How hard is it to get a mortgage?

finooola

I used to naively think that all you had to do was save x amount of money, go up to the bank and say "I've saved this, and I earn this, I'm this age and my outgoings are this - how much of a mortgage can I get?" Lately I've been reading articles about it in the papers though and it seems a lot more complicated. One I read recently for example implied that it was better to save 100 quid consistently every month than 50 here and 500 there.

My situation is there is me, my boyfriend and our nearly two year old. I'm pregnant. I haven't worked since my first baby was born but intend to go back in about a year or two. We are in our mid 30s. We will be first time buyers. We have 10,000 saved. My fella has a reasonably decent job/income, however he is paid in Sterling and we're a bit worried that Sterling's current ups and downs might spook the bank.

Should we save more? Would getting hitched make a difference to them? Do I need to be working or should my fella just apply for a mortgage on his own? Anything else? Thanks in advance!

Slydice

The central bank has its rules listed here:
https://www.centralbank.ie/press-area/press-releases/Pages/CentralBankannouncesnewregulationsonresidentialmortgagelending.aspx

So like, let's say you're a first time buyer and only use the rules they have on that page:

Place costs: 100,000
(so, like this is price you'd be paying for the place)

Deposit should be: 10,000
(as in, you need 10% of the price you'd be paying up front)

Total (combined or not) Income of who is getting the mortgage: €28,571.43
(divide price you'd be paying by 3.5)
(as in, one or both of ye need to be earning that much each year before taxes etc)


Next example (200k):
(where I just take the above figures and multiply by 2)
Place costs: 200,000
Deposit should be: 20,000
Total (combined or not) Income of who is getting the mortgage: €57,142.86

Next example (300k):
(this gets complicated as it goes above the first time buyers 220k limit)
Place costs: 300,000 (deposit will be 90% of 220k and 80% of remainder)
Deposit should be 22,000 (90% of 220k) added with 16,000 (80% of 80k) so: 38,000
Total (combined or not) Income of who is getting the mortgage: €85,714.29


So like.. this is a rough guide. A load of smarty finance people will be able to tell you how to break,bend,abuse the rules or even push the rules to the limit and that's up to you. Stuff like that doesn't usually end well.

Lycoge

finooola wrote:

One I read recently for example implied that it was better to save 100 quid consistently every month than 50 here and 500 there.

The bank wants to calculate whether you'll be able to afford the monthly mortgage repayments. So yes saving a set amount each month is better as you are demonstrating that at a minimum you can afford that amount each month. Set up a standing order for an amount you know you can comfortably put away each month (without dipping back into it). Then no harm in adding extra if it comes your way but at least you've shown there's a minimum set amount you're putting away. We had a mortgage saving account which we never touched and then another joint current account which we put our extras into and used if we needed it.

finooola wrote:

My situation is there is me, my boyfriend and our nearly two year old. I'm pregnant. I haven't worked since my first baby was born but intend to go back in about a year or two.

Multiply your combined income by 3.5 and that's likely the max mortgage the bank will give you.

With 1 child, they will factor a monthly cost of the child in relation to your monthly outgoings. Being pregnant has no impact once you drawdown before baby is born. After that they will calculate monthly outgoings of 2 children.

finooola wrote:

Should we save more? Would getting hitched make a difference to them? Do I need to be working or should my fella just apply for a mortgage on his own? Anything else? Thanks in advance!

Have at least 6 months of consistent saving, also demonstrate monthly rent paid (this will act as showing your ability to pay this on a monthly basis too). Make sure any rent paid is evidenced through standing orders.

Unmarried, your boyfriend can apply as a single applicant. The child(ren) will still be dependents for your boyfriend. Married, both of your incomes are taken into account and you are also a dependent if not working (as far as I know)
Dont know what impact the sterling will have.

Best advice is to speak to your bank's mortgage adviser or a broker. They'll give you advice about your own circumstances and tell you what you need to do to get positioned before you submit a mortgage application.

NotorietyH

While savings are a good indicator, when I got my mortgage recently, they also looked at how much I was paying in rent, I didn't have much in the way of savings but was able to show I was paying more than the mortgage in rent solidly for three years.

aligator_am

Slydice wrote: »

The central bank has its rules listed here:
https://www.centralbank.ie/press-area/press-releases/Pages/CentralBankannouncesnewregulationsonresidentialmortgagelending.aspx

So like, let's say you're a first time buyer and only use the rules they have on that page:

Place costs: 100,000
(so, like this is price you'd be paying for the place)

Deposit should be: 10,000
(as in, you need 10% of the price you'd be paying up front)

Total (combined or not) Income of who is getting the mortgage: €28,571.43
(divide price you'd be paying by 3.5)
(as in, one or both of ye need to be earning that much each year before taxes etc)


Next example (200k):
(where I just take the above figures and multiply by 2)
Place costs: 200,000
Deposit should be: 20,000
Total (combined or not) Income of who is getting the mortgage: €57,142.86

Next example (300k):
(this gets complicated as it goes above the first time buyers 220k limit)
Place costs: 300,000 (deposit will be 90% of 220k and 80% of remainder)
Deposit should be 22,000 (90% of 220k) added with 16,000 (80% of 80k) so: 38,000
Total (combined or not) Income of who is getting the mortgage: €85,714.29


So like.. this is a rough guide. A load of smarty finance people will be able to tell you how to break,bend,abuse the rules or even push the rules to the limit and that's up to you. Stuff like that doesn't usually end well.

Hopefully you can clear something up for me, my understanding is that in general the bank will loan you 3.5 times your salary (I know there are exceptions), you then need the deposit of 20% (I'm not 1st time buyer) and then you need to make up the balance of the value of the house yourself.

However yesterday someone told me that the bank will only loan you 80% of the value of 3.5 times your salary? it's confused me no end

Also, someone here may know, when working out how much the bank will lend you, do they factor in benefits in kind as part of the salary?

Thanks in advance
Al

impr0v

They will loan you 3.5 times your salary. I suspect the 80% thing is somebody mixing the multiple rule up with the deposit rule.

I don't know the answer to the BIK query, but I doubt that they will factor it into the calculation.

riclad

Simple advice save x amount with your bank EVERY month,
build up a steady savings record ,save as much as you can while having a
normal healthy lifestyle.

Afroshack

my dad is a mortgage broker and he gave me some advice when I started saving for my own place.
save as much of a deposit as you can. gifts of money are common but a decent savings record is essential - it shows you can plan ahead, manage your finances and you will have a rainy day fund in case one of you gets sick or loses your job. small and regular is better than large chunks twice a year.
the x3.5 times your salary rule can be bent if you are in a permanent career where you are guaranteed to be earning more in 5-10 years (medicine, education, banking, tech)
a permanent job in a stable sector looks better than making a million being self-employed. He always found it easier getting loans for people who worked in penny's full time making 25k than a self-employed builder who can make 60k one year and 10k the next.
don't have ANY returned direct debits or bounced cheques - even if you were only a euro short it shows poor financial planning if you haven't got enough in your account on the right day
avoid using your debit and credit cards. take.out say 200 in cash every week for food/petrol and stick to it. they don't look favourably on small impulse purchases like 4euro coffees in Starbucks or 10euro in a pub, it all adds up

It seems like a lot, but it did help a lot of his clients. Those that were refused had 100s of small purchases made on cards, a returned DD or were just visibly spending money on random stuff (beauty salons, gadgets, pubs, lavish holidays) and dipping into savings to fund it.

Ayuntamiento

We're supposed to be moving towards a cashless society so it makes little sense that a bank would care if you prefer paying with your debit card at the till rather than queuing at ATMs everywhere.

riclad

Self employed people have to provide accounts for the last 3 years signed
by an accountant , and info re savings , expenses , etc

wench

Afroshack wrote: »

avoid using your debit and credit cards. take.out say 200 in cash every week for food/petrol and stick to it. they don't look favourably on small impulse purchases like 4euro coffees in Starbucks or 10euro in a pub, it all adds up

It seems like a lot, but it did help a lot of his clients. Those that were refused had 100s of small purchases made on cards, a returned DD or were just visibly spending money on random stuff (beauty salons, gadgets, pubs, lavish holidays) and dipping into savings to fund it.

Using cards isn't a problem. Almost all my spending is done on credit card, and some on debit. The bank weren't bothered at all, just wanted to see 6 months of statements showing the the bill was cleared every month, and I wasn't carrying debt on the card.

Agree that dipping into savings or having returned dd should definitely be avoided.

Afroshack

Ayuntamiento wrote: »

We're supposed to be moving towards a cashless society so it makes little sense that a bank would care if you prefer paying with your debit card at the till rather than queuing at ATMs everywhere.

the bank have no issue with you using a debit card, they just want to see that you are in the habit of setting aside X amount of money and living off that every month. with debits and credit cards, it's easy to fall into a trap of spending "more" all the time where you can't physically see the cash coming out. one person got refused because they were using cards several times a day for online shoppong, food, expensive coffee, blow dries and manicures, as well as taking out "living expenses money" during the week which was supposed to be the money set aside for that week. it's not the debit card itself they have a problem with but ito impulsive spending outside of your set amount every week, which is made far easier with a card.

68 lost souls

Supposedly also any transactions to a bookmakers such as paddy power, or gambling such as the lotto is a no no

athtrasna

68 lost souls wrote: »

Supposedly also any transactions to a bookmakers such as paddy power, or gambling such as the lotto is a no no

Not according to recent posters on the mortgage thread

mirrorwall14

I have a running balance on my credit card of ~4-500. No issue with mortgage. Chunk paid off each month and some spent

beechwood55

Have a read of this.
http://www.thejournal.ie/mortgages-northern-ireland-republic-2781808-May2016/

Ayuntamiento

Realistically, the more you earn the easier it is to get a mortgage. And the more you earn, the more that the bank will let you away with when going through your application.

If you're a couple with a modest combined income (60k for example) and you're trying to get the max loan possible within the CB rules, the bank will make you work hard for it.
They'll want to see extreme discipline with your finances, a great savings record, very little debt, etc.
If they can find any excuse to lower the amount that they'll lend to you, then they'll use it. Hence all these stories about people losing out on mortgages because of spontaneous spending on debit cards, paddy power accounts, any credit card debt, etc etc.
The bank are trying to make it look like they've learned lessons from the past by saving those on lower incomes from themselves :rolleyes:

If you're a couple with a combined income of over 100k, you still have to fall within the CB rules and go through the application procedure. However, they tend not to question your expenditure patterns to any great extent. You're also more likely to get an exemption from the rules.

I think that's where a lot of the confusion on these threads arises from. Some people are absolutely put through the ringer while others seem to sail through the process. It probably has more to do with income levels than anything else unfortunately.

finooola

finooola wrote: »

........... however he is paid in Sterling and we're a bit worried that Sterling's current ups and downs might spook the bank...........

That could be an issue, £100 sterling doesn't buy as many € as it did last year so if he's paid the same now as than he's effectively after a pay cut if ye are living in the Eurozone.

BailMeOut

they also stress test the repayments so you need to be able to show you can make your monthly payments. So if you have any other debts or monthly payments you need to make these will also be a factor.

BailMeOut

Just got a mortgage approval yesterday and very interesting how the bank calculated my max loan amount. They took my monthly income after tax, subtracted €2800 from this and what was left was considered the max monthly mortgage payment I can afford which incidentally is higher than 3.5x my salary.

The €2800 amount they used is some estimate they deem necessary to live on after taxes and mortgage payment for a family of five.

Ayuntamiento

Ayuntamiento wrote: »

We're supposed to be moving towards a cashless society so it makes little sense that a bank would care if you prefer paying with your debit card at the till rather than queuing at ATMs everywhere.

We're moving to a cashless society because its easier and cheaper for the banks. As that poster said, when your looking for 300k in a loan the bank looks at your purchase history and makes judgements based on your spending habits. Take out x amount in cash at the start of the week and you can retain the small bit of privacy you have left. So you can have your 4 euro coffee or your couple of pints on a week night without a bank clerk scrutinizing your every little purchase.

Ayuntamiento

Deleted User wrote: »

We're moving to a cashless society because its easier and cheaper for the banks. As that poster said, when your looking for 300k in a loan the bank looks at your purchase history and makes judgements based on your spending habits. Take out x amount in cash at the start of the week and you can retain the small bit of privacy you have left. So you can have your 4 euro coffee or your couple of pints on a week night without a bank clerk scrutinizing your every little purchase.

I'm approved for a mortgage far in excess of €300k and I didn't change my spending habits in any way prior to seeking approval. If the bank sees that you can still live a normal life whilst saving and paying rent, that is proof that you'll continue to do so with a mortgage.

Ayuntamiento

Also I believe other people on boards have said that the bank queried regular, unexplained withdrawals of large sums of money (ie. >€100) from their accounts. It might be that they're wondering do you have some kind of financial committment that you haven't declared to them which you're trying to hide (a loan, maintenance payments, a gambling habit, etc).

Privacy is a sacrifice you make for the money.

Ayuntamiento

Ayuntamiento wrote: »

I'm approved for a mortgage far in excess of €300k and I didn't change my spending habits in any way prior to seeking approval. If the bank sees that you can still live a normal life whilst saving and paying rent, that is proof that you'll continue to do so with a mortgage.

As you said in your previous post some people get put through the ringer if they earn less and get scrutinized as a result.

What irks me is trying to save while paying a massive rent. I've been paying rent every month for about 15 years, why can't they take that into account when/if I go to request a mortgage. Back in 2009 when both of us got made redundant we still made rent.

finooola

Thanks for the replies/discussion, guys. It's very informative.

Update on my situation - we were told today my fella's bank (Permanent TSB) won't consider us for a mortgage due to him being employed by a non-Irish company. So it's back to the drawing board for us! We'll probably have to wait to ask again until I'm back in employment.

ThisRegard

A non-Irish company? Does his company have a registered office in Ireland or is he employed from outside of the state? There's probably hundreds of thousands of mortgage owners employed by non-Irish companies.

Michael D Not Higgins

ThisRegard wrote: »

A non-Irish company? Does his company have a registered office in Ireland or is he employed from outside of the state? There's probably hundreds of thousands of mortgage owners employed by non-Irish companies.

As per the original post, the OP's boyfriend is paid in Sterling, presumably working in the north.

yosser hughes

finooola wrote: »

Thanks for the replies/discussion, guys. It's very informative.

Update on my situation - we were told today my fella's bank (Permanent TSB) won't consider us for a mortgage due to him being employed by a non-Irish company. So it's back to the drawing board for us! We'll probably have to wait to ask again until I'm back in employment.

Strerling has strengthened well in the last days days at least.

ThisRegard

Michael D Not Higgins wrote: »

As per the original post, the OP's boyfriend is paid in Sterling, presumably working in the north.

Ah, ok, I didn't click it was the OP that I was replying to.

La.m

finooola wrote: »

Thanks for the replies/discussion, guys. It's very informative.

Update on my situation - we were told today my fella's bank (Permanent TSB) won't consider us for a mortgage due to him being employed by a non-Irish company. So it's back to the drawing board for us! We'll probably have to wait to ask again until I'm back in employment.

Try KBC. My friend is working in London and commutes home at the weekend. Her husband is working in Ireland and KBC had no problem giving them a mortgage. They've some of the best rates too.

My other suggestion from personal experience is use a broker. They'll give you all the information in one place, answer all your questions and put together the application in a manner that makes it easy for the Bank to say yes.

Brioscai

Bailmeout, who did you go with please? We have only been approved for our rent equivalent. This equates to under 20% net earnings as we failed to show enough savings.

BailMeOut

Brioscai wrote: »

Bailmeout, who did you go with please? We have only been approved for our rent equivalent. This equates to under 20% net earnings as we failed to show enough savings.

AIB

Is your approved amount more or less than 3.5x income?

finooola

Michael D Not Higgins wrote: »

As per the original post, the OP's boyfriend is paid in Sterling, presumably working in the north.

No, he works from home in the Republic, but the company is based in London. Well, head office is in Japan but you get the drift! The bank were at pains to point out that this was just their own policy and that we probably wouldn't have the same issue with other banks. My bank is AIB, but I don't think there's much point me asking them right now since I'm not working (just had a baby the other day!).

BailMeOut

finooola wrote: »

No, he works from home in the Republic, but the company is based in London. Well, head office is in Japan but you get the drift! The bank were at pains to point out that this was just their own policy and that we probably wouldn't have the same issue with other banks. My bank is AIB, but I don't think there's much point me asking them right now since I'm not working (just had a baby the other day!).

congratulations on the baby!

I work for solely and get paid from USA companies in USA and live in Ireland and had no issues with AIB. Is your husband an employee or a contractor (sole trader)? Where is his income tax being withheld and paid?

Parchment

Afroshack wrote: »

my dad is a mortgage broker and he gave me some advice when I started saving for my own place.
save as much of a deposit as you can. gifts of money are common but a decent savings record is essential - it shows you can plan ahead, manage your finances and you will have a rainy day fund in case one of you gets sick or loses your job. small and regular is better than large chunks twice a year.
the x3.5 times your salary rule can be bent if you are in a permanent career where you are guaranteed to be earning more in 5-10 years (medicine, education, banking, tech)
a permanent job in a stable sector looks better than making a million being self-employed. He always found it easier getting loans for people who worked in penny's full time making 25k than a self-employed builder who can make 60k one year and 10k the next.
don't have ANY returned direct debits or bounced cheques - even if you were only a euro short it shows poor financial planning if you haven't got enough in your account on the right day
avoid using your debit and credit cards. take.out say 200 in cash every week for food/petrol and stick to it. they don't look favourably on small impulse purchases like 4euro coffees in Starbucks or 10euro in a pub, it all adds up

It seems like a lot, but it did help a lot of his clients. Those that were refused had 100s of small purchases made on cards, a returned DD or were just visibly spending money on random stuff (beauty salons, gadgets, pubs, lavish holidays) and dipping into savings to fund it.

This is spot on advice! It echoes everything we heard from each bank we applied to.

We both are in stable jobs (im a permanent public servant) but neither of us earn earth shattering amounts.We both save regularly, never use credit cards for "credit" purposes - just for paying for things online etc. We are pretty boring with money and dont do anything to rash with it.

The banks really need to see that you have capacity to pay out X amount each month - for us they saw it as we paid our rent, without fail, each month. Also they could see our regular savings leaving our bank accounts - then going into savings accounts.

They will question amounts - i lodged 1k into my savings & they queried where it came from (as it was out of the ordinary), i could show the transaction where i took it out and then my mom won some money on the lotto and that made up the balance!

Basically you need a visible track record of being sensible with your money. Car loans are a no-no from what i gathered and i know of two friends who were told it was best to clear theirs before applying for a mortgage.

finooola

BailMeOut wrote: »

congratulations on the baby!

I work for solely and get paid from USA companies in USA and live in Ireland and had no issues with AIB. Is your husband an employee or a contractor (sole trader)? Where is his income tax being withheld and paid?

He pays his tax in Ireland since May or June, I think it was. Before that we both lived in London and were getting paid and paying tax there.

BailMeOut

finooola wrote: »

He pays his tax in Ireland since May or June, I think it was. Before that we both lived in London and were getting paid and paying tax there.

ok so with AIB you may need more time here. They wanted three years of earnings and tax returns in Ireland from me before I could apply. As others said you should look at other banks or even better use a broker.

ibrahimovic

How long do you need to be in a full time job? I have been full time employed for about 4 months now, I presume that is too short?

Samuel T. Cogley

ibrahimovic wrote: »

How long do you need to be in a full time job? I have been full time employed for about 4 months now, I presume that is too short?

Longer the better, but considerations will be made after 6 months, but generally depends on your probation duration. If this is your first FT job that might be flagged also.

There's very little downside to starting to approach banks now, it'll be weeks/months in the applications stage so things may change.

ibrahimovic

Appreciate the reply thanks, no harm in contacting them good idea.

Zapperzy

How far back do the banks look through statements?
Set up a credit union account a month ago and putting away a set amount every week by standing order from my ptsb current account with the intention of applying for a mortgage in 2-3 years time (in FT work, waiting on permanent contract). Boyfriend is doing the same into a separate account. Are we doing right by all this? Should I have set up a savings account with my own bank or is credit union acceptable?

myshirt

Credit Union is absolutely fine.

Only thing I would say to you is your money won't work hard for you in a credit union. In other words the pace of inflation will beat the pace of what your money earns. If it is 2/3 years down the line, consider options to get that money working for you and not against you, so you're not swimming against the tide.

B-D-P--

Me and my partner, Unmarried, walked into bank, have 2 plus 30k jobs, no outstanding loans, Dont use credidcards and both in same job over 3 years.
Walked out easy with loan thats substantial enough, Easily build our 2 story home to good finish.

No issues at all, obviously it toke a little longer than 1 meeting but we didnt run into any issues.