Applying for Mortgage question

theballz

Hi,

I am looking at applying for a mortgage with the intention to buy in January 2019.

Property value: 520,000
Deposit saved: 52,000
Loan Term: 35 years

According to the KBC calculator repayments would be 1,934.20 over a 35 year period.

My financial situation:
- I work in Software Sales (permanent)
- Single
- Base salary 68,000, additional 68,000 in bonuses (consistently exceeding.)
- No outstanding loans

I know the above does would not equate for a mortgage of that size, however for the last 12 month I have been paying 1,942.00 in rent (which is higher than the proposed mortgage) - would the bank take my propensity to spent into consideration when applying for a mortgage or is is strictly down to salary?

limnam

theballz wrote: »

Hi,

I am looking at applying for a mortgage with the intention to buy in January 2019.

Property value: 520,000
Deposit saved: 52,000
Loan Term: 35 years

According to the KBC calculator repayments would be 1,934.20 over a 35 year period.

My financial situation:
- I work in Software Sales (permanent)
- Single
- Base salary 68,000, additional 68,000 in bonuses (consistently exceeding.)
- No outstanding loans

I know the above does would not equate for a mortgage of that size, however for the last 12 month I have been paying 1,942.00 in rent (which is higher than the proposed mortgage) - would the bank take my propensity to spent into consideration when applying for a mortgage or is is strictly down to salary?

Sounds like you're miles off.

jodaw

Computer says no

I would imagine

Also how is it only possible to have 52K saved when you are earning in excess of 136K Gross per year. This would say that your living costs have matched your earnings every year before the past year.

Andrew Beef

You should talk to a good broker; some banks include bonuses in which case you’d be almost bang on 3.5 times.

Avatar MIA

First question, are you a first-time buyer?

RunRoryRun

Unfortunately the bank will give you a max approval of 3.5 times your guaranteed salary. This excludes your bonus, whether you're exceeding consistently or not. Can go up to 4 times salary with an exception.

limnam

Andrew Beef wrote: »

You should talk to a good broker; some banks include bonuses in which case you’d be almost bang on 3.5 times.

Do you know which banks?


I thought they could only calculate guaranteed bonus's which by the nature would be few and far between.

Andrew Beef

RunRoryRun wrote: »

Unfortunately the bank will give you a max approval of 3.5 times your guaranteed salary. This excludes your bonus, whether you're exceeding consistently or not. Can go up to 4 times salary with an exception.

The above is not accurate.

Ulster Bank, for example, will include bonuses.

Andrew Beef

Some banks take the average of the last three years’ bonuses but it’s not accurate to say that it’s just your salary that’s taken into account.

theballz

limnam wrote: »

Sounds like you're miles off.

Very helpful and insightful feedback. Thank you.

jodaw wrote: »

Computer says no

I would imagine

Also how is it only possible to have 52K saved when you are earning in excess of 136K Gross per year. This would say that your living costs have matched your earnings every year before the past year.

The nature of my provision, this year I have made well in excess of my salary + bonus package.

Andrew Beef wrote: »

You should talk to a good broker; some banks include bonuses in which case you’d be almost bang on 3.5 times.

A few people have advised the same. If you have any suggestions that would be fantastic.

Avatar MIA wrote: »

First question, are you a first-time buyer?

Yes, I am a first time buyer.

RunRoryRun wrote: »

Unfortunately the bank will give you a max approval of 3.5 times your guaranteed salary. This excludes your bonus, whether you're exceeding consistently or not. Can go up to 4 times salary with an exception.

AIB have told me they will take into consideration 50% of my bonus. Bringing my salary calculation up to 102,000 euro.

theballz

Re propensity to buy: It is also worth mentioning that AIB did say they would take into consideration previous loans etc. For 6 months I was paying 400 euro on a car loan on top of the 1,942 a month rent - bringing up to 2,342 a month.

However the 3.5 times still stands.

limnam

Andrew Beef wrote: »

Ulster Bank, for example, will include bonuses.

Had no interest in doing it for us a few months back.

limnam

theballz wrote: »

Very helpful and insightful feedback. Thank you

Sorry.


I'd make a terrible broker.

Avatar MIA

One other thing which would help indirectly.

You would appear to be in a strong position (making a fortune for your employer) to renegotiate your deal to a payment model that includes a higher basic salary.

Andrew Beef

limnam wrote: »

Andrew Beef wrote: »

Ulster Bank, for example, will include bonuses.

Had no interest in doing it for us a few months back.

They included mine.

Avatar MIA

Andrew Beef wrote: »

They included mine.

Would be on a case by case basis.

I suspect in the OP's case the level of bonus to get to the required level would be too high. Worth a discussion tough.

limnam

Andrew Beef wrote: »

They included mine.

So I'd say the safest thing to say is they _might_ include it.

bleary

I never really understand the argument that people are paying as much in rent as this mortgage would be. Yes maybe but rates are historically low.
Over 35 years they will increase and small rises can make a big difference to affordability .
Also agree if you are earning 120 grand and more a year you should have more than 50 grand saved

limnam

bleary wrote: »

I never really understand the argument that people are paying as much in rent as this mortgage would be. Yes maybe but rates are historically low.
Over 35 years they will increase and small rises can make a big difference to affordability .
Also agree if you are earning 120 grand and more a year you should have more than 50 grand saved

There's not many things in how banks calculate affordability that makes sense.


I guess the case is that he's shown over a sustained period of time that he can "afford" the repayments.


But I think in this case it doesn't make much difference the base wage against the overall cost of the house are miles apart.


Even if they took a % of the bonus into consideration and an exception you'd still find it hard,that's even before any sort of stress testing.

somesoldiers

Avatar MIA wrote: »

Would be on a case by case basis.

I suspect in the OP's case the level of bonus to get to the required level would be too high. Worth a discussion tough.

Yes me too, it is far too much. If he was on 130k base and needed to show bonus of another 10 to top it up, there would be less of an issue

Esse85

Your obviously incredibly good at what you do to be on a salary of €60k plus and making that again in bonuses.
I presume in bonuses alone your making well over €120k gross to be taking home €68k net.

Would there be an opportunity to change employer and acquire a higher base salary?

Andrew Beef

limnam wrote: »

Andrew Beef wrote: »

They included mine.

So I'd say the safest thing to say is they _might_ include it.

Just admit you were wrong.

Ulster Bank and some other banks include bonuses as a matter of course.

It wasn’t some wild one-off just for me.

limnam

Andrew Beef wrote: »

Just admit you were wrong.

Ulster Bank and some other banks include bonuses as a matter of course.

It wasn’t some wild one-off just for me.

Wrong of what?


I didn't make the original statement.


So now that we've cleared up your mistake.


What I said was, they didn't do it for me.


Which means they're not doing it for everyone.


Which means we can clearly state they "may" take it into consideration.

hanaimai

theballz wrote: »

Re propensity to buy: It is also worth mentioning that AIB did say they would take into consideration previous loans etc. For 6 months I was paying 400 euro on a car loan on top of the 1,942 a month rent - bringing up to 2,342 a month.

However the 3.5 times still stands.

So what AIB have told you related to the affordability assessment. This is one aspect that is considered to qualify for a mortgage - essentially can you meet the monthly repayments. Banks must carry out an affordability assessment but they have leeway to determine the exact criteria for the assessment - hence why you'll hear different things from different banks in this regard.

However, your problem is the Loan-to-Income (LTI) rule of banks only being able to lend 3.5 times your income (or up to 4.5 with an exception). This is a hard rule set by the Central bank i.e. no one is getting more than 4.5 in any circumstances. The banks have some discretion in relation to bonuses. Usually they will ask for proof of at least 2-3 years worth of bonuses and they will take an average of the total and add a percentage (depending on their own criteria) on to your gross salary for the purposes of the LTI calculation.

You should talk to a broker who might be able to advise which banks are more likely to take a higher percentage of your bonus into account. As someone else suggested, you should also look into getting your base salary raised. It's super unlikely any bank would ever take 100% of a bonus into account for the LTI calculation so if you can get your base salary raised, this might push you closer to the amount you are looking for.

Otherwise, keep saving to get your LTV down. The lower your LTV, the more likely the bank is to offer you an exemption too.

Andrew Beef

limnam wrote: »

Andrew Beef wrote: »

Just admit you were wrong.

Ulster Bank and some other banks include bonuses as a matter of course.

It wasn’t some wild one-off just for me.

Wrong of what?


I didn't make the original statement.


So now that we've cleared up your mistake.


What I said was, they didn't do it for me.


Which means they're not doing it for everyone.


Which means we can clearly state they "may" take it into consideration.

Unfortunately, you appear to have no idea what you’re talking about. I say unfortunately because it’s bad when anonymous posters mislead someone who’s looking for help. The OP’s best bet is to consult with a mortgage broker rather than rely on posters who seem to “blow in the wind” when it comes to their advice.

Andrew Beef

limnam wrote: »

Andrew Beef wrote: »

You should talk to a good broker; some banks include bonuses in which case you’d be almost bang on 3.5 times.

Do you know which banks?


I thought they could only calculate guaranteed bonus's which by the nature would be few and far between.

No, you’re wrong.

Andrew Beef

Ulster Bank will include bonuses, not “may”, they will. A quick google search will confirm that. However, the ratio will be problematic for the OP. They’ll only allow bonuses at 20%.

https://www.ulsterbankintermediaries.ie/lending-criteria/acceptable-income

limnam

Andrew Beef wrote: »

No, you’re wrong.

So the statement by the other poster was this

RunRoryRun wrote: »

Unfortunately the bank will give you a max approval of 3.5 times your guaranteed salary. This excludes your bonus, whether you're exceeding consistently or not. Can go up to 4 times salary with an exception.

I merely pointed out that I was under the impression it was only guaranteed.


I never stated it was.


I never gave anyone advice. I was actually asking you a question of what bank it was.



Now get off your high horse.

Andrew Beef

limnam,

It’s okay to be wrong. Don’t worry about it.

The OP should chat with a broker.

theballz

Quick update here, a lot of you thought I was mad in thinking I could get the mortgage approval I outlined above.

Well I did get it and more.

To anyone is viewing this thread, do not be nervous when applying.

manatoo

theballz wrote: »

Quick update here, a lot of you thought I was mad in thinking I could get the mortgage approval I outlined above.

Well I did get it and more.

To anyone is viewing this thread, do not be nervous when applying.

Fair play. And FML, what do I need to do to get your kind of income

theballz

manatoo wrote: »

Fair play. And FML, what do I need to do to get your kind of income

Hardwork and timing.

Very best and thank you

theballz

Another quick update:

Went sale agreed last week

SozBbz

Congrats OP.

Did you go through a broker in the end? I'm in a similar field (earning similar) and was actually surprised how much I got approved for. For context I already have 1 mortgage and was looking for a second joint mortgage with my partner (not in sales). Couldnt believe some of the numbers that came back. I thought my existing mortgage would count against me, and that my bonus wouldnt be factored in at all.... both not true (although depending on the bank, it varied by how much). We were offered almost double what I'd expected.

From my experience a few years ago buying the apartment by myself, no bank wanted to consider any part of my bonus (as in sales its never guaranteed)

Also recently sale agreed and delighted to be able to keep the apartment and still have a decent budget for a house that I'm happy with. Obviously we'd have had more to spend if we sold up and put everything into the house purchase, but actually happy with what we've got lined up and I don't feel like we've compromised too much as the new house gives us both all the warm and fuzzies.

I've no intention of drawing down the full amount approved though. I don't want a massive mortgage just because I can.

theballz

SozBbz wrote: »

Congrats OP.

Did you go through a broker in the end? I'm in a similar field (earning similar) and was actually surprised how much I got approved for. For context I already have 1 mortgage and was looking for a second joint mortgage with my partner (not in sales). Couldnt believe some of the numbers that came back. I thought my existing mortgage would count against me, and that my bonus wouldnt be factored in at all.... both not true (although depending on the bank, it varied by how much). We were offered almost double what I'd expected.

From my experience a few years ago buying the apartment by myself, no bank wanted to consider any part of my bonus (as in sales its never guaranteed)

Also recently sale agreed and delighted to be able to keep the apartment and still have a decent budget for a house that I'm happy with. Obviously we'd have had more to spend if we sold up and put everything into the house purchase, but actually happy with what we've got lined up and I don't feel like we've compromised too much as the new house gives us both all the warm and fuzzies.

I've no intention of drawing down the full amount approved though. I don't want a massive mortgage just because I can.

Yes, I did go with the broker in the end. It took him a little bit of time but the process on my side was very straight forward.

I do agree, after reading these replies, speaking to friends and first hand seeing peers get turned down I was rather surprised.

Best of luck with the second house (should you decide to go for it!)

TheSheriff

Hey,

Would it be possible to get a PM of the broker you used to secure this ? My partners is in sales and we are hoping to apply for a mortgage in the few months.

Any contacts appreciated !

SozBbz

theballz wrote: »

Yes, I did go with the broker in the end. It took him a little bit of time but the process on my side was very straight forward.

I do agree, after reading these replies, speaking to friends and first hand seeing peers get turned down I was rather surprised.

Best of luck with the second house (should you decide to go for it!)

Yep I think a broker is the way to go if your situation is in anyway non standard. We'd a few things, my existing property, my partner is a contractor, I work in sales... so all in we thought it would be easier to take advise for a few hundred euro rather than spend ages wasting out time applying to banks that wouldn't accept our circumstances. It the context of buying a house its nothing really.

I did it myself the first time around, went straight to the bank but I suppose it was a single applicant /first time buyer and I wasn't expecting to have my commission taken into account. I did get an exception then, to 4.5x my base salary so perhaps that was their way of factoring it in.

We're sale agreed and getting our survey/valuation done soon so fingers crossed. We're only looking to borrow 2/3rds of what the banks have offered us, I just set that limit personally as I want our mortgage to be super manageable and I don't want us to find ourselves over extended in hanging on to the apartment also.