Getting Mortgage Ready

Jemm

Hi everyone,

Just wondering if anyone can help with what steps I need to take to be 'mortgage ready'.

1).First of all, I earn 30,000eur so as a single applicant would that be even considered or do I need to earn more money:)?

2). Also, I've no loans, just cleared the credit card and pay 450 per month rent. I have savings of approx 4k which I expect would need for all the fees that go with buying and my parents were going to provide the deposit amount (8% of purchase price) but I assume the bank need proof I can actually save on a regular basis and if so, for how long and is there a certain percentage of my salary that I need to save each month?

3). I've tried a few mortgage calculators who advise I could potentially get a mortgage of around 135000. Is that likely in the current market?

Thanks in advance

marathonic

You'll want a savings record over at least 6 months. The banks generally don't like gifted deposits but some may play ball if your parents are willing to sign documents stating that it's a gift and not a loan.

The banks don't go by salary multiples any more. They go on disposable income. You'd need to make a budget for expected outgoings that are non-discretionary (electricity, TV licence, food, transport, heating, insurance, etc.). Add to this the mortgage, stress tested at 6% - which would be €817 per month over 30 years for €135,000.

They expect you to have €1,250 left over after this (at least, the main banks do). For a couple, they expect €2,000 left over from joint income. For each child, add another €250.

D3PO

id imagine 135k would not be realistic on a single salary of 30k at all not even close.

OP first things first you need to be able to save regular amounts on a regular basis. Secondly you need to figure out for yourself what is a reasonable amount to apply for as a mortgage.

Even if the banks did offer your 135k (which they wont) you need to take a responsible view on what you can afford. Interest rates are at historical lows and will only go up.

As Marathonic has pointed out you need to stress test at a min of 6% and check how mortgage rates there would impact you. You need to get a mortgage that you can afford at these levels and also be able to save money aswell for unexpected expense, boiler breaking down, leak, washing machine breaking etc etc.

It would be (and Im not saying you are) very irresponsible to look at 135k at current rates = x amount a month and assume you can then afford that mortgage.

First things first aside from the 450 a month in rent how much are you regularly saving each month ? That will give you a reasonable idea of your affordability ceiling in terms of what kind of mortgage amount you should be looking at.

moxin

It also depends how old you are also, the younger you are the more you get. A person in their 30's will get slightly less than a person in their 20's assuming equal qualifications.

GavMan

Jemm wrote: »

Hi everyone,

Just wondering if anyone can help with what steps I need to take to be 'mortgage ready'.

1).First of all, I earn 30,000eur so as a single applicant would that be even considered or do I need to earn more money:)?

2). Also, I've no loans, just cleared the credit card and pay 450 per month rent. I have savings of approx 4k which I expect would need for all the fees that go with buying and my parents were going to provide the deposit amount (8% of purchase price) but I assume the bank need proof I can actually save on a regular basis and if so, for how long and is there a certain percentage of my salary that I need to save each month?

3). I've tried a few mortgage calculators who advise I could potentially get a mortgage of around 135000. Is that likely in the current market?

Thanks in advance

Are you paying rent to your folks or a landlord? If its to your folks, make sure you're transferring it to them online so there is an record of it. Withdrawing cash and handing to them. That 450 along with what you're saving should give you an indication of what you can afford to pay monthly. Does that figure tally with what is the likely repayment of a 135k mortgage?

Same goes for savings. Make transfers. Its easier to cross reference statements that way.

I would say you would need to show rent+savings of around 1000-1100 per month for that (even though over 25 years repayments are approx 730-750 per month).

Repayments of about 730-750, at current rates, rising to around 800 in stress test. Assuming you have no pension, should leave you in an around (just above) that 1250 disposable. Which, IMO, seems pretty high for a single person. Utilities and living expenses wouldn't get near that in the real world.

In terms of cash gifts, the advice I have received (from 2 brokers and pillar banks) is that they are fine as long as your folks will sign off that it is not a loan and your folks will retain no interest in the property.

A lot may also depend on the property you want to buy. It will want to be in near enough to turn key condition to get this over the line. Application for an apartment might be more favourable...

OP, my last advice would be to consult with a good broker. A good broker will set you straight on where you are and where you need to get to

Jemm

Thanks for the replies people.

Just to clarify, I pay rent to a landlord and it is detailed on my account balance. I don't intend to apply for a mortgage straight away as I heard I would need at least six months of regular consistent saving before an application. I plan to save 550 per month which when added to the rent is evidence to the bank that I can am able to use the remaining amount for bills and other living expenses. Should I buy a property, I would also rent out the second room which would be money I could put aside for unexpected expenses.

It's definitely not a decision I will rush into but just wanted to check on the likelihood of actually being able to obtain the mortgage

D3PO

i would just say re renting out a room firstly banks wont consider this income in your affordability and id strong urge you not to in your calculations either. if you get it thats a bonus.

re 135k mortgage. Your savings and current rent would just about cover a stress tested 6% however you must remember as an owner you have much more expenses that you do as a renter in terms of property tax, life assurance and maintenance also consider water charges that are on the way.

realistically if you can only save 1k per month 135k is in my opinion is really stretching things. Id also be worried about somebody who can only save 550 a month on 30k gross as a single person.

Thats over 24.5k nett a year or a smidge over 2 grand a month nett. No way should a single person in your position have expenses of over a grand a month if they are serious about wanting to be a home owner.

I'm not having a go just trying to put the reality of the situation in print for you.

moxin

A 30 yr 135k mortgage at VAR 4.5%(guess estmate) means a monthly payment of 684 a month. http://www.drcalculator.com/mortgage/ie/

As I have said on other threads, I don't think you will qualify for a 135k mortgage due to the recent lending restraints. Banks take into account rent as part of ability to repay your mortgage. You pay 450 now, conservatively I say save that 550 to make it 1000, save more the merrier. That should be enough as proof of savings ability in order to repay a mortgage(i think your mortgage will be stress tested around 700 pm max for a lower mortgage) but that is not enough to allow you to save for a hefty deposit in a short time. Remember legal fees(inc stamp duty) can be 5k alone!!

If your mortgage payment will be 700, banks will need proof you can save 700 a mth, likewise for any figure as long its less than 35% of your net income. Perhaps make an application to a broker or direct to one of the banks to get the cold hard facts of your position so you will be able to plan for the future on what your finances should be.

Jemm

D3PO wrote: »

i would just say re renting out a room firstly banks wont consider this income in your affordability and id strong urge you not to in your calculations either. if you get it thats a bonus.

re 135k mortgage. Your savings and current rent would just about cover a stress tested 6% however you must remember as an owner you have much more expenses that you do as a renter in terms of property tax, life assurance and maintenance also consider water charges that are on the way.

realistically if you can only save 1k per month 135k is in my opinion is really stretching things. Id also be worried about somebody who can only save 550 a month on 30k gross as a single person.

Thats over 24.5k nett a year or a smidge over 2 grand a month nett. No way should a single person in your position have expenses of over a grand a month if they are serious about wanting to be a home owner.

I'm not having a go just trying to put the reality of the situation in print for you.

Thanks for the advice. Within what range would you think I should be saving and also the max mortgage amount I should consider?

jameshayes

just my 2 cents here, when applying for your mortgage, your bank will really only look at the last 6 months activity. Get the 8% from your parents now and lodge it into your savings account, when you are ready to apply for your mortgage it will look like you've been saving a lot longer than you have.

Its a teeny tiny bit unethical, but they don't ask where the money came from if its there more than 6 months, so don't worry!

BookBook

jameshayes wrote: »

just my 2 cents here, when applying for your mortgage, your bank will really only look at the last 6 months activity. Get the 8% from your parents now and lodge it into your savings account, when you are ready to apply for your mortgage it will look like you've been saving a lot longer than you have.

Its a teeny tiny bit unethical, but they don't ask where the money came from if its there more than 6 months, so don't worry!

I was asked to provide proof of where my savings came from (at least half came from the proceeds of house sale a few years back, rest from savings over last few years).

runawaybishop

moxin wrote: »

A 30 yr 135k mortgage at VAR 4.5%(guess estmate) means a monthly payment of 684 a month. http://www.drcalculator.com/mortgage/ie/

As I have said on other threads, I don't think you will qualify for a 135k mortgage due to the recent lending restraints. Banks take into account rent as part of ability to repay your mortgage. You pay 450 now, conservatively I say save that 550 to make it 1000, save more the merrier. That should be enough as proof of savings ability in order to repay a mortgage(i think your mortgage will be stress tested around 700 pm max for a lower mortgage) but that is not enough to allow you to save for a hefty deposit in a short time. Remember legal fees(inc stamp duty) can be 5k alone!!

If your mortgage payment will be 700, banks will need proof you can save 700 a mth, likewise for any figure as long its less than 35% of your net income. Perhaps make an application to a broker or direct to one of the banks to get the cold hard facts of your position so you will be able to plan for the future on what your finances should be.

Banks will want proof you can save more than 700 a month, as your outgoings on the house will be significantly more. Its not just the mortgage repayments, you also need house and life in/assurance.

moxin

runawaybishop wrote: »

Banks will want proof you can save more than 700 a month, as your outgoings on the house will be significantly more. Its not just the mortgage repayments, you also need house and life in/assurance.

Yes, its not in the order of hundreds extra a month! How much per month do you think should be set aside for house and life in/assurance?

runawaybishop

moxin wrote: »

Yes, its not in the order of hundreds extra a month! How much per month do you think should be set aside for house and life in/assurance?

It depends on your health and your house. Its not trivial.

D3PO

Jemm wrote: »

Thanks for the advice. Within what range would you think I should be saving and also the max mortgage amount I should consider?

I dont think 135k is outside the realms of possibility but it will probably mean you need to look at adjusting your current lifestyle, I forgot to mention the expense of house insurance aswell in my last post

135k stress tested at 6% is going to be €770 or €810 on a 30 or 35 year mortgage respectively. If your over 30 then your only going to get a 30 year mortgage most probably and as we dont know Im going to assume thats the case

below are rough estimations for you of expenses you will have that you dont currently

€810 mortgage
€25 life assurance
€25 house insurance
€20 Local property tax
€25 water tax (mooted to be approx 300 a year)

now thats about 900 odd now currently putting rent and savings aside of 1000 may sound like that means you will be fine but then you have to consider

a) heating costs, depending on what your renting now verus what you will be buying you may well be looking at higher heating costs thats going to immediatly eat into that 100 a month

b) maintenance. Renting you dont have to concern yourself if the cooker breaks or the shower or whatever you ring the LL and get it sorted. Now obviously things dont go all the time but they do and can be costly. As well as little things like having to pay for boiler services yourself etc.

Im in my house 8 years now. During that time ive had a few maintenance issues ranging from relatively small cost wise to substancial.

For example last year I had a leak upstairs, it turned out to be an issue caused by rainwater getting though a problem in the chimney liner. 3 grand to get it sorted now that was an extreme maintenance issue and Im not suggesting that you will ever have somethign that bad at all but the fact is you need to be able to afford to sort these things if they happen.

would your current lifestyle which would allow you save 1,200 a year for maintenance be enough ? Id say your running it very close to the wind.

If you could get used to saving 650 instead of 550 a month on top of your rent to get used to living off that little bit less you will be in a far better place to actually live without the worry of thinking about can you pay all your bills.

Then if you do rent out a room great its a bonus and gives ya some disposable income to maybe have an annual holiday and save a few quid too

of course this is just my opinion but the better prepared you are going into this the less stressful everyting will be and after all thats one of the reasons you buy a house

One final piece of advise when you do go to get a mortgage contact Killers1 on Boards. Hes a broker (dont cost you anything) and hes been reccomended time and time again by boardsies who have used his services.

jlm29

Depending on where in the country you are, you might not need a mortgage of 135k to buy a house. Remember that if you do get approved for a mortgage, that's a max, not a min! You might be pleasantly surprised at what you can buy for under 100k now, and that would make it much more affordable!

Jemm

Thanks people for the advice. It's something that's a good while away but at least having a guideline idea to start is useful.