Getting a mortgage without a record of repayment.

Throwaway12345

Hello

This is a throwaway account as some friends would recognize my real username, it will not be seen outside this thread. If the mods wish to know my real account, please PM me.

Basically, my question is regarding mortgage applications.

I'd be looking for a mortgage of about 80k.
I am 26 and earn 29k a year.
Never had a loan.
I've got savings of 80k, saved over the past 7 years.

Unfortunately, while I have been giving rent money to my parents (about 100 p/w) I don't really have it documented. I usually just handed it over in cash whenever I had a chance to call to an ATM on my way home from work. Sometimes, depending on my parents needs and whatever I was doing at the time, I'd hand over lump sums of a few weeks payments at a time. So basically although I can show that I can save money I haven't shown that I can repay money. All the bank will see in my bank statements are a number of inconsistently timed ATM withdrawals, close to none of them the exact amount.

Its my understanding that being turned down for a mortgage damages your chances of getting a mortgage in future, so with that in mind am I shooting myself in the foot by applying for a mortgage now? Or would the savings built up be enough to assure the banks that I am capable of repaying the mortgage?

I'm not looking for assurances that they will absolutely give me the money, but I would prefer not to be wasting everyones time if lacking the repayment record would cause the application to be rejected out of hand.

Thanks in advance.

The_Morrigan

At your age to have 80K in savings will stand to you, to be perfectly honest with you this is really something you need to discuss with a mortgage adviser. We don't know how they deal with applicants who have never left home, which is a very common thing these days. They may accept a letter/statement from your parents stating you gave housekeeping over on a regular basis, they may not need any evidence of this if you have a decent enough salary and no existing debt. The risk calculators are moving goal posts. There is no harm contacting a few of them and gauging a reaction.
They might even be able to give you a few pointers on how to gear yourself up for a better application.

Throwaway12345

The_Morrigan wrote: »

At your age to have 80K in savings will stand to you, to be perfectly honest with you this is really something you need to discuss with a mortgage adviser. We don't know how they deal with applicants who have never left home, which is a very common thing these days. They may accept a letter/statement from your parents stating you gave housekeeping over on a regular basis, they may not need any evidence of this if you have a decent enough salary and no existing debt. The risk calculators are moving goal posts. There is no harm contacting a few of them and gauging a reaction.
They might even be able to give you a few pointers on how to gear yourself up for a better application.

Thank you for your response, Morrigan.

quadrifoglio verde

Throwaway12345 wrote: »

Hello

This is a throwaway account as some friends would recognize my real username, it will not be seen outside this thread. If the mods wish to know my real account, please PM me.

Basically, my question is regarding mortgage applications.

I'd be looking for a mortgage of about 80k.
I am 26 and earn 29k a year.
Never had a loan.
I've got savings of 80k, saved over the past 7 years.

Unfortunately, while I have been giving rent money to my parents (about 100 p/w) I don't really have it documented. I usually just handed it over in cash whenever I had a chance to call to an ATM on my way home from work. Sometimes, depending on my parents needs and whatever I was doing at the time, I'd hand over lump sums of a few weeks payments at a time. So basically although I can show that I can save money I haven't shown that I can repay money. All the bank will see in my bank statements are a number of inconsistently timed ATM withdrawals, close to none of them the exact amount.

Its my understanding that being turned down for a mortgage damages your chances of getting a mortgage in future, so with that in mind am I shooting myself in the foot by applying for a mortgage now? Or would the savings built up be enough to assure the banks that I am capable of repaying the mortgage?

I'm not looking for assurances that they will absolutely give me the money, but I would prefer not to be wasting everyones time if lacking the repayment record would cause the application to be rejected out of hand.

Thanks in advance.

How much do you plan to borrow? While your savings are impressive for your age and income, the latter will hamper what the bank will lend you. At the same time if it was something around the 140 mark, I couldn't see them saying no, as they've got nothing to lose, unless they think house prices are going to fall another 50%!

athtrasna

quadrifoglio verde wrote: »

How much do you plan to borrow? While your savings are impressive for your age and income, the latter will hamper what the bank will lend you. At the same time if it was something around the 140 mark, I couldn't see them saying no, as they've got nothing to lose, unless they think house prices are going to fall another 50%!

OP says mortgage value 80k

Victor

That sounds like an admirable level of saving.

You could talk to a broker and see what they say about repayment history.

They are unlikely to accept payments to your parents as 'rent'.

quadrifoglio verde

athtrasna wrote: »

OP says mortgage value 80k

Cheers, read it and missed that. From the banks point if view there's more than enough equity in it for them to get their money back, question is would the op be able to make the repayments in their stress tests. Although the repayments on 80 should be low enough

L1011

With that level of savings in that period of time, if done consistently, rent or not shouldn't matter. Both show an ability to repay.

Your concern should only be the stress testing on the monthly payments as they may not want to offer 20 years on 80k. If they do you should be OK

Mrs OBumble

MYOB wrote: »

With that level of savings in that period of time, if done consistently, rent or not shouldn't matter. Both show an ability to repay.

Ahh, but the OP has not told us whether his/her savings come from savings or from other things, eg inheritance, side business, gifts. etc.

OP, go to a bank or two, and talk to them. They won't let you go ahead with an application unless they think you have a chance of success. They don't want a decline any more than you do.

D3PO

some good replies here just one thing the OP said people seem to have skimmed over.

OP being refused for a mortgage DOES NOT have any impact on any future mortgage application. Dont know where you heard that from but whoever told you that is seriously misinformend.

Throwaway12345

quadrifoglio verde wrote: »

How much do you plan to borrow? While your savings are impressive for your age and income, the latter will hamper what the bank will lend you. At the same time if it was something around the 140 mark, I couldn't see them saying no, as they've got nothing to lose, unless they think house prices are going to fall another 50%!

Depending on who you talk to, they just might! :P

Thanks for the response, Quadrifoglio Verde.

Victor wrote: »

That sounds like an admirable level of saving.

You could talk to a broker and see what they say about repayment history.

They are unlikely to accept payments to your parents as 'rent'.

So even if it were consistently paid it wouldn't matter for much?

Thanks for the advice Victor.

MYOB wrote: »

With that level of savings in that period of time, if done consistently, rent or not shouldn't matter. Both show an ability to repay.

Your concern should only be the stress testing on the monthly payments as they may not want to offer 20 years on 80k. If they do you should be OK

80k @ 4.5% over 20 years is €506, about 26% of my take home pay.
80k @ 6% over 20 years is €573, about 30% of my take home pay.
80K @ 8% over 20 years is €670, about 35% of my take home pay.

I cannot see mortgages hitting 8% (Famous last words). Is 30% Net a reasonable measure on how much to spend on a mortgage?

Thanks for your response MYOB.

Mrs OBumble wrote: »

Ahh, but the OP has not told us whether his/her savings come from savings or from other things, eg inheritance, side business, gifts. etc.

OP, go to a bank or two, and talk to them. They won't let you go ahead with an application unless they think you have a chance of success. They don't want a decline any more than you do.

My parents drilled into me the importance of never ever going into debt unnecessarily and without planning it carefully, having dealt with almost 20% mortgage interest rates in the early 90's.

No gifts, no inheritance. I still have my communion money!

Thanks for the advice Mrs O'Bumble.

D3PO wrote: »

some good replies here just one thing the OP said people seem to have skimmed over.

OP being refused for a mortgage DOES NOT have any impact on any future mortgage application. Dont know where you heard that from but whoever told you that is seriously misinformend.

It sounded reasonable when I heard it (just like how insurers ask have you been turned down on car insurance) so I never questioned it.

Thanks for the reply D3PO.

The_Morrigan

Throwaway12345 wrote: »

My parents drilled into me the importance of never ever going into debt unnecessarily and without planning it carefully, having dealt with almost 20% mortgage interest rates in the early 90's.

No gifts, no inheritance. I still have my communion money!

That is the most fabulous attitude to have, I grew up in a banking family, my father is a retired manager and I have worked in the industry for 14 years so between us we heard and saw it all and I wish more people thought like that.

As an aside, like you I had substantial savings of my own in my early 20's & I bought at 28 with a mortgage of less than 75% of the value of the property, one mistake I did make was to not hold onto some of my savings for a rainy day. Thankfully I never needed to rely on savings at the time, but I would suggest you hold back some of your savings just in case something crops up in the first year or so of the mortgage or infact with a house that may need a bit of work.

Just something to factor into your calculations.

Victor

Throwaway12345 wrote: »

So even if it were consistently paid it wouldn't matter for much?

To a degree, you are paying housekeeping, not rent. Based on how most households work these things, I imagine it includes a least a portion of food, cleaning, utilities, etc., so you are unlikely to be paying an market rent.

Now, if you had a standing order paying X every month and obviously paying for groceries, utilities, etc, that might help, but only partially.

ForEffsSake

What banks look for is evidence of ability to pay the mortgage every month. You have a great amount of savings - if you saved a regular amount of money every month equal to or (better still) more than your mortgage then the rent amount is pretty irrelevant. Our rent is tiny and much less than the amount we would pay as mortgage. Our mortgage advisor told us to put a regular sum into savings that, added to the rent amount, would be more than the mortgage payment.

It's consistency that counts - and not dipping into your savings is important.

Woshy

I think it depends on the bank. We've just gone sale agreed on a house that we're buying half in cash (which is mostly from a gift from a family member although some of it is our savings). We're living with family at the moment (and paying nothing) and prior to that we did pay rent monthly but it was a small amount as we were house sitting for somebody, so we weren't as straight forward as other cases. We did save a set amount every month though as well.

With 80k put away I presume you still save x amount every month? That goes towards showing your ability to repay a mortgage, not just how much rent you are paying. Also, having more money to put into the house (so your loan to value ration) helps in their decisions too.

Some banks were better than others in considering our actual situation and circumtances and seeing the potential in lending to us. One in particular (AIB) completely lacked the ability to see past the fact that we weren't a standard family of two people earning x amount and wanting a 90% mortgage and paying a documented rent every month.

Like other posters have said, your best bet is to go in and talk to them about your situation. I think you are in a very good position tbh.

Best of luck!

Eldarion

D3PO wrote: »

some good replies here just one thing the OP said people seem to have skimmed over.

OP being refused for a mortgage DOES NOT have any impact on any future mortgage application. Dont know where you heard that from but whoever told you that is seriously misinformend.

Have to counter this as it was said so clear cut. Repeated rejections of applications for credit can and will affect your credit rating. Thus can indeed impact future mortgage applications.

Also to note there is a difference between talking to a broker in the bank and officially applying for a mortgage. Chances are the broker will not submit the application unless he/she is reasonably sure it will be granted.