First Time Buyer - Mortgage Limit?

janeysorcha

Myself & my partner are hoping to buy our first home in the coming year. We are both in full time employment with a combined salary of 64k. We've met with some banks before we began saving who will offer us 3.5 times our combined salary which would be about €224,000. Unfortunately, we're both from south Dublin City & with rising house prices this is not enough to stay in the area.

I've heard that in some cases there can be an exception to these rules. Has anyone ever got more than 3.5 times there annual salary? If so, which banks did you find most helpful?

myshirt

Your combined salary is too low to get an exception.

But anyway, to get an exception note the things that banks talk about helping you, like having a 20% or better deposit, having a specific house, having 90k+ household income (DINKS), showing you can afford the mortgage, etc.

Have not heard of anyone getting more than 3.5 without approaching the lender with a specific house.

Given that they only ever stretch it up to 4 times income. To be honest, you might thank them. Your budget should never be based on 'whatever the bank will give me' but moreso it should be what you can afford and sustain.

janeysorcha

myshirt wrote: »

Your combined salary is too low to get an exception.

But anyway, to get an exception note the things that banks talk about helping you, like having a 20% or better deposit, having a specific house, having 90k+ household income (DINKS), showing you can afford the mortgage, etc.

Have not heard of anyone getting more than 3.5 without approaching the lender with a specific house.

Given that they only ever stretch it up to 4 times income. To be honest, you might thank them. Your budget should never be based on 'whatever the bank will give me' but moreso it should be what you can afford and sustain.

Thank you for your reply. We have actually saved a higher deposit than the 10% required. I wasn't sure on the conditions of the exception the banks offer or if it varied from lender

awec

myshirt wrote: »

Your combined salary is too low to get an exception.

But anyway, to get an exception note the things that banks talk about helping you, like having a 20% or better deposit, having a specific house, having 90k+ household income (DINKS), showing you can afford the mortgage, etc.

Have not heard of anyone getting more than 3.5 without approaching the lender with a specific house.

Given that they only ever stretch it up to 4 times income. To be honest, you might thank them. Your budget should never be based on 'whatever the bank will give me' but moreso it should be what you can afford and sustain.

You can definitely get more than this but it's getting into crazy territory.

CPTM

I was offered 5X my salary as a mortgage option. Only because I had managed to save more than the expected mortgage repayment amount for 6 months in a row in an account untouched. The monthly saving amount needs to be more than the expected repayment amount because they do a stress test during the application stage, by calculating the effect of a 2% interest rate increase, and if your monthly savings ability + rent outweigh that 2% increase, then they can break the rules. Or at least, BOI did for me.. But they're the most expensive, so I wouldn't recommend then. Shop around.

janeysorcha

CPTM wrote: »

I was offered 5X my salary as a mortgage option. Only because I had managed to save more than the expected mortgage repayment amount for 6 months in a row in an account untouched. The monthly saving amount needs to be more than the expected repayment amount because they do a stress test during the application stage, by calculating the effect of a 2% interest rate increase, and if your monthly savings ability + rent outweigh that 2% increase, then they can break the rules. Or at least, BOI did for me.. But they're the most expensive, so I wouldn't recommend then. Shop around.

At the moment, we're saving about 2000 a month. Our monthly repayments would have been around €900 for a mortgage of €224,000. To rent in our current area, it's about €1500+ for a 1 bed apartment so you can imagine our frustration

CPTM

janeysorcha wrote:

At the moment, we're saving about 2000 a month. Our monthly repayments would have been around €900 for a mortgage of €224,000. To rent in our current area, it's about €1500+ for a 1 bed apartment so you can imagine our frustration

I think I'm missing something.. So you're saving 2000 per month and you're also spending 1500 on rent? Or how much is your rent?

Make sure your savings are consistent and completely untouched. Surely the bank will let common sense prevail. Are there any other reasons you've seen pushback? For example, credit card debts or non-permenant jobs?

CPTM

awec wrote:

They aren't getting pushback, they are getting offered 3.5 times their salary (i.e. the normal maximum).

Sorry I mis-read, I thought they had tried and failed to get more than the 3.5 times the salary.

awec wrote:

I don't think common sense comes into it, I would imagine that banks have defined criteria that must be met before they'd look at going above the limit.

Yes, I agree, except that decision making process that allows them to go beyond the limit is what I call "common sense". I'm sure someone somewhere has summarised it in a spreadsheet so that decisions are made uniformly. But first comes the common sense to allow exceptions beyond 3.5, then comes the 'predefined criteria' to which you're referring to make sure nobody takes it too far.

janeysorcha

CPTM wrote: »

I think I'm missing something.. So you're saving 2000 per month and you're also spending 1500 on rent? Or how much is your rent?

Make sure your savings are consistent and completely untouched. Surely the bank will let common sense prevail. Are there any other reasons you've seen pushback? For example, credit card debts or non-permenant jobs?

We're saving €2000 a month but still living at home. We have yet to apply so we haven't been pushed back, one of us has recently changed job so simply had to wait to pass the probation period before applying.

CPTM

janeysorcha wrote: »

We're saving €2000 a month but still living at home. We have yet to apply so we haven't been pushed back, one of us has recently changed job so simply had to wait to pass the probation period before applying.

Good approach. Hopefully you won't need to wait too long. I'm not sure where you are based in South Dublin, but I had a good experience in Terenure's Bank of Ireland. The lady in there was really easy to talk to about it all, and really friendly. The only thing is that Bank of Ireland seem to be the most expensive, but an approval from one bank might make another more likely to approve.

68 lost souls

CPTM wrote: »

The only thing is that Bank of Ireland seem to be the most expensive, but an approval from one bank might make another more likely to approve.

Bank of Ireland worked out the cheapest for us over the next 5-8 years by about €8,000 at which point we will be free to change providers if we see fit.

awec

janeysorcha wrote: »

We're saving €2000 a month but still living at home. We have yet to apply so we haven't been pushed back, one of us has recently changed job so simply had to wait to pass the probation period before applying.

Yea this will be a big factor IMO. Even if you show you regularly saved 2000 a month it will be because your cost of living is almost nothing right now.

Carlos Orange

My broker said they could get me about 4.1x my salary which is about yours but I'm single. Didn't take extra in the end. Will an extra 40-60k make a difference? You might be better looking elsewhere even if it isn't your preference. I had a couple of times my salary in savings which probably makes getting an exception easier and was paying rent.

Moonbeam

Would it be worth waiting a year or so and job hunting to up your salaries?
Long term it might mean that you could buy a house in a location that you might prefer.

myshirt

What is the typical profile of a purchaser is this part of the market?

bleary

You're saving a thousand a month each while living at home, well done on that but please don't fall into the trap of thinking that if the bank would only give you a little extra it would be fine.
The boom the last time was fuelled by crazy lending by the banks and borrowing from people just like you. All that extra credit does is inflate the price. Which is ok as long as
You both continue earning the same or more than currently so
No redundancy
No unpaid maternity
No major illnesses
No major changes in interest rates.
Continue saving, try to increase your earnings which are low or move somewhere more affordable. Please don't try to stretch the rules, your earnings are not high enough to do so.

janeysorcha

We've actually got over double the required deposit at the moment. We've also paid off our loans. It's quite frustrating as houses prices are just higher & higher each day!

dudara

It's not just about the deposit though, it's also about your ability to meet the repayments with money to spare. Have you done the maths on that yet?

janeysorcha

dudara wrote: »

It's not just about the deposit though, it's also about your ability to meet the repayments with money to spare. Have you done the maths on that yet?

For a mortgage of €224,000, our monthly repayments be approx €900.

The_Causeway

janeysorcha wrote: »

For a mortgage of €224,000, our monthly repayments be approx €900.

You would be eligible for more than 3.5 times your salary depending on how much income you have left net monthly after your mortgage repayments and any other financial committments ie loans, children. As an underwriter it's not my favourite thing to do but I've seen people on lower combined incomes get them. As far as I know all banks have stopped offering exceptions for now, the bank I work for has as we gave away quiet a lot at the start of the year so we had to stop. In general, they start offering them towards the end of the year again. They are more particular then about who gets them as they have a limited amount left.

How much do you actually want to borrow?

(Not knowing your ages or positions in life) - you can't afford to buy what you want to buy where you want to buy it.

Some of your options are to borrow beyond the cap (I don't see this happening), buy something smaller, earn more, buy somewhere else, keep saving.

What other options have you considered?

68 lost souls

janeysorcha wrote: »

We've actually got over double the required deposit at the moment. We've also paid off our loans. It's quite frustrating as houses prices are just higher & higher each day!

Don't forget you will need money to pay legal fees, furniture, bills, appliances, any renovation work etc etc. Its a tough slogg buying your first house but its worth it, best of luck

dudara

janeysorcha wrote: »

For a mortgage of €224,000, our monthly repayments be approx €900.

That's not exactly the answer I was looking for. What the bank will look at is how much money you have left over after meeting your commitments each month. They don't want you putting all your take home pay into the mortgage. They will also stress test this to make sure that you still have the capacity to repay even if mortgage rates increase.

In addition you will need to factor another several thousand to cover stamp duty, solicitors fees etc.

I'd personally recommend speaking to a good mortgage / financial advisor who can help lay out all of this for you. A good one can be worth their weight in gold (well nearly!)

OscarBluth

Is there a particular area you want to stay in, or just south Dublin? With your budget, assuming you want a three bed house, there are some nice houses in Crumlin, Drimnagh or Tallaght which are all south side and could all fit a family. If you'd be happy with a two-bed, there's more choice. Some of these areas have bad reputations, and bad areas, but I've not heard anything bad from friends who are living there. Crumlin in particular is very accessible to the city centre, and lots of the houses you could buy for that money have 60ft long back gardens.

The thing is, most people I know who are buying houses now earn more money than their parents would have - two salaries rather than one, more 'prestigious' careers - solicitors instead of teachers, etc - yet very few of us have been able to afford to buy in the areas we grew up in. If you were lucky enough to grow up in what is now a very fancy neighbourhood, as seems to have happened with many south Dublin suburbs, and you don't earn the salary required to live there now, you might be happier if you readjust your expectations rather than put pressure on yourself to get in an unrealistic amount of debt.

Hani Kosti

We have been approved in principal for 3.85 times salary and our friend got 4 times salary.
We had more than 10% required deposit saved. Difference between rent paid and mortgage was €80/month and we easily passed stress test of 8% interest rate.
So yes it is possible to get more than 3.5 times

Michael D Not Higgins

According to the Central Bank figures, last year 17.5% of FTBs got an exemption from the LTI rules. Of those, the average LTI was 3.8 and average mortgage of 241k (i.e. average salary of 63.5k) with property value of 319k (24.5% deposit). The rough breakdown of exemptions is 40% up to 3.75, 35% up to 4, 20% up to 4.25 and 5% up to 4.5.

So if we assume you can get 3.8 with a 20% deposit you can afford to buy in the region of 300k.

Cuddlesworth

myshirt wrote: »

What is the typical profile of a purchaser is this part of the market?

For houses, 100k+ combined with 100k+ deposit. Sub 400k seems very competitive at the moment.

There are 2 bed apartments in the OP's budget.

zl1whqvjs75cdy

Hani Kosti wrote: »

We have been approved in principal for 3.85 times salary and our friend got 4 times salary.
We had more than 10% required deposit saved. Difference between rent paid and mortgage was €80/month and we easily passed stress test of 8% interest rate.
So yes it is possible to get more than 3.5 times

Jesus they stressed you at 8 %? Serious stress

The_Conductor

donkeyoaty0099 wrote: »

Jesus they stressed you at 8 %? Serious stress

8%? Is this correct? Seems remarkably high?

awec

What bank stress tests at 8%?

I'm not really sure how you would borrow 3.85x and still pass an 8% stress test easily. Unless I am missing something those figures don't add up.

somesoldiers

The_Conductor wrote: »

8%? Is this correct? Seems remarkably high?

1-2% is much more likely, even that is not likely any time soon

Cuddlesworth

awec wrote: »

What bank stress tests at 8%?

I'm not really sure how you would borrow 3.85x and still pass an 8% stress test easily. Unless I am missing something those figures don't add up.

People who earn a large amount of money in addition to their base pay?

awec

Cuddlesworth wrote: »

People who earn a large amount of money in addition to their base pay?

If the bank was willing to include that sort of income in a stress test then why wouldn't they include it in the income used for the 3.5x calculation?

I could be totally wrong, but in times where interest rates hit 8% surely this extra money is more likely to disappear than the base salary?

janeysorcha

Thanks all! All advice is much appreciated. We've met with one lender who believed we would be in a position to seek an exception, but would have to wait until later in the year. The same lender also advised to complete 6 months in a new job before applying. We have yet to apply but I was intrigued to gain any insight into exceptions.

starmc14

janeysorcha wrote:

Thanks all! All advice is much appreciated. We've met with one lender who believed we would be in a position to seek an exception, but would have to wait until later in the year. The same lender also advised to complete 6 months in a new job before applying. We have yet to apply but I was intrigued to gain any insight into exceptions.

I got full approval in principle from KBC 3 months into a new job and have just gone sale agreed with 2 weeks left to run on my probation. Met KBC last week again, mortgage application gone for loan approval pending letter from work. No issues.
TSB on the other hand wouldn't even process an application for AIP until probation is passed. So I guess it depends on the lender.

MSVforever

OscarBluth wrote: »

Is there a particular area you want to stay in, or just south Dublin? With your budget, assuming you want a three bed house, there are some nice houses in Crumlin, Drimnagh or Tallaght which are all south side and could all fit a family. If you'd be happy with a two-bed, there's more choice. Some of these areas have bad reputations, and bad areas, but I've not heard anything bad from friends who are living there. Crumlin in particular is very accessible to the city centre, and lots of the houses you could buy for that money have 60ft long back gardens.

The thing is, most people I know who are buying houses now earn more money than their parents would have - two salaries rather than one, more 'prestigious' careers - solicitors instead of teachers, etc - yet very few of us have been able to afford to buy in the areas we grew up in. If you were lucky enough to grow up in what is now a very fancy neighbourhood, as seems to have happened with many south Dublin suburbs, and you don't earn the salary required to live there now, you might be happier if you readjust your expectations rather than put pressure on yourself to get in an unrealistic amount of debt.

We are renting in Crumlin since 2007 and house prices are crazy. For the Op's budget you would get a 2up 2down in the roughest parts (with no proper insulation - houses were built in the 30's/40s).
Realistically you need a budget of around €300k for the Crumlin / Drimnagh area atm(have a browse on daft). Kimmage /Walkinstown would be in the €350 - €500k bracket...

Parts of Clondalkin (Cherrywood, Grangeview, Deansrath, Bawnogue, Neilstown) or rougher areas in Tallaght (Killinarden, Jobstown, Brookview, Springfield etc) have housing stock in the sub €225k price range though.

janeysorcha

MSVforever wrote: »

We are renting in Crumlin since 2007 and house prices are crazy. For the Op's budget you would get a 2up 2down in the roughest parts (with no proper insulation - houses were built in the 30's/40s).
Realistically you need a budget of around €300k for the Crumlin / Drimnagh area atm(have a browse on daft). Kimmage /Walkinstown would be in the €350 - €500k bracket...

Parts of Clondalkin (Cherrywood, Grangeview, Deansrath, Bawnogue, Neilstown) or rougher areas in Tallaght (Killinarden, Jobstown, Brookview, Springfield etc) have housing stock in the sub €225k price range though.

And that's just the asking price. We are at the point where it is time to move out of home but rent prices are crazy and prices are too extortionate to buy.