First time buyer mortgage / Self build

StephenRy30

Hi would saving for one year be enough for a self build mortgage , along with gift from parents and using land as deposit.
Partner is on 30k , I'm a second year apprentice on around 20k a year but will be getting pay increase over next two years until qualified will be making more then .

Am I right with our salary at the moment together we will get a mortgage of €175k and with 50k from my parents as a gift will give us
€225k to build

Other hidden costs not included in above price
Will be helped by parents aswell, like
Legal fees
Architect/ engineer
Water connection
Planning/ Council

Q&A

At €225k a deposit of €50k will cover the 10% deposit and legal fees. If you're building you probably want a buffer of savings for unforseen costs.

Banks will look at your last 6 months bank statements to see if you can afford the repayments. This is where lifestyle factors may impact. If you've evidence that rent and savings will be sufficient to cover stressed repayments (i.e., repayments if rates where 2% higher) you should be ok. Unfortunately these indicators tend to be backward looking I'm not sure if a bank will take into account potential future pay increases, especially when a number of years away

StephenRy30

Q&A wrote: »

At €225k a deposit of €50k will cover the 10% deposit and legal fees. If you're building you probably want a buffer of savings for unforseen costs.

Banks will look at your last 6 months bank statements to see if you can afford the repayments. This is where lifestyle factors may impact. If you've evidence that rent and savings will be sufficient to cover stressed repayments (i.e., repayments if rates where 2% higher) you should be ok. Unfortunately these indicators tend to be backward looking I'm not sure if a bank will take into account potential future pay increases, especially when a number of years away

Thanks for the reply . Yes I know they look at 6 to 9 months of bank statements i have nothing to hide i dont gamble or anything like that . We are both living in my parents house so we are saving. I have been onto ask paul and he said even though I am in a apprenticeship I can still get a mortgage especially with 50k gift .
Our mortgage repayments would be around 1k - €1,200 so between two people it's pretty easy to be able to pay back.

Do the banks just want to see you are making more then the mortgage repayments to be able to pay it back?

Yeah I'm not sure they would look at the pay increase either but it does tell I salary will increase which would benefit us to paying back the mortgage.

spion1892

The banks are basically looking for if you can make the payments with room to spare. They call this the income left over and different lenders look for different levels of buffer. The buffer they look for also generally increases for the number of kids you have as well.

What you have left over for each month in the last six months, plus any rent you have been paying is where they will focus.

As a really rough rule of thumb you need this to be about 1.5 times the payments, to be in the clear.

StephenRy30

spion1892 wrote: »

The banks are basically looking for if you can make the payments with room to spare. They call this the income left over and different lenders look for different levels of buffer. The buffer they look for also generally increases for the number of kids you have as well.

What you have left over for each month in the last six months, plus any rent you have been paying is where they will focus.

As a really rough rule of thumb you need this to be about 1.5 times the payments, to be in the clear.

1.5 times each or together?

We are not paying rent and have no kids

notsobadinc

With your combined salaries been quite low at the moment, ye could have a look at the County Council / Rebuilding Ireland scheme. Link below, but work on this application asap before this fund runs out as the process is very slow and can be tedious. You could potentially avail of a higher loan amount also, once the house is less than 175sq metres and ye are both first time buyers. Some of the lowest interest rates in country for first time buyers, flexible terms etc.

Again,if first time buyers, the Help to Buy scheme allows a maximum of 30k/10% of construction costs so another saving, however, with both your earnings over the past 4 years been taken into account, the amount to claim could be a lot less than 30k.

http://rebuildingirelandhomeloan.ie/

Just on another note, depending on where ye are located/planning to build, the funds of 225-250k will be tight to build a home in line with the current energy/building regulations. I was looking at building on a great lakeshore site I have, but it's alot cheaper for me to buy a house in my home county currently, than to build!

Also, might be no harm to set up some form of rent to come out of your bank accounts every month, even if your parents just hold this on your behalf, but the banks/underwriters will want to see your capacity to save so paying "rent" of say 250 to your folks every month(which they save for you) is better than paying no rent at all.

StephenRy30

notsobadinc wrote: »

With your combined salaries been quite low at the moment, ye could have a look at the County Council / Rebuilding Ireland scheme. Link below, but work on this application asap before this fund runs out as the process is very slow and can be tedious. You could potentially avail of a higher loan amount also, once the house is less than 175sq metres and ye are both first time buyers. Some of the lowest interest rates in country for first time buyers, flexible terms etc.

Again,if first time buyers, the Help to Buy scheme allows a maximum of 30k/10% of construction costs so another saving, however, with both your earnings over the past 4 years been taken into account, the amount to claim could be a lot less than 30k.

http://rebuildingirelandhomeloan.ie/

Just on another note, depending on where ye are located/planning to build, the funds of 225-250k will be tight to build a home in line with the current energy/building regulations. I was looking at building on a great lakeshore site I have, but it's alot cheaper for me to buy a house in my home county currently, than to build!

Also, might be no harm to set up some form of rent to come out of your bank accounts every month, even if your parents just hold this on your behalf, but the banks/underwriters will want to see your capacity to save so paying "rent" of say 250 to your folks every month(which they save for you) is better than paying no rent at all.

Thanks we are looking into that aswell we will be doing the plumbing & electrical ourselves so hopefully save a bit on that part.
Would the €250 be on top of saving? I was told once your saving a certain amount each month we wouldn't need to be seen paying rent to parents. As saving is just as good if not better as saving more .

notsobadinc

Ye are very fortunate so if ye can save on plumbing and electrical work..
I was in same position as ye, living at home and paying no rent, yet saving a large amount every month+I was advised that the more I can save, is clearly better. However in saying that, you currently cannot show any prospective lender that your paying rent along with saving.
So even a nominal amount of 250 in "rent" (your folks can keep this for ye for a later date) plus say the X amount ye are currently saving, then when it comes to stress testing, it could reflect better that ye are paying rent as well as saving.

Also, no lender will entertain you until you can show savings that ye, as a couple have actually saved. So you could have 50k gifted by your parents but you would still need to show proof of at least 6 months of your own savings before looking to apply for the mortgage. With your joint salary, ye should easily put away 800-1200 a month x 6 months. And clear any car loans if applicable.

StephenRy30

notsobadinc wrote: »

Ye are very fortunate so if ye can save on plumbing and electrical work..
I was in same position as ye, living at home and paying no rent, yet saving a large amount every month+I was advised that the more I can save, is clearly better. However in saying that, you currently cannot show any prospective lender that your paying rent along with saving.
So even a nominal amount of 250 in "rent" (your folks can keep this for ye for a later date) plus say the X amount ye are currently saving, then when it comes to stress testing, it could reflect better that ye are paying rent as well as saving.

Also, no lender will entertain you until you can show savings that ye, as a couple have actually saved. So you could have 50k gifted by your parents but you would still need to show proof of at least 6 months of your own savings before looking to apply for the mortgage. With your joint salary, ye should easily put away 800-1200 a month x 6 months. And clear any car loans if applicable.

To bad I dont know any carpenters aswell haha, but yet plumbing and electricial we will save it that department.

Exactly yeah I'm just going to stick to saving each month no need to give rent to parents as they are letting us save as much as we can .

Thanks for advice i know they will look at our own savings over 6 months which is fine just think the 50k will put us in a good position aswell.

XsApollo

StephenRy30 wrote: »

1.5 times each or together?

We are not paying rent and have no kids

If I remember correctly the cost of living for a single person the banks will calculate at 1500 a month.
Married couple is 2000 a month , 250 per child thereafter , not sure how it works for a non married couple or 2 people buying a house.

So that’s 1500 or 2000 taken from your monthly salary , whats leftover after that is your repayment capacity , they will also stress test the mortgage payment so add a few % on to the interest rate they are offering you and work it out from there.
So if after 1500 is deducted from your wages you are left with 500 then that’s what you can afford to pay on a mortgage a month

Paul_Mc1988

StephenRy30 wrote: »

Thanks we are looking into that aswell we will be doing the plumbing & electrical ourselves so hopefully save a bit on that part.
Would the €250 be on top of saving? I was told once your saving a certain amount each month we wouldn't need to be seen paying rent to parents. As saving is just as good if not better as saving more .

Just a heads up you need to be reci certified to the wire the house if doing it yourself. Need certs for the esb to get a connection etc.

StephenRy30

Paul_Mc1988 wrote: »

Just a heads up you need to be reci certified to the wire the house if doing it yourself. Need certs for the esb to get a connection etc.

Ah yeah I know all that thanks for advice.

Trish56

No if you are living at home rent free you do not need to show you're paying rent. Lender will look for proof of repayment capacity which is stressed repayment at an interest rate of approx. 5.50% so you need to show you are saving this amount per month over 6 months. Under Central Bank regulations you can borrow up to 3.5 times your joint income. As a couple you need to have net disposable income after the stressed mortgage repayment of €2050 per month.

Lenders usually use a figure between €85 to €100 per sq. ft for the build cost plus 10% for cost overruns with some lenders using 20% for cost overruns. With one lender you can add in the Development charge plus professional fees in the costings. You can borrow up to 100% of the construction costs subject to income once you have a site.

StephenRy30 wrote: »

Thanks we are looking into that aswell we will be doing the plumbing & electrical ourselves so hopefully save a bit on that part.
Would the €250 be on top of saving? I was told once your saving a certain amount each month we wouldn't need to be seen paying rent to parents. As saving is just as good if not better as saving more .