Questions about mortgage, what income do banks accept?

Akrasia

Hi there

I'm a 30 year old married man with 3 kids. The kids are young so my wife is staying at home to care for them and I am the only wage.

I earn 27k a year before tax, this works out about 1.8k a month after tax. I know that the banks would laugh at me if i asked them for a mortgage based on this alone, but can I also add in the child benefit and family income supplement payments we receive?

The child benefit is 390 a month for the 3 kids and Family income supplement is €140 a week. If I add these to my income, this would give me a take home income of 2796 a month

Would a bank consider these payments as part of the household income?

We are looking at buying a house that is priced at 85,000 and would only require a mortgage of about 65,000. Currently we are renting a house for 500 euros a month and the monthly repayment on a mortgage of 65k would be a lot less than this a month so it makes financial sense for us to move if we can get finance.

Does anyone know if it would be at all possible to arrange a mortgage on this basis?

whippet

They generally won't accept these additions as income when looking at mortgages.

What they will look at is the ability to pay from basic earnings ... and more crucially your savings history, you will need to show regular savings from your own income - and have at least 10% of the purchase price ready for a deposit.

McDook

Would your FIS be reduced if you werent paying rent?

miezekatze

I think a mortgage of 65k would actually be realistic for your income. I don't know if they would accept child benefit etc. as income, but even without that I think you would probably be OK. You have a proven record of paying a higher amount each month on rent and if you have savings of 20k then your LTV won't even be that high.

Wabbit Ears

If going by the old formula from when I bought my house of 2 1/2 times your income for a single income purchase plus the deposit of 10% you should be grand esp if you had 20% or so

phormium

Banks don't go by the old method of a multiple of income any more. They now do it on a net disposable income basis and 3 children with one income would bring down your affordability.

Do you have a credit union account? Many credit unions give the equivalent of small mortgages as secured loans, granted their rates are probably higher and the term shorter but worth considering if banks won't consider you.

Any social welfare type payments such as FIS are not normally taken into account as income and child benefit cannot be used.

Akrasia

Thanks for the replies everyone.

The FIS payment is based on my income and the number of children I have, it doesn't take into account my costs (eg rent) so the amount I receive is fixed on an annual basis and would only go down if my income goes up (or if I lose my job)

The banks are really frustrating. I've been using the online calculators and as soon as I say I have children, they say I can't afford the repayments on a mortgage but they'll give a single person a massive mortgage on the basis of their existing circumstances regardless of the fact that they could be planning to get married and have kids the day after they get mortgage approval.

It's also frustrating if they won't accept childrens allowance or payments from the state

I'm looking for a secured loan on a property that has already come down in price by more than 50% in the last few years and is unlikely to fall by more than a few thousand euros more (if it's not already at the clearance price) The mortgage repayments would be more affordable to me than the current rent that I pay even if there is a significant interest rate increase.

Do the local branches have any discretion when it comes to mortgage approval anymore? Is it possible to make a case on an individual basis or is it all automated and set by head office?

Bigcheeze

Online calculators are useless. Either deal with the branch or talk to a mortgage broker or the credit union option as someone mentioned.

Mrs OBumble

Akrasia wrote: »

The FIS payment is based on my income and the number of children I have ... so the amount I receive is fixed on an annual basis and would only go down if my income goes up (or if I lose my job)

Or if the government changes the eligibility rules - and that reason is why the banks won't count it, it's not income that you have good control over.

Akrasia

Nobody has full control over their income. I'm in a stable job but there's nothing stopping the company from announcing tomorrow that they're closing down their irish operations and making everyone redundant.

Payments like FIS and Child benefit are reasonably stable, the government might tweak them in the budget, but they're unlikely to make huge changes to these as there would be political consequences, but as you said, they're not guaranteed

Anyway, thanks for the replies.

We'll arrange to meet with some insurance brokers and see what our options are, it's nice to go into these meetings with some information about how everything works

phormium

Financial institutions are not allowed accept child benefit as income for the purposes of approving loans, that is not their rule they are simply not allowed, that money is meant to be for children not to repay loans. Now I know you could argue that the house is for the children but nevertheless that is the rule.

Any social welfare payments such as FIS are paid because you have insufficient income to live on, they cannot be used to bump up income from the point of borrowing, that would be irresponsible lending, we have seen enough of that! Even back in tiger days social welfare payments were not generally taken into account other than permanent payments such as invalidity or pension payments.

Ray Palmer

The lunacy that a person on an income supplement wanting it to be used as a mortgage calculation is just amazing. The income the person makes is so low the state see it as unliveable with a family.
Council housing is specifically designed for people in this situation so go on the housing list is really the only option. You don't earn enough to afford a house. The state is helping you due to your children as you can't provide for them on your own. How you expect to afford to cater for these children in the future as they cost more with a mortgage boggles the mind.

If you want to buy a house get a better paid job. Of course when that happens your FIS will be cut but the banks will consider the income. It is a disincentive for some but for the OP it would be a help. Of course your wife could get a job too but then the same effect on FIS.

McDook

Or you could just ask the bank instead of the internet and get a definite answer for yourself and be satisfied.

runawaybishop

Akrasia wrote: »

We are looking at buying a house that is priced at 85,000 and would only require a mortgage of about 65,000. Currently we are renting a house for 500 euros a month and the monthly repayment on a mortgage of 65k would be a lot less than this a month so it makes financial sense for us to move if we can get finance.

Its not just the mortage you have to pay though, you need house insurance and life assurance - dont forget to budget for them.

D3PO

runawaybishop wrote: »

Its not just the mortage you have to pay though, you need house insurance and life assurance - dont forget to budget for them.

and property tax and house maintenance and and and .......

Eldarion

I'm glad I wasn't the only one appalled at the idea of aid due to insufficient liveable income being used to purchase appreciating assets.

ted1

Ray Palmer wrote: »

The lunacy that a person on an income supplement wanting it to be used as a mortgage calculation is just amazing. The income the person makes is so low the state see it as unliveable with a family.
Council housing is specifically designed for people in this situation so go on the housing list is really the only option. You don't earn enough to afford a house. The state is helping you due to your children as you can't provide for them on your own. How you expect to afford to cater for these children in the future as they cost more with a mortgage boggles the mind.

If you want to buy a house get a better paid job. Of course when that happens your FIS will be cut but the banks will consider the income. It is a disincentive for some but for the OP it would be a help. Of course your wife could get a job too but then the same effect on FIS.

outside of Dublin they can't give houses or apartments away. 27k is more than enough for a mortgage of 65k.

The OP is currently paying 500 a month, on 65k it would be closer to 350. he will have security and doesn't face being evicted decides to sell the house or move into it himself. life on a 65k mortgage wouldn't be much, nor would property tax.

your attitude stinks, some people prefer to be able to fend for themselves than relying on the state. if the OP wants to be king of his own castle. more power to him.

runawaybishop

ted1 wrote: »

The OP is currently paying 500 a month, on 65k it would be closer to 350.

Except it wouldn't. You dont just fork out 350 a month for your mortage and call it a day, there are a raft of additional expenses to take into account.

phormium

Credit Union is the only way to go here if you can get it from them, I really believe they will be the future lenders for small mortgages like this where the income is insufficient for the banks to even look at it but affordability is there.

However I still don't believe FIS should make up any part of allowable income.

ted1

runawaybishop wrote: »

Except it wouldn't. You dont just fork out 350 a month for your mortage and call it a day, there are a raft of additional expenses to take into account.

I do own houses i realise that, at the end of the term the OP will no longer have to pay rent or mortgage. There is a buffer zone of 150 a month (say 100 after insurance and assurance)

Chattastrophe!

ted1 wrote: »

your attitude stinks, some people prefer to be able to fend for themselves than relying on the state. if the OP wants to be king of his own castle. more power to him.

Yes, but ... what he's proposing is not fending for himself at all, it's basically accepting that he's going to continue to be reliant on the state until (at least) the mortgage is paid off.

In fact, having a mortgage would surely be a disincentive for him to ever get off the FIS (either by seeking a better paid job, or by his partner getting a job.)

I'm in a position where my partner and I are both working full-time - neither of us on great money, but enough that we certainly wouldn't qualify for the FIS or for any other welfare payments. There is no way we could afford to get a mortgage for another few years, and we're fine with that, we'll continue to rent until we can afford our own place. But how on earth would it be fair that someone reliant on benefits would be able to get mortgage approval, based on these welfare payments as part of their income, if an ordinary hard-working couple can't?

runawaybishop

ted1 wrote: »

I do own houses i realise that, at the end of the term the OP will no longer have to pay rent or mortgage. There is a buffer zone of 150 a month (say 100 after insurance and assurance)

Right, but you didn't mention that (there is also maintenance etc). Anyway, the bank will most likely not grant approval as thee is only one income source and significant expenditure.

ted1

Chattastrophe! wrote: »

There is no way we could afford to get a mortgage for another few years, and we're fine with that, we'll continue to rent until we can afford our own place. But how on earth would it be fair that someone reliant on benefits would be able to get mortgage approval, based on these welfare payments as part of their income, if an ordinary hard-working couple can't?

you need to look at the size of the mortgage. what size mortgage would you hope to get? the OP is only looking for 65k.

the OP may be able to get one based on his income without FIS. That's fair enough. The OP is an ordinary hard working couple. they have kids, between him using his wivies tax credits and the cost of child minding it more than likly doesn't make financial sense for his wife to work, unless she can get a better paid job than him. then they should swap roles.

Ray Palmer

ted1 wrote: »

outside of Dublin they can't give houses or apartments away. 27k is more than enough for a mortgage of 65k.

The OP is currently paying 500 a month, on 65k it would be closer to 350. he will have security and doesn't face being evicted decides to sell the house or move into it himself. life on a 65k mortgage wouldn't be much, nor would property tax.

your attitude stinks, some people prefer to be able to fend for themselves than relying on the state. if the OP wants to be king of his own castle. more power to him.

He is not fending for him self if he is relying on FIS. Which he is only entitled to while the kids live with him and remain in full time education. CB will be cut off before that too. The state income is for the children not the married couple.

It is a pretty horrible attitude to expect the state to fund a house purchase. Incredibly short sighted to expect to get these payment indefinitely or while paying for a house.

Luckily the banks won't lend on this income and rightly so. He can't afford to pay for his kids without state aid but you expect him to buy a house? You do understand why that sounds crazy?

Remember to comment on the post not the poster as my attitude is not open for comment as per the charter.

Ray Palmer

ted1 wrote: »

. The OP is an ordinary hard working couple. .

No they aren't it is not ordinary to get FIS. You are the working poor if you are on FIS. They are poor. If they can afford to buy a house then it suggests their payments are too high and maybe payments should be weighted based on the cost of accommodation in areas.

Akrasia

Eldarion wrote: »

I'm glad I wasn't the only one appalled at the idea of aid due to insufficient liveable income being used to purchase appreciating assets.

Give me a break would ya. That's not what I'm doing at all. We're not trying to scam the state.

We're just trying to figure out how best we can provide security for our family into the future and save money. The house we are renting now is due for a rent review this year and the costs could go up by 50 to 100 euros a month

If we got a mortgage of 65k that would cost about 300 quid a month and home insurance and life insurance is about 55 euros a month so we'd be saving about 150 euros a month over the current cost of renting. The 1800 a year would cover the cost of the property tax and maintenance of the property which was estimated at about 1300 per year for an average home (and presumably less for smaller houses like the one we would like to buy)

http://blog.aaireland.ie/annual-cost-of-owning-and-running-a-home-more-than-e15000-reports-aa/

If the banks were more flexible, we would be able to make a case for a mortgage based on my earned income alone without taking FIS into account at all (based on the old lending criteria before bubble territory and the overly restrictive mortgage lending practises post crash)

Mrs OBumble

ted1 wrote: »

outside of Dublin they can't give houses or apartments away.

Please PM me the contact details of any houses being "given away" in Galway City!


I'm glad that Ray brought up the fact that council housing is the government's preferred approach to assisting low-paid people like the OP. My fingers twitched over a sentence about it earlier in the discussion, but I decided not to post it because some people get really upset with the idea that they are council-house candidates.

OP, get on the list. Don't accept voluntary housing. Live there for 10 or 20 or whatever years, and then do the tenant purchase thing. You may not get the neighbourhood of your dreams, but you don't lose your home if your job goes belly-up, either.

Akrasia

Chattastrophe! wrote: »

Yes, but ... what he's proposing is not fending for himself at all, it's basically accepting that he's going to continue to be reliant on the state until (at least) the mortgage is paid off.

In fact, having a mortgage would surely be a disincentive for him to ever get off the FIS (either by seeking a better paid job, or by his partner getting a job.)

What? I have no intention of being on FIS forever. My wife did have a job but she lost it in the recession. She will go back to work in a few years when it is economically viable to do so (when there are jobs available, and the childcare costs are reduced when they're all in school)

If we were interested in scamming the state, my wife would be claiming Job Seekers allowance even though she's not available for work. This would make us a lot more money and also entitle us to rent allowance. We are not interested in scamming anyone. We just want a modest place to live to raise our family.

I'm in a position where my partner and I are both working full-time - neither of us on great money, but enough that we certainly wouldn't qualify for the FIS or for any other welfare payments. There is no way we could afford to get a mortgage for another few years, and we're fine with that, we'll continue to rent until we can afford our own place. But how on earth would it be fair that someone reliant on benefits would be able to get mortgage approval, based on these welfare payments as part of their income, if an ordinary hard-working couple can't?

There is something wrong with the banking system if an average working couple don't earn enough money to be able to get a mortgage for an average house in Ireland. It seems like the lending criteria has gotten far too restrictive. I am the first to say that the banks should never have been giving out the crazy mortgages they were giving during the bubble and that was the main reason why house prices shot up so much, but that's no reason to overshoot and be far too restrictive afterwards.

ted1

Ray Palmer wrote: »

No they aren't it is not ordinary to get FIS. You are the working poor if you are on FIS. They are poor. If they can afford to buy a house then it suggests their payments are too high and maybe payments should be weighted based on the cost of accommodation in areas.

or that property they wish to buy is very low.

ted1

Ray Palmer wrote: »

It is a pretty horrible attitude to expect the state to fund a house purchase. Incredibly short sighted to expect to get these payment indefinitely or while paying for a house.

I've already said to exclude the state contribution. a mortgage of 300 -350 is doable on 27k without state assistance, and is less than his rent.

Triceratops Ballet

the banks will look for any reason to say no to an application. In inherited a house that needs substantial work. Between two of us we currently pay 1000 a month in rent, I earn 35k a year, have saved €600 pm for as long as I can remember, He lost his job and went back to college working part time earning approx 18-20k a year. We applied for a 65k mortgage to be able to move into the House and were turned down by AIB, BOI, PTSB and Ulster bank!! I was baffled there is genuinely no reason I can see as to why, they all said they would like to see us boost our savings! I had 8k in the bank at the time and himself had 4 and I already own the house!! This was last summer so we'll be going back to them later on this year

Op they will look for any reason to turn you down and while I can see the logic in what you're trying to do, and I sympathise as I know how frustrating it is. I can imagine that the FIS would go against you.