left then that is what you should be able to repay. This is of course stress tested to 2% over the current interest rate.

Very few banks work off multiples and you're right it's only a guide to the max loan amount someone might qualify for. BOI/ICS use it and the multiple changes depending on the salary level. You need to have a proven repayment capacity for the stressed mortgage repayment and sufficient disposable income left over to live off each month after the stressed mortgage repayments, personal loans & any childcare or other liabilities are factored in.

Jellybean73

Hi Killers1,
Thank you for your advice and Joe316. You are right the adviser should have explained the factors involved, but we did ask and we received a mundane answer and it was cagey.

For the last year all bills and rent are paid by one income, plus we are making savings. Albeit smaller amounts. We have one child. We have savings to cover education. We are good savers and we can show all of this. No loans at all. We have been careful and didn't eat more than we could chew. We are careful now and we were careful in the past. We have a good history. Originally our plan was always to use my salary to save the deposit, etc and then leave work. We have the deposit and more. Unfortunately, I ended up ill, but needless to say we have already made those savings. On paper, we are really good.

It was a preliminary chat with the adviser and it wasn't even the amount of the estimated loan that took us aback, it was the attitude towards my job. Telling me to quit before we submit the application was a bit offhand. Surely, if we submit one income and we get the loan, it shouldn't matter whether I am working or not.

As long as the stress test shows what my husband can pay, it really shouldn't matter whether I have an income or not. I just find it strange.......

We would have to be happy enough with the lower amount of the loan......and obviously that's fine.......but why query or even want to know about my income and then prove that I am leaving. Surely that is my decision and I would like the flexibility.

I think there is a possibility that he didn't look at our file carefully. Plus, it was a preliminary chat. He just seemed to be focused on my income. It's pretty small. In addition, he suggested that we submit both incomes for the application and then I leave work straight after. So let's imagine that we are successful in getting a higher loan amount that is based on the two incomes.....then i leave work the next day...... now what.... well now my husband's income cant service the loan. It just doesn't make sense at all.

It is a possibility that we didn't talk to someone suitable and we could talk to someone else instead.

It still doesn't make sense why I have to prove to the underwriters that I may leave work in the future by actually quitting now, ie prior to the application? Surely that is not right. That can't be good advice from the mortgage adviser. How ironic!

killers1

Jellybean73 wrote: »

Hi Killers1,
Thank you for your advice and Joe316. You are right the adviser should have explained the factors involved, but we did ask and we received a mundane answer and it was cagey.

For the last year all bills and rent are paid by one income, plus we are making savings. Albeit smaller amounts. We have one child. We have savings to cover education. We are good savers and we can show all of this. No loans at all. We have been careful and didn't eat more than we could chew. We are careful now and we were careful in the past. We have a good history. Originally our plan was always to use my salary to save the deposit, etc and then leave work. We have the deposit and more. Unfortunately, I ended up ill, but needless to say we have already made those savings. On paper, we are really good.

It was a preliminary chat with the adviser and it wasn't even the amount of the estimated loan that took us aback, it was the attitude towards my job. Telling me to quit before we submit the application was a bit offhand. Surely, if we submit one income and we get the loan, it shouldn't matter whether I am working or not.

As long as the stress test shows what my husband can pay, it really shouldn't matter whether I have an income or not. I just find it strange.......

We would have to be happy enough with the lower amount of the loan......and obviously that's fine.......but why query or even want to know about my income and then prove that I am leaving. Surely that is my decision and I would like the flexibility.

I think there is a possibility that he didn't look at our file carefully. Plus, it was a preliminary chat. He just seemed to be focused on my income. It's pretty small. In addition, he suggested that we submit both incomes for the application and then I leave work straight after. So let's imagine that we are successful in getting a higher loan amount that is based on the two incomes.....then i leave work the next day...... now what.... well now my husband's income cant service the loan. It just doesn't make sense at all.

It is a possibility that we didn't talk to someone suitable and we could talk to someone else instead.

It still doesn't make sense why I have to prove to the underwriters that I may leave work in the future by actually quitting now, ie prior to the application? Surely that is not right. That can't be good advice from the mortgage adviser. How ironic!

It obviously wasn't explained to you very well. If your husband's income is sufficient in it's own right to borrow the amount you need and he has a proven repayment capacity for the stressed mortgage repayment in his own right you should have no issue gaining approval. If they have reduced the loan amount they would be willing to offer you it's because you have an issue proving affordability.

Jellybean73

killers1 wrote: »

It obviously wasn't explained to you very well. If your husband's income is sufficient in it's own right to borrow the amount you need and he has a proven repayment capacity for the stressed mortgage repayment in his own right you should have no issue gaining approval. If they have reduced the loan amount they would be willing to offer you it's because you have an issue proving affordability.

I think you misunderstand what I am saying. The issue is not the amount of the loan on one income. That is logical. We don't expect or want more than we can reasonably pay.

The issue is why I must leave work now before we file an application on one income?

killers1

Jellybean73 wrote: »

I think you misunderstand what I am saying. The issue is not the amount of the loan on one income. That is logical. We don't expect or want more than we can reasonably pay.

The issue is why I must leave work now before we file an application on one income?

You certainly don't need to leave work before making an application and if the advisor is telling you that I'd run a mile!

Jellybean73

Thanks Killers1.

I guess my posts were long winded, but the crux of my question was why I should quit my job before we submitted the single income application.

We were surprised by the mortgage advisers advice. Which was to quit now or else submit a joint income application and then quit.

I think it's time to approach someone else to deal with our application.

killers1

Jellybean73 wrote: »

Thanks Killers1.

I guess my posts were long winded, but the crux of my question was why I should quit my job before we submitted the single income application.

We were surprised by the mortgage advisers advice. Which was to quit now or else submit a joint income application and then quit.

I think it's time to approach someone else to deal with our application.

I think you might be right... It's very straightforward, you tell them that you want the application assessed on your husband's sole income as you may be giving up work in the short term. It's not rocket science!