First Time Buyer and Exemption

Jack_92

Hello Everyone,

Myself and my girlfriend (both 26yrs) are planning to apply for a mortgage hopefully in January. Our current joint income is 62k. We have been saving since we graduated, two years now and managed to save nearly 40k. Since then we have been also living in the same rented accommodation which is 1200e and paying bills (approx. 120e). We don't have any children/ loans/ debts etc. I have been in the same employment for the last two years whereas my girlfriend will be two years in January.

We have been observing the market in the last couple of months and unfortunately it would be almost impossible to find anything in the range 230-250k in Dublin. Most of the 2 bed apartments in the areas we are looking for are in the range 265-285k., which would require us to apply for LTI exemption.

What are the chances we could get an exemption in our current situation?

Thank you,

Jack

catrionanic

Well there is no harm in trying! But generally to be considered for a LTI exemption, banks will want to see combined earnings for both applicants in excess of 100k.

Saving 40k in two years on that income, while paying rent, is very commendable so well done.

I think you will need to change the areas you are looking in, though. Or else keep saving and give it a few years for your salaries to increase.

PSFarrell

I was in the same boat hoping to buy a 2 bedroom apartment. I had no dependents, 60k salary and permanent employment . I broached the bank about an exemption and was told it was highly unlikely. The bank said that I would firstly have to go sale agreed on the property and then request the exemption. Essentially I would be bidding with money I didn't have and then praying the mortgage would get approved. I made the decision to buy a 1 bed instead. Your only real options are to keep saving, change location or consider a 1 bedroom.

Interested Observer

Is there any prospect of either/both of you getting a pay raise any time soon? With the 3.5x multiplier it wouldn't take a huge increase to get up to what you need.

Alkers

PSFarrell wrote:

Your only real options are to keep saving, change location or consider a 1 bedroom.

Don't buy a one bed!

If you do get a two/three bed you'll be able to avail of the rent a room scheme tax free to help with finances for a few years.

At your age, you should both have a reasonably chance of getting salary increases every year, this is your best option to pursue.

Absolutely apply for an exemption with all the banks but you may have more luck in January (annual quotas).

Jack_92

Thank you for your responses.

PSFarrell wrote: »

I was in the same boat hoping to buy a 2 bedroom apartment. I had no dependents, 60k salary and permanent employment . I broached the bank about an exemption and was told it was highly unlikely. The bank said that I would firstly have to go sale agreed on the property and then request the exemption. Essentially I would be bidding with money I didn't have and then praying the mortgage would get approved. I made the decision to buy a 1 bed instead. Your only real options are to keep saving, change location or consider a 1 bedroom.

Is this a common process? So is it impossible to get the exemption without sale agreed?

Interested Observer wrote: »

Is there any prospect of either/both of you getting a pay raise any time soon? With the 3.5x multiplier it wouldn't take a huge increase to get up to what you need.

Our combined salary would have to go up by 10k to be able to borrow 275k. Although it is very likely we will be getting paid more in the future, I doubt it will jump by that amount anytime soon.

Simona1986 wrote: »

Don't buy a one bed!

If you do get a two/three bed you'll be able to avail of the rent a room scheme tax free to help with finances for a few years.

At your age, you should both have a reasonably chance of getting salary increases every year, this is your best option to pursue.

Absolutely apply for an exemption with all the banks but you may have more luck in January (annual quotas).

Thank you. We would only consider two/three bed. We would be planning to rent one of the rooms out once we moved in. Would the banks factor this in?

Fol20

I have to say, well done on saving 40k in 2 years. You seem to have a level head at only 26 years of age. Is any of your family able to give you a loan of the extra few thousand you need. I would also check if a broker can do any better. Again well done on saving 40k!

PSFarrell

I was told with my salary level that this was the only way I could apply for an exemption. The bank suggested asking my parents for pre inheritance to bridge the gap which I found rather disgusting. I know the banks can give out 20% of loans above the the 3.5 threshold but I got the impression that most people coming in for loans are looking for them. Prices appear to be stabilizing and from what you have said if you keep saving at your current rate you will be able to save enough. Good luck

quadrifoglio verde

Jack_92 wrote: »

Is this a common process? So is it impossible to get the exemption without sale agreed?

With exemptions, you apply for a higher approval in principle that the 3.5 times salary.
You then have to find a house you want to buy and go sale agreed.
The risk with exemptions is that the bank may have already used up the 20% of their loan book for that year that can go towards exemptions and are unable to then lend you the higher amount.

It's annoying but it is there to prevent the banks being potentially reckless with their lending.

peteb2

quadrifoglio verde wrote:

It's annoying but it is there to prevent the banks being potentially reckless with their lending.

So instead they are just reckless with the approval in principle? ðŸ˜

Interested Observer

peteb2 wrote: »

So instead they are just reckless with the approval in principle? ðŸ˜

I mean that's a strange way to put it. There's no risk associated with AIP, they aren't giving you any money.

skywayavenue

Jack_92 wrote: »

Hello Everyone,

Myself and my girlfriend (both 26yrs) are planning to apply for a mortgage hopefully in January. Our current joint income is 62k. We have been saving since we graduated, two years now and managed to save nearly 40k. Since then we have been also living in the same rented accommodation which is 1200e and paying bills (approx. 120e). We don't have any children/ loans/ debts etc. I have been in the same employment for the last two years whereas my girlfriend will be two years in January.

We have been observing the market in the last couple of months and unfortunately it would be almost impossible to find anything in the range 230-250k in Dublin. Most of the 2 bed apartments in the areas we are looking for are in the range 265-285k., which would require us to apply for LTI exemption.

What are the chances we could get an exemption in our current situation?

Thank you,

Jack

We were in a similar position although not as much savings. We got an exemption of 4.5 times our combined salary which was 68k. That was back in March with KBC.

shelly24

We are second time buyers and managed to secure an exemption on not needing 20% deposit with PTSB. Then BOi said we could have one allowing us to have more then 3.5 times salary but would only give it to us when we went sale agreed. We went sale agreed a week later and then they old us they had ran out of exemptions.
We then went to Ulster bank and they gave us a ‘special offer’ allowing us 4 times our salary if we sign up to a 7 year fixed rate. We are happy with that.

cruizer101

To be fair you are probably good candidates for an exemption giving the amount you have managed to save whilst paying rent it shows your are sensible with money and given your age salary increases are likely.
No one here can give you a definite answer and all the banks criteria is a bit different, and may even change in the new year.
If you are going to be potentially looking to drawdown early in the new year I'd nearly start talking to the bank soon enough as the application process can take a while.

Jack_92

skywayavenue wrote: »

We were in a similar position although not as much savings. We got an exemption of 4.5 times our combined salary which was 68k. That was back in March with KBC.

That's interesting. Have they offered you an exemption once you had sale agreed or before? From what I've read, it's a quite common requirement in order to obtain an exemption. Did you go through broker or go directly to the bank?

Interested Observer

Was told by a broker earlier that banks don't have exemptions any more this year.

jimmycrackcorm

Interested Observer wrote:

Was told by a broker earlier that banks don't have exemptions any more this year.

They'll be starting back in January.

skywayavenue

Jack_92 wrote: »

That's interesting. Have they offered you an exemption once you had sale agreed or before? From what I've read, it's a quite common requirement in order to obtain an exemption. Did you go through broker or go directly to the bank?

Exemption was offered before we went sale agreed and we did use a broker.

witchgirl26

We got an exemption with Bank of Ireland on the LTI however we were told that we'd been approved in principal for it and the amount but that it would depend on the full process of approval which you can only start when you have a particular property to attach the mortgage to. This means there is a small chance that the bank may have used up their quota of exemptions between when you get the AIP and full approval. We were lucky as we were acting quite quickly so there wasn't that much time difference.

OP might be worth applying for AIP with a few banks to see if you can get the exemption in the first place and then look to buy early in the year. Not all banks work their exemptions on the full year basis by the way. Some allocated them out over quarters or half yearly. Best time to buy to get them is then at the start of a quarter.

Jack_92

Thank you, that's all really helpful. Ok so say I have got a mortgage approved for 275k including exemption. With this budget and current market in mind, is it realistic to look at the properties that have asking price between 250k and 275k? I’m asking price means nothing and is only set to attract more interest. Do you guys know whether any of current properties in Dublin are being sold for asking price or should I not waste my time/ hope and start bidding on the properties that would be below my budget i.e. 220-250k knowing I would have to pay extra 20k caused by current demand?

mugsymugsy

Jack_92 wrote: »

Thank you, that's all really helpful. Ok so say I have got a mortgage approved for 275k including exemption. With this budget and current market in mind, is it realistic to look at the properties that have asking price between 250k and 275k? I’m asking price means nothing and is only set to attract more interest. Do you guys know whether any of current properties in Dublin are being sold for asking price or should I not waste my time/ hope and start bidding on the properties that would be below my budget i.e. 220-250k knowing I would have to pay extra 20k caused by current demand?

I don't know if there is an automatic way but here is what I used to do before we weren't ready to purchase a property.
1. Sign up to daft email alerts for properties in your area that matches your criteria - this is your for sale price.
2. Go the ppr website where house prices that are sold are lodged.
3. Check to see what the difference between for sale prices in your email and sold prices on ppr

You will see some prices go way higher etc

If you want to do something now you might be able to see recent properties on ppr that have sold that haven't been removed from daft or estate agents and Google the address to see if you can find it.

Best of luck

catrionanic

We've just been looking around Dublin, although we were searching in the 550-650 range (our budget was 700 or thereabouts). We found that the majority of properties went for around 10% over asking - so we didn't even bother to look at properties with asking prices close to our budget. Sometimes a bit more and sometimes a bit less, but 10% was a good guide. We were outbid on 4 properties because they went so far over asking.

You would sometimes uncover one that went for close to asking, but there didn't seem to be a general trend as to why.

In the end we got ours for only 5k over asking. There wasn't a lot of interest in it and we still aren't sure why but hey ho.

There may be even more competition at your price range. Only way to know is to start to look and see. You can ring estate agents about properties which have recently gone sale agreed and they will generally tell you what they went for - they are only delighted to tell you how much more than the asking price they achieved!

wersal gummage

mugsymugsy wrote: »

2. Go the ppr website where house prices that are sold are lodged.

Just to be aware, if you are new to all of this, that the register is updated after a sale completes, which in some cases can be several months after a sale is agreed, which could also be many months after the place was advertised. This may or may not be relevant to you. Eg it's possible that a sale on the ppr from 6 months ago was actually sale agreed 9 or 12 months ago. If the market is rising quickly it might be relevant.


Edit, just to be clear, I'm making the point for the information of the person who originally asked the question, not for the person I'm quoting who clearly understands this

PSFarrell

From my own experience I found that most apartments went for over the asking price. I was looking to buy in or around Smithfield. In the end I got something in my price range. I paid 20% over the asking but I felt the initial price was set very low to attract interest. At the price level your looking at there will be quite a bit of competition so I would give yourself some room to bid.

bri007

Do you mind me asking which bank you got the exemption with?

Jack_92 wrote: »

Thank you, that's all really helpful. Ok so say I have got a mortgage approved for 275k including exemption. With this budget and current market in mind, is it realistic to look at the properties that have asking price between 250k and 275k? I’m asking price means nothing and is only set to attract more interest. Do you guys know whether any of current properties in Dublin are being sold for asking price or should I not waste my time/ hope and start bidding on the properties that would be below my budget i.e. 220-250k knowing I would have to pay extra 20k caused by current demand?

Jack_92

bri007 wrote: »

Do you mind me asking which bank you got the exemption with?

We haven't applied yet. It was hypothetical to make a point.

LauraMarieA

For original poster we have just received an exemption this week via our broker. The offer is from Ulster bank. The process of getting an exemption for us has been relatively straight forward so far.

If you have any questions regarding exemption feel free to pm me!

bri007

Pm sent

LauraMarieA wrote: »

For original poster we have just received an exemption this week via our broker. The offer is from Ulster bank. The process of getting an exemption for us has been relatively straight forward so far.

If you have any questions regarding exemption feel free to pm me!

fungie

Ulster bank are still giving exceptions, we got one yesterday.

Sarn

You’ll find that banks are resetting their exemptions at the moment. Realistically, anyone going sale agreed now will fall into the 2019 allocation.