Mortgage Advice

lisademps

I have €40,000 savings. If I apply for a loan and get 200,000, is my 40K gone and I'm really only getting 160,000, or do I still have my 40K to spend?

ec18

the house is 200K or the loan is 200k?

P_Cash

If u have 40. And apply for 200. Then 200+40 is 240.

lisademps

ec18 wrote: »

the house is 200K or the loan is 200k?

Well both scenarios please. This is all hypothetical. Basically I want to know if I can keep my savings!

The_Chap

If you are FTB you will at least need to use 10% of the house value from your savings

so, if you want loan of 200k - house price could be 222k and you'd need at least 22k of deposit

if house price is 200k, then you'd need at least 20k deposit - loan would then be 180k

ANXIOUS

Is this a serious question?

The_Chap

ANXIOUS wrote: »

Is this a serious question?

believe it or not, some people don't know how buying a house works....;)

ABajaninCork

Isn't the maximum you can borrow 3.5 your salary? Think the new bank rules came in this week...

And the bank will want you to use some of the savings. Isn't that why you saved - to buy property??

The_Chap

ABajaninCork wrote: »

Isn't the maximum you can borrow 3.5 your salary? Think the new bank rules came in this week...

And the bank will want you to use some of the savings. Isn't that why you saved - to buy property??

This is true, so single income or joint would need to be at least 50k to fly

NinjaTruncs

lisademps wrote: »

Well both scenarios please. This is all hypothetical. Basically I want to know if I can keep my savings!

No you won't get to keep your savings, the bank will expect you to use them towards the purchase of the property. How much you need to use will depend on the value of the house, under the new rules if you were to buy a house for ~200K you would need to use ~20K of your savings, solicitors fees and furnishing the house will then take a good chunk out of what's left.

Electric Sheep

The_Chap wrote: »

believe it or not, some people don't know how buying a house works....;)

And yet they still think they are "entitled" to buy a house. The house of their dreams, even...

rathmoresham

People use this site to gain information, not to get ridiculed by others. Help a person out instead of making them feel bad just because they are not educated in the same subject matter as you..

The_Morrigan

rathmoresham wrote: »

People use this site to gain information, not to get ridiculed by others. Help a person out instead of making them feel bad just because they are not educated in the same subject matter as you..

Leave the moderation to the mod team please.

Baby01032012

rathmoresham wrote: »

People use this site to gain information, not to get ridiculed by others. Help a person out instead of making them feel bad just because they are not educated in the same subject matter as you..

Well said rathmoresham, putty there aren't more posters like you

The_Morrigan

Baby01032012 wrote: »

Well said rathmoresham, putty there aren't more posters like you

There aren't more posters like that because backseat modding is against every charter on Boards.
Please don't encourage it.

lisademps

ABajaninCork wrote: »

Isn't the maximum you can borrow 3.5 your salary? Think the new bank rules came in this week...

And the bank will want you to use some of the savings. Isn't that why you saved - to buy property??

Yeah exactly so I will be lucky to get 140,000 plus my 40,000 savings. So no matter what I have saved I still won't be able to buy a house.

ec18

lisademps wrote: »

Yeah exactly so I will be lucky to get 140,000 plus my 40,000 savings. So no matter what I have saved I still won't be able to buy a house.

For example, if your salary is 30K p/a

your maximum mortgage is 30,000 * 3.5 = 105,000
Your savings are 40,000

You can buy a house worth 145,000 and your savings will be used as part of the funds to purchase the house.

lisademps

ec18 wrote: »

For example, if your salary is 30K p/a

your maximum mortgage is 30,000 * 3.5 = 105,000
Your savings are 40,000

You can buy a house worth 145,000 and your savings will be used as part of the funds to purchase the house.

Yes but the problem is finding a house for 145K, or 200K for that matter. It just seems that the market is there for couples, a single wage is not going to get you a house.

Michael D Not Higgins

lisademps wrote: »

Yeah exactly so I will be lucky to get 140,000 plus my 40,000 savings. So no matter what I have saved I still won't be able to buy a house.

You have to understand that there are going to be couples with more than your salary and more than your savings also looking to buy a house. They have more buying power than you have. This has been the way for at least 20 years (maybe more?) and is not changed by the new lending rules. In fact, the new rules reduces the overall credit available and may reduce house prices.

As an example, let's assume you have 40k salary and 40k savings. Like you've said above, you'll probably get 180k today. You're bidding against a couple with combined salary of maybe 50k (I seem to recall this being used as the household average somewhere) and 50k savings (similar proportion to your own). They can afford a house of 225k. You're outbid. If the LTI were 5 and LTV 90%, you might get 240k, but the couple with two salaries also looking at the same house can get 300k. You're outbid again.

This is how the credit availability works and family homes will inevitably go for what the couple can afford not the single person. The one benefit you have is that the prices may come down and you won't have to borrow as much.

ShowMeTheCash

lisademps wrote: »

Yes but the problem is finding a house for 145K, or 200K for that matter. It just seems that the market is there for couples, a single wage is not going to get you a house.

Don't see this as a bad thing, these measure which where totally ignored pre 2008 are there to protect people from borrowing too much...

Make no mistake interests rates will rise, no point buying something you cannot afford to pay back!

Alterntatives: Get a better job, move somewhere cheaper, keep on saving.

Personally on a low salary like 30K I would not want to be in too much debt, there are basics, bills, food, entertainment that everyone kind of needs to cover, I think if you can do this on 1000 to 1500 a month you are doing well.
So 12K to 18K a year probably leaves 12K to 6K expendable income do cover all of lifes other costs - Granted if you pay rent it might be eating most of it up but you do not want to be down to the wire with a mortgage!

lisademps

ShowMeTheCash wrote: »

Don't see this as a bad thing, these measure which where totally ignored pre 2008 are there to protect people from borrowing too much...

Make no mistake interests rates will rise, no point buying something you cannot afford to pay back!

Alterntatives: Get a better job, move somewhere cheaper, keep on saving.

Personally on a low salary like 30K I would not want to be in too much debt, there are basics, bills, food, entertainment that everyone kind of needs to cover, I think if you can do this on 1000 to 1500 a month you are doing well.
So 12K to 18K a year probably leaves 12K to 6K expendable income do cover all of lifes other costs - Granted if you pay rent it might be eating most of it up but you do not want to be down to the wire with a mortgage!

I have a great job, I'm trying to move out of Dublin but can't even afford that, and I am saving still, don't really have a choice now but to save.

And I know what I can and can't afford to pay back. At the minute I am paying 550 for rent and 800 for a car (which ends in April) and still managing to save 500 and able to live comfortably. So the paying back isn't the problem, it's getting the house and mortgage!

ShowMeTheCash

Michael D Not Higgins wrote: »

You have to understand that there are going to be couples with more than your salary and more than your savings also looking to buy a house. They have more buying power than you have. This has been the way for at least 20 years (maybe more?) and is not changed by the new lending rules. In fact, the new rules reduces the overall credit available and may reduce house prices.

As an example, let's assume you have 40k salary and 40k savings. Like you've said above, you'll probably get 180k today. You're bidding against a couple with combined salary of maybe 50k (I seem to recall this being used as the household average somewhere) and 50k savings (similar proportion to your own). They can afford a house of 225k. You're outbid. If the LTI were 5 and LTV 90%, you might get 240k, but the couple with two salaries also looking at the same house can get 300k. You're outbid again.

This is how the credit availability works and family homes will inevitably go for what the couple can afford not the single person. The one benefit you have is that the prices may come down and you won't have to borrow as much.

This is not true.
When couple borrowing they will factor in the cost of two people, daily costs go up and the formula is not the same.

It used to be 3 (Or 3.5 for this example) x the big salary + the small

So lets say one salary is 30K and the other is 20K (50K combined)

30K x 3.5 + 20 will only be 125K + deposit. 165K

In reality a couple will bring two salaries of 40K each

40K x 3.5 + 40K will be 180 plus deposit 220K

But really it comes down to disposable income.

lets say on 40K you get 120K mortgage so you think on 80K you get double right?... No you actually might get more, at 40K bank might factor in you have living expenses of 20K per year so really you only have 20K for savings and mortgage, but at 80K (We are talking Net) you have 60 disposible income which is three times that of the 40K.

ShowMeTheCash

lisademps wrote: »

I have a great job, I'm trying to move out of Dublin but can't even afford that, and I am saving still, don't really have a choice now but to save.

And I know what I can and can't afford to pay back. At the minute I am paying 550 for rent and 800 for a car (which ends in April) and still managing to save 500 and able to live comfortably. So the paying back isn't the problem, it's getting the house and mortgage!

550 a week?

You can pay back it now but what about next month? Or Next year?

Mortgage rates today are about 4.5 % 375 per month on every 100K you owe.
You Borrow 200K thats 750 euro a month on interest alone.
For every 1% move your mortgage will go up 167 euro a month.

The bank will look at a 2 or 3 % rise in interest minimum so you will need to be able to pay 1250 a month on interest alone and probably no less than 500 euro a month off the mortgage if you plan to pay it back in 25 years to 1250 to 1800 euro a month comfortably.

That does not include interest rates going nuts! Interest rates in the 80 shot up to 16%

In your case your repayment would shoot to nearly 3000 euro a month.

lisademps

ShowMeTheCash wrote: »

550 a week?

You can pay back it now but what about next month? Or Next year?

Mortgage rates today are about 4.5 % 375 per month on every 100K you owe.
You Borrow 200K thats 750 euro a month on interest alone.
For every 1% move your mortgage will go up 167 euro a month.

The bank will look at a 2 or 3 % rise in interest minimum so you will need to be able to pay 1250 a month on interest alone and probably no less than 500 euro a month off the mortgage if you plan to pay it back in 25 years to 1250 to 1800 euro a month comfortably.

That does not include interest rates going nuts! Interest rates in the 80 shot up to 16%

In your case your repayment would shoot to nearly 3000 euro a month.

3000 euro a month really.

The_Morrigan

lisademps wrote: »

3000 euro a month really.

Yup...my mortgage has increased by €300 in 6 years and the rates haven't moved much.

This is why they do stress testing based on your current income/expenditure.

NinjaTruncs

The_Morrigan wrote: »

Yup...my mortgage has increased by €300 in 6 years and the rates haven't moved much.

This is why they do stress testing based on your current income/expenditure.

Its scaremongering to suggest that a 200K mortgage would cost 3K to repay. If interest rates went anywhere near what they were in the 80s, the entire financial system is screwed not just the OP. At the moment, and that is all we can go on at the moment the repayment would be half that depending on the term of the mortgage.

However the logic is true, banks will stress test your ability to repay much higher than what the actual repayments would be, in my case the stress tested payments are approx. 25% higher than the actual repayments based on current interest rates.

ShowMeTheCash

NinjaTruncs wrote: »

Its scaremongering to suggest that a 200K mortgage would cost 3K to repay. If interest rates went anywhere near what they were in the 80s, the entire financial system is screwed not just the OP. At the moment, and that is all we can go on at the moment the repayment would be half that depending on the term of the mortgage.

However the logic is true, banks will stress test your ability to repay much higher than what the actual repayments would be, in my case the stress tested payments are approx. 25% higher than the actual repayments based on current interest rates.

Well this is what happens, markets will crash things fall apart then rebuild, it happens over and over and over again and will continue like this.

The 16% is really just to demonstate a worst case scenario it is not scaremongering people should really educate themselves in what has happened within their own lifetime, that being said 8% to 10% throughout history is a real possibility and coming off the back of record lows, people need to remember the record lows we have seen are not the norm!

But that being said I would say running a 4% - 8% interest buffer for the next 10 years would be sensible.

So 1800 - 2000 euro would be a top end possibility on 200K Interest min 750 top end 1300.

ShowMeTheCash

lisademps wrote: »

3000 euro a month really.

It has happened!

What do you reckon you could afford per month?

Agent Smyth

Back in the 90s when I got my first mortgage we were advised to borrow as much as you can for house purchase
The thinking behind it was the mortgage is based on current salary but in the future you most likely will be earning more.

ShowMeTheCash

Agent Smyth wrote: »

Back in the 90s when I got my first mortgage we were advised to borrow as much as you can for house purchase
The thinking behind it was the mortgage is based on current salary but in the future you most likely will be earning more.

People in the 90s got on average 3 maybe 4 times there annual salary.
Peoople in 2006 where getting mortgages of 10 times there annual salary!

ABajaninCork

ShowMeTheCash wrote: »

People in the 90s got on average 3 maybe 4 times there annual salary.
Peoople in 2006 where getting mortgages of 10 times there annual salary!

That's what landed a lot of people here in trouble! In real terms salaries have actually fallen from the boom times. Don't forget to factor in the property tax, USC and water rates.