New Central Bank Policy on mortgages.

chainsawpaddy

Hello all,

I am currently in the middle of applying for a mortgage, trouble is with the new central bank policy I can only apply for a mortgage 3.5 times my salary and as I am on a graduate salary the maximum they will submit an application for me is ~€90,000, regardless of what savings I have.

The trouble is, the house I need or more importantly the location of the house I need, means I won't even get a front porch for that price, therefore my question is, what are the rules on getting a seller to accept a cash lump sum to keep the "on book" price of the house down to that price?

This is yet another ridiculous policy by government to curb house prices, however its going to have the opposite effect and just make people have to do what I intend to do.

It is also going to make it impossible for people to buy in areas where they have to, because there salaries will not allow them as small time landlords are going to hoover up any house under €150,000 with a good ROI due to the spiralling rent prices. If the government really wanted to implement policies that will curb increasing house prices, then they should implement a maximum rental property price.

Anyway back to my question, what are the issues, if any, around me giving a seller a lump sum of €10-50,000 under the table?

Thanks.

laurah591

Hi, I'm not sure what your asking here - if you pay the vendor between 10&50k this can form a significant deposit. Have you same saved? Or is it that you expect a loan for the additional sum and do not want the bank to know?

chainsawpaddy

laurah591 wrote: »

Hi, I'm not sure what your asking here - if you pay the vendor between 10&50k this can form a significant deposit. Have you same saved? Or is it that you expect a loan for the additional sum and do not want the bank to know?

He Laurah591,

The trouble is the banks can only submit an application for a maximum of 3.5 times anyones salary now. So lets say a person is on a salary of €26,000, this means that the bank will only give that person €91,000. However, if someone were to be looking at houses around the €130-150,000 mark, the banks would not entertain that person for a mortgage of that much. So if someone was to considering approaching a seller and offering them a lump sum and getting them to sell the house (on paper) for the maximum mortgage someone could get +10% (~€100,000).

So, for example if a house was €130,000, could someone give the seller €30,000 under the table and get a mortgage for the remainder of ~€90,000 and then come up with their 10% deposit. Total house value (on paper) of €100,000.

I assume there are legal issues in doing this, however some people may not be left with a choice, so I would like to know how severe the consequences could be for someone getting caught doing this? What are the main risks that could be involved, aside from the taxman finding out?

The money is saved.

phormium

But sure if someone wanted to buy a house for 130k and could only get a mortgage of 90k based on income but has 40k to complete the purchase where's the problem? There is no need for ducking and diving, it's a straightforward mortgage.

chainsawpaddy

phormium wrote: »

But sure if someone wanted to buy a house for 130k and could only get a mortgage of 90k based on income but has 40k to complete the purchase where's the problem? There is no need for ducking and diving, it's a straightforward mortgage.

Hi Phormium,

Thanks for the reply. That is great so, I just thought that if I was getting a mortgage I could only buy a house for the maximum the banks would lend me + my 10% deposit. So I thought I would be restricted to ~€100,000.

CiniO

chainsawpaddy wrote: »

Hi Phormium,

Thanks for the reply. That is great so, I just thought that if I was getting a mortgage I could only buy a house for the maximum the banks would lend me + my 10% deposit. So I thought I would be restricted to ~€100,000.

Nonsense.

If you wanted to buy a house for €300k, but you annual salary was €26k so as you say bank would only borrow you €91k then still no problem if you have rest in savings.
You put up €209k in deposit, and borrow €91k from the bank and house is yours.

Mrs OBumble

chainsawpaddy wrote: »

...could someone give the seller €30,000 under the table

OP, do you actually have 30k in savings?

Or would this under-the-table amount be borrowed from someone else - in which case the bank would still count it in assessing how much loan you could service.

TBH, you totally misunderstand the new rules. They are to protect people from taking out stupid mortgages that they simply cannot afford to service. Recent history has shown us that a significant number of people are simply not capable of making adequate decisions about debt themselves, so the government has had to do it for them.