Fairly Large Deposit, Fairly Low Income

Thargor

I need some advice on whether or not this plan is doable. Im 32, no dependents, no debt, very little outgoings in a month due to general frugality, no car. Earn 30k a year in secure job, hopefully rising to 32 this year. I save about 50-60% of my earnings every month and have done for the last 6 years. No pension, no other plans or large financial decisions.

I want to buy a house as Im sick of renting and want to do something with my savings and start getting a bit of a return, I basically want to copy my current landlords system which works well for him and buy a 3 bed house to live in in Bray where I work. Ill take on 2-3 tenants for hopefully 450-500 Euro a month each, tax-free on Rent a room, this will also free up the 450 a month I currently pay in rent for bills and expenses, there is currently no issue renting a room in Bray, demand is crazy.

I have 105k in savings, this is made up of 50k in Prize Bonds, 25k in Post office, 10k in shares of the company I work for and 20k in cash.

Looking at Daft and MyHome Ill need to stretch to 275-300k minimum to get a house I would want to live in although I have seen the odd one go for lower than that. I like Bray, my job is here that Ill stick with, any other companies that might recruit me are well within commuting distance if that ever changes.

Is there a way to pull this off? Whats the best way to go about this? Any advice appreciated.

Elliott S

Thargor wrote: »

Ill take on 2-3 tenants for hopefully 450-500 Euro a month each, tax-free on Rent a room

Remember that rent collected can't exceed €12,000. If it does, you pay tax on the FULL €12,000, not just the excess. So best stick to two tenants and charge each tenant just under €500 per month.

368100

Very doable op, my brother just did exactly the same for 3bed apt in cabinteely. 2 tenants will cover his mortgage. But you need to use most of your savings, won't work without that. 32k + 12k = 44k x 3.5 times = mortgage of 154k but all lenders have a 15% tolerance to go outside Cboi limits and your savings record along with loan to value should be enough mitigating factors to push mortgage to 175k or so.

Baby01032012

368100 wrote: »

Very doable op, my brother just did exactly the same for 3bed apt in cabinteely. 2 tenants will cover his mortgage. But you need to use most of your savings, won't work without that. 32k + 12k = 44k x 3.5 times = mortgage of 154k but all lenders have a 15% tolerance to go outside Cboi limits and your savings record along with loan to value should be enough mitigating factors to push mortgage to 175k or so.

The problem with that is no lender will take potential rental income into account. So it's 30k x 3.5 = 105 plus deposit 105 = 210 that includes stamp duty and legal fees to be covered. Forget about bray. You can do this but look at another area within this budget.

lawred2

Thargor wrote: »

I need some advice on whether or not this plan is doable. Im 32, no dependents, no debt, very little outgoings in a month due to general frugality, no car. Earn 30k a year in secure job, hopefully rising to 32 this year. I save about 50-60% of my earnings every month and have done for the last 6 years. No pension, no other plans or large financial decisions.

I want to buy a house as Im sick of renting and want to do something with my savings and start getting a bit of a return, I basically want to copy my current landlords system which works well for him and buy a 3 bed house to live in in Bray where I work. Ill take on 2-3 tenants for hopefully 450-500 Euro a month each, tax-free on Rent a room, this will also free up the 450 a month I currently pay in rent for bills and expenses, there is currently no issue renting a room in Bray, demand is crazy.

I have 105k in savings, this is made up of 50k in Prize Bonds, 25k in Post office, 10k in shares of the company I work for and 20k in cash.

Looking at Daft and MyHome Ill need to stretch to 275-300k minimum to get a house I would want to live in although I have seen the odd one go for lower than that. I like Bray, my job is here that Ill stick with, any other companies that might recruit me are well within commuting distance if that ever changes.

Is there a way to pull this off? Whats the best way to go about this? Any advice appreciated.

Some job renting and saving half your salary of 30k a year..

Fair play to you

368100

Baby01032012 wrote: »

368100 wrote: »

Very doable op, my brother just did exactly the same for 3bed apt in cabinteely. 2 tenants will cover his mortgage. But you need to use most of your savings, won't work without that. 32k + 12k = 44k x 3.5 times = mortgage of 154k but all lenders have a 15% tolerance to go outside Cboi limits and your savings record along with loan to value should be enough mitigating factors to push mortgage to 175k or so.

The problem with that is no lender will take potential rental income into account. So it's 30k x 3.5 = 105 plus deposit 105 = 210 that includes stamp duty and legal fees to be covered. Forget about bray. You can do this but look at another area within this budget.

Some lenders do take rental income into consideration

Thargor

Is there no broker that would do a deal or find some BTL loophole or something like that? I don't really want to buy somewhere I don't want to live myself...

Thargor

Also does the bank not have any power to grant an exception to someone who has proved they can pay like me? Even without tenants I could still afford 1500 a month towards the mortgage no problem.

Stheno

Thargor wrote: »

Also does the bank not have any power to grant an exception to someone who has proved they can pay like me? Even without tenants I could still afford 1500 a month towards the mortgage no problem.

On 30K monthly net income is just under 2100 going by an online tax calculator.

Banks won't loan a mortgage of 1500 a month on that income as its almost 80% of income.

Sono

How can you be renting the past 6 years and save 50-60% of your salary of €30k? That is almost impossible. What kind of rent you paying?

Avatar MIA

Thargor wrote: »

Also does the bank not have any power to grant an exception to someone who has proved they can pay like me? Even without tenants I could still afford 1500 a month towards the mortgage no problem.

€1,500 a month would be approx 70% of your net income (excluding rent), with only approx €600 left over for groceries, travel, house insurance etc.

If you can find a bank that will include your potential rental income and push out the mortgage term as long as possible the figures will look better.

Thargor

Sono wrote: »

How can you be renting the past 6 years and save 50-60% of your salary of €30k? That is almost impossible. What kind of rent you paying?

Of course its possible, my rent is only 450 including bills, no car, dont drink much, very little outgoings. I hate spending money and most people I hang around with are the same.

Thargor

Avatar MIA wrote: »

€1,500 a month would be approx 70% of your net income (excluding rent), with only approx €600 left over for groceries, travel, house insurance etc.

If you can find a bank that will include your potential rental income and push out the mortgage term as long as possible the figures will look better.

Will any bank do that though? Is there a broker that specialises in cases like this?

How much would I have to get my parents to kick in to make this viable do you think?

JuliusCaesar

Get all your paperwork together - they'll all want pretty much the same. (Any bank or building society will have leaflet/info on website).

Photocopy this paperwork multiple times.

Take to a broker and few different banks and building societies. I think EBS doesn't deal with brokers anyway.

See who offers you the best deal when you meet with them. A personal visit is always best. It's time-consuming, but it can all be done fairly efficiently.

quietsailor

There is a broker called Killers1 who posts on Boards and he is well regarded enough that there was a thread started here for people to relate their experiences and it was a very positive thread.

My wife and I are using him for our own mortgage and he simplifies the process a lot for us.

quietsailor

JuliusCaesar wrote: »

Get all your paperwork together - they'll all want pretty much the same. (Any bank or building society will have leaflet/info on website).

Photocopy this paperwork multiple times.

Take to a broker and few different banks and building societies. I think EBS doesn't deal with brokers anyway.

See who offers you the best deal when you meet with them. A personal visit is always best. It's time-consuming, but it can all be done fairly efficiently.

For the tl:dr's trust no one, double check and cross check everyone and everything!

Long post to follow but here is what I learned from the application process -
1. Work out what banks and brokers you want to apply to and get the blank salary cert from each one. Once you've done that fill them in and send them all to your HR department - if your unlucky and can't find a house quickly you might need to reapply so don't piss them off by sending them certs in drips.

2. Print off 6 months of statements for every financial account you have - bank statements, savings accounts, investments, post office, credit union. Some might be 3 or 6 month statements so you might need to stick a cover note at the start of each statement to make it obvious. You know about it but some poor drone in the bowels of AIB (for example)won't and will send back a query which drags the process out and then you could be asked to submit newer statements - it has happened to us.

3. If you have access to a large photocopier scan them all in to PDFs.
I found that keeping all the same statements in one PDF and name it accordingly - I would have named a bank statement
"Quietsailor Bank X, account 1234 - Mar to Sep 2016"
If there is a Mrs OP do the same for him / her
I know it sounds long winded but you WILL be swamped with paperwork and get confused trying to track it.

4. Every time you send all this documentation anywhere - by post or by email - put in a cover letter detailing what you have sent and what periods it covers*. It would be a good place to detail statements that are not fully to date as they are 6 month statements or any other relevant info - remember the people checking your paperwork see hundreds of applications a week and won't bother looking for info on a statement that is out of kilter. They will just throw it back with a query for more info.
Keep a copy for yourself so you have proof of what was sent.

5. If you email an application ask for a confirmation.

6.if you post them
a) package them extremely well
b)REGISTER THEM
- if that pack gets out into the public domain you have photo id, bank statements, proof of address - everything needed to walk into your bank and withdrawn money. It's a long shot that it'll happen but with the size of deposits needed today do it'll be well worth a thiefs time to try.



*I've had to resend documentation to one bank, first by post and the second by email as they swore they didn't get my pay slips. The thing is I had made up a pack of everything, then photocopied it 6 times and my pay slips were in the middle so there is no way I could have not sent them. That means my PPS number is floating around a bank out of control.

Thargor

JuliusCaesar wrote: »

Get all your paperwork together - they'll all want pretty much the same. (Any bank or building society will have leaflet/info on website).

Photocopy this paperwork multiple times.

Take to a broker and few different banks and building societies. I think EBS doesn't deal with brokers anyway.

See who offers you the best deal when you meet with them. A personal visit is always best. It's time-consuming, but it can all be done fairly efficiently.

quietsailor wrote: »

There is a broker called Killers1 who posts on Boards and he is well regarded enough that there was a thread started here for people to relate their experiences and it was a very positive thread.

My wife and I are using him for our own mortgage and he simplifies the process a lot for us.

quietsailor wrote: »

For the tl:dr's trust no one, double check and cross check everyone and everything!

Long post to follow but here is what I learned from the application process -
1. Work out what banks and brokers you want to apply to and get the blank salary cert from each one. Once you've done that fill them in and send them all to your HR department - if your unlucky and can't find a house quickly you might need to reapply so don't piss them off by sending them certs in drips.

2. Print off 6 months of statements for every financial account you have - bank statements, savings accounts, investments, post office, credit union. Some might be 3 or 6 month statements so you might need to stick a cover note at the start of each statement to make it obvious. You know about it but some poor drone in the bowels of AIB (for example)won't and will send back a query which drags the process out and then you could be asked to submit newer statements - it has happened to us.

3. If you have access to a large photocopier scan them all in to PDFs.
I found that keeping all the same statements in one PDF and name it accordingly - I would have named a bank statement
"Quietsailor Bank X, account 1234 - Mar to Sep 2016"
If there is a Mrs OP do the same for him / her
I know it sounds long winded but you WILL be swamped with paperwork and get confused trying to track it.

4. Every time you send all this documentation anywhere - by post or by email - put in a cover letter detailing what you have sent and what periods it covers*. It would be a good place to detail statements that are not fully to date as they are 6 month statements or any other relevant info - remember the people checking your paperwork see hundreds of applications a week and won't bother looking for info on a statement that is out of kilter. They will just throw it back with a query for more info.
Keep a copy for yourself so you have proof of what was sent.

5. If you email an application ask for a confirmation.

6.if you post them
a) package them extremely well
b)REGISTER THEM
- if that pack gets out into the public domain you have photo id, bank statements, proof of address - everything needed to walk into your bank and withdrawn money. It's a long shot that it'll happen but with the size of deposits needed today do it'll be well worth a thiefs time to try.



*I've had to resend documentation to one bank, first by post and the second by email as they swore they didn't get my pay slips. The thing is the I had made up a pack of everything, then photocopied it 6 times and my pay slips were in the middle so I could have not sent them. That means my PPS number is floating around a bank out of control.

Perfect thanks, so do you think theres a chance of me stretching to a 275-300k mortgage with my current assets?

quietsailor

Thargor wrote: »

Perfect thanks, so do you think theres a chance of me stretching to a 275-300k mortgage with my current assets?

That I don't know as different banks seem to have different algorithms, we've been lucky enough to get a few mortgage approvals and there was a €60K range.
Some will take in rental income past and future, some will only take past (and provable ) income and they apply different percentage reductions (rental income is never as valuable as PAYE income )

Some give better rates at 60% or 50% Loan To Value and that's a different calculation again!!!!!

Do you know the old joke about 5 exclamation marks being a sign of an unhinged mind - thats what the application process will do to you. Don't get mad over it, it's a waste of energy, go with the flow but have someone you can rant with to let off steam. My wife and I had each other for that & luckily enough we always seemed to loose our plot when the other stayed calm.

Stheno

Thargor wrote: »

Perfect thanks, so do you think theres a chance of me stretching to a 275-300k mortgage with my current assets?

All you can do is apply tbh

Pepe LeFrits

All you can do is ask OP. They'll be looking for a lot of evidence re: your savings though because they will be sceptical.

Consumerhelp.ie says some lenders do factor in potential rental income from rent-a-room so who knows.

I'd still be surprised though to be honest. You may say you can get by on X but most banks' underwriting software won't be understanding. They'll apply stress testing (e.g. check your ability to repay based on a rate 2% higher than current market rates) and if your repayments are over a certain percentage of your take home, you'll just get flat out declined. But as quietsailor says, each bank has different rules so you may get one that's ok with it.

quadrifoglio verde

The fact that you have a large deposit will help, and you should get more than 3.5 times your salary. But large deposit or not, they're unlikely to be able to give you what you'd need, to buy what you want.
Yes they'd have equity, but equity means diddly squat to the bank if you lose your job and stop paying back the mortgage because it's extremely difficult for them to repossess. And while you might not class it as reckless borrowing, in front of a judge, he'd be saying its reckless lending. They won't take income from rent a room into account, too many people back in 2006 said they were renting the rooms out to get the mortgage when they'd no intentions of doing so

Best thing is to apply, see what you get approved for and then see what you can buy. If you can't see anything that you want to buy then I'd hold off until your earning more money, or something comes up within budget that you like.

bigroad

If i had your savings i would look for a house /apt futher down the coast that is on a bus/train route.
It is possible you could buy a small house outright.
It is also possible you could rent out a room.All you would have then is bus train ticket and normal household bills.
At this stage you could save a lot of your income to do whatever you want while the value of your property hopefully would rise in value and no mortgage to worry about.

Thargor

Nah turning it into a commute from out the country is not an option, collecting 12 grand of rent is nearly the whole point of the exercise aswell.

Suppose Ill have to see if I can get the parents to contribute towards it, another 40k and Id basically have a 50% deposit, combined with the proven ability to pay surely Id have to get someone to give me a mortgage?

Is there a way I should organise my finance in the meantime? Like start saving into some kind of mortgage account in one of the banks or something like that?

Stheno

Thargor wrote: »

Nah turning it into a commute from out the country is not an option, collecting 12 grand of rent is nearly the whole point of the exercise aswell.

Suppose Ill have to see if I can get the parents to contribute towards it, another 40k and Id basically have a 50% deposit, combined with the proven ability to pay surely Id have to get someone to give me a mortgage?

Is there a way I should organise my finance in the meantime? Like start saving into some kind of mortgage account in one of the banks or something like that?

I think you need to be realistic here. On 30K you will get approved for three and a half times income which is 105K

The banks are allowed increase that by 15% which brings you to about 117K

Even with the money from your parents you will be looking for 150K which is five times your income and outside the 15% rule.

Thargor

You do see the odd 3 bedroom go for 255 - 265k though, and the whole time I was trying to complete the process Ill be saving ~1200 a month aswell. I suppose I could start looking at 2 beds and find one where a living room or dining room could be converted into a bedroom for me...

Stheno

Thargor wrote: »

You do see the odd 3 bedroom go for 255 - 265k though, and the whole time I was trying to complete the process Ill be saving ~1200 a month aswell. I suppose I could start looking at 2 beds and find one where a living room or dining room could be converted into a bedroom for me...

That's good thinking, it's the sort of thing you have going for you

masterK

One thing to bear in mind, you're 32 with no dependants now, however that can change very quickly. If you're to have a family in the next 5 years your ability to pay a mortgage may change dramatically

There is something the op is forgetting maybe because he is accommodation that includes bills in the rent.

The unavoidable one are electricity, heating, property tax, insurance, bins and in this day and age broadband. If the op is planning to rent room the house will need to warm and to a a certain standard.

Thargor

Well obviously Im factoring in cost of living aswell, I wasnt expecting all that to be free.

greenorchard

Stheno wrote: »

I think you need to be realistic here. On 30K you will get approved for three and a half times income which is 105K

The banks are allowed increase that by 15% which brings you to about 117K

Even with the money from your parents you will be looking for 150K which is five times your income and outside the 15% rule.

There's no rule that they can only increase it by 15%. It's that they can make an exception on the LTI for 15% of their mortgages, think this might be where you're thinking of 15%. Some banks will offer around 4.5 times income to certain people, which would be 135k here.